October 23, 2015, by editor
Mao’s China as a market for Western Europe? PRC early economic exchanges and implications for the international economy
Written by Valeria Zanier.
It was widely known by analysts during the Cold War that business across the two sides of the Iron Curtain was quite a usual practice, regardless of the strategic embargo imposed by NATO. Academic scholarship has in principle recognized that the study of an economic and technological dimension is relevant to the understanding of the Cold War, though such issues have not yet received the full amount of attention.
Historical analysis has privileged the point of view of national political leaders, while non-state actors (traders, bankers, bureaucrats), who were directly involved in day-to-day operations, have received little attention. In fact it is by studying the role of such non-state actors and their relationship with the governmental leaders, that scholars can obtain revealing insights of how trade across the Blocs influenced post WWII European development, the political changes which led Socialist countries to capitalist transition, and the rise of economic globalization.
The few historians who have tackled the issue of East-West trade, have mainly focused on Europe and the USSR. Major NATO countries in Europe like France and Great Britain saw great potential in trading with Bloc countries, both as a continuation of a history of dense relations, and as an essential tool for an economic recovery after war disruption. At the same time, neutral or smaller countries such as Finland, Sweden and Switzerland played an even more active role with the Eastern Bloc, contributing to the expansion of an integrated trade. The findings on the USSR and Eastern Europe have inspired me to research China’s foreign economic relations during the Cold War, a subject very much understudied. They also pushed me to study China’s economic integration with the world from a historical perspective.
In the last two decades, we have become used to China’s many successes, which have generated an enormous amount of literature. Funny enough, much of this literature has focused on the present while neglecting the much longer and complex story of China’s economic development.
China’s planned economy under Mao (1949-1976) appears as just one of the many phases in the country’s history, in fact a short period of time when compared to current transitional China (thirty-seven years since Deng Xiaoping’s Reform and Opening-Up, thirty-nine years if we count from Mao’s death), a tiny fraction of time compared to China’s long history.
Another objective of my current research is to establish whether Mao’s China harboured elements of continuity with the country’s pre-WWII and post-1978 integration into the world economy. Using business correspondence, intelligence reports, and memoirs pertaining to Britain, France, Germany, Italy and Hong Kong’s economic relations with Red China, I have uncovered the perceptions of numerous Western European companies about the Chinese market. By the end of the 1950’s, they had detected high potential. Blessed by fast economic growth during the First Five Year Plan (1953-1958), Mao’s China looked with interest at Western heavy, chemical and petrochemical sectors. In the early 1960’s – soon after recovering from the tragedy of the Great Leap Forward – China carried out a number of carefully prepared technology acquisitions from the West and Japan, which were to lay the basis of future modern development.
Economic operators worked in close connection with diplomats and governmental actors, guaranteeing discretion and proving useful to anticipate official moves when needed. The results in economic and technology exchanges show that China’s political leadership had recognized, two decades ahead of Deng’s reforms, that there was indeed value in acquiring Western technology and a need to comply with ostensibly capitalist ways of operating. Although many factors conflate to depict Mao’s China as a country exclusively locked into itself and the Eastern Bloc, there is evidence that China also valued cooperation with “first world countries”, and had concrete opportunities to study what the West could offer as an alternative to the circumscribed alliance with the USSR and the Eastern Bloc countries. Although further research is necessary in order to clarify the evolution of the foreign trade system in the years of planned economy, the idea of the complete isolation of the People’s Republic of China during Cold War appears more and more questionable.
My analysis of China’s foreign trade under Mao also confirms some important patterns of the country’s pre-WWII attitude, when Western European trading companies and industries played a crucial role (Germany was China’s first trading partner before the war, during the capitalist oriented Guomindang regime). Though Mao had nationalised most of the economy and shut down most foreign companies, Western European business people were able to carve out a role for themselves and to strengthen their position in business. This happened even when there were no official ties, much before Nixon’s green light in 1972. These findings have great relevance for the long-term paths of Europe-China and West-China relations.
The success of China’s business operations with Western countries was possible because of a varied attitude among political leaders and to the active involvement of non-state actors familiar with the capitalist economy. Many of the cadres who handled foreign trade operations at high and middle levels had been active in the Guomindang era and had operational knowledge of the capitalist system, as well as useful contacts abroad.
Mao’s China could count on a well established transnational network operated by overseas Chinese based in Hong Kong, Malaysia and Singapore, which played a crucial role in connecting China with the world economy. Overseas Chinese investors would be the protagonists of early development as soon as China opened up in late 1970’s. Hong Kong played a relevant role as a financial hub until China’s accession to WTO, and is still crucial in entrepote trade with China.