Explaining China's Export Drive

Explaining China's Export Drive: The Only Success Among Command Economies Given the cumbersome controls on China's external sector, many China specialists, including those from the World Bank, have argued that China's export success could not last. However, China's stunning export performance in the reform era of 1978—1990 has repeatedly defied the skeptics. Though China's external sector is heavily regulated, there are also significant elements of flexibility, including special freedoms for foreign investors, special economic zones and open areas, free-wheeling rural enterprises, and a widespread grey market in foreign exchange. Moreover, cumbersome controls can be circumvented through the rampant black market in foreign exchange and covert Hong Kong connections. This study quantifies the contributions of the above factors to China's export drive. It appears that China has been able to capitalize on the above elements of flexibility through its Hong Kong connections, facilitating the synergy of foreign know-how and capital with China's cheap labour into a potent force to penetrate the world market.