Alternative International Economic Strategies and Their Relevance for China

TLDR: In this article, the authors argue that China has both more to gain and more to lose from a change toward an open system than most other countries, and the main issues concern inequality within and between regions, highly differential capacity among regions in their near-term capacity to respond to increased trade and investment, and possible dislocations of a unique system of social participation and protection.

Abstract: When a country moves away from tight restrictions on trade and investment toward a more open system, it can gain significantly from increased efficiency but may also encounter intensified problems in such domains as unemployment, setbacks to particular industries, increased inequality, issues of foreign influence, and even absolutely reduced income levels in poorer regions. China has both more to gain and more to lose from a change toward an open system than most other countries. The scope for gain is especially great because of the pervasive character of prior departures from efficiency in relative prices and in the structure of production, because the country became so far out of touch with modern technology, and because it has an industrial base and the necessary skills to move rapidly to higher levels of productivity. But the scope for loss is also great because the society has so many distinctive characteristics worth a great deal of effort to preserve. Some of the main issues concern inequality within and between regions, highly differential capacity among regions in their near-term capacity to respond to increased trade and investment, and possible dislocations of a unique system of social participation and protection.