ABSTRACT
For more than a decade, China's long-term economic development strategy has been predicated upon the creation of a viable domestic economy using a variety of market incentives and the adoption of Ricardo's international trade theory of comparative advantage. his development approach utilizes the twin engines of domestic production incentives and greatly expanded foreign loans, credits, and investments and international trade within the framework of the world capitalist economic system to generate the wealth necessary to build a modern economy. China's current support for the contemporary world economic system stands in sharp contrast to Beijing's earlier system-transforming posture adopted soon after the 1949 Communist Revolution, initially in conjunction with the Soviet Union and later as the self-proclaimed radical leader of the Third world, and to its subsequent system-reforming approach of the early 1970s based upon Third World-oriented New International Economic Order (NIEO) principles. 1
An integral part of China's integration into the global economic system has been membership and active participation in a variety of multilateral economic institutions (MEIs). 2 Beginning in late 1978, China acknowledged the need for external development assistance by shifting from the status of an aid-giver to an aid recipi 796ent within the framework of the United Nations Development Program (UNDP). Subsequent policy pronouncements reinterpreted China's long-standing policy of self-reliance to permit direct foreign investment and economic aid, loans, and credit from both bilateral and multilateral sources. As an outgrowth of the Open Door policy adopted in February 1980, China sought and was granted admission into the World Bank Group, or WBG (a collective term for the International Monetary Fund, or IMF; the International Bank for Reconstruction and Development, or IBRD, but commonly called the World Bank; and its affiliated agencies, the International Development Association, or IDA, and the International Finance Cor poraiton, or IFC). In 1983 China was granted observer status in the world trading organization, the General Agreement on Tariffs and Trade (GATT). In 1986 China made formal applcation for full GATT membership and joined the Asian Development Bank (ADB).
China has been a MEI participant for a decade, and during that period membership in these organizations has represented both a challenge and an opportunity for Beijing. The absorption of 1.1 billion people into the world and regional economy has not been without its difficulties and problems. On balance, both China and the world have reaped great benefits both from the intangible psychic perspective of linkage and belonging and from the more tangible economic rewards of enhanced prosperity and well-being.
Prior to June 1989 the multidimensional MEI connections which had been forged appear to have laid the groundwork for even further integration of China into the global economic and political system. The June 4, 1989 Tiananmen Square massacre and the subsequent wave of political repression against the democracy movement in China came as a shock of the first magnitude both inside and outside the country and raised serious questions about the permanence and viability of China's participatory role in the global economic system. These events prompted a series of moves by the United States, other G-7 countries, and select MEIs to isolate and penalize China's hard-line leaders. Within two weeks of the crackdown and largely at the behest of the United States, both the World Bank and the Asian Development Bank suspended over $1 billion in loans and credits to China. Bilateral aid programs bankrolled mainly by Japan and the European Community were also placed on hold. And somewhat later the U.S. Congress voted to impose sanctions including the restriction of funds for certain MEI lending to China. Though the UNDP country program in China was not adversely affected, further negotiations on China's GATT membership application were temporarily postponed. Finally, hundreds of foreign firms doing business in China were forced to reevaluate the more uncertain commercial climate and their future economic prospects within a potentially more orthodox Marxist-Leninist political environment.
This chapter focuses upon China's participation in a number of key MEIs since 1979, the nature and consequences of China's relationships with those organizations, the impact of the Tiananmen Square incident on those linkages, and the implications for both China and the global community for the 1990s.
