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Discuss How and Why China’s Relations with the World Economy Change After 1993?

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Discuss how and why China’s relations with the world economy change after 1993?

The economic reforms of China, called “open doors policy” starting in 1978 with Deng Xiaoping –the leader of the Communist Party of China (CPC) - marked the beginning of a new era where China initiated to open its economy to the world. (Nolan, 2005)
In 1992, during his Southern tour, Deng Xiaoping introduced the term of “Socialist Market economy” to describe Chinese economy and in 1993 the term was added to the Constitution, which means that socialism was still the basis of the economical system but that the State also protected the market economy from now on and therefore was ready to go international.
This essay will discuss to which extent 1993 was the changing year for China’s international economic relations.

Naughton (2007) refers to the 1990s reform in China as a “reform with losers” meaning that at this point, Chinese economy was moving towards a transformation to capitalism. They started to strengthen the institutions of market economy and began to privatize the State sector.

The State-owned Enterprises (SOE) reform - specifically the “grasping the big, letting go of the small” strategy - was aimed to improve the efficiency and corporate governance of the State companies by keeping the key resources (such as infrastructure construction, telecommunications, financial services, energy and raw materials) (GENG, X., YANG, X. and JANUS, A. 2009) and the big companies and let go the smallest ones, leaving space for private and international companies to implement their selves.

At the macroeconomic level, the SOE reform can be seen as a strategic adjustment of the nationalised and centralised economy towards a more market-oriented economy; at the microeconomic level, the reform is intended to transform the Chinese SOEs into modern corporations in order to be able to...

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