In the decade of the 1980s China emerged as one of the most dynamic trading countries in the world. The Maoist legacy of economic and financial self-reliance was overthrown in favor of a policy of “openness” that welcomed direct foreign investment, created special export processing zones on the coast, encouraged dramatically higher levels of foreign trade, and utilized foreign borrowing to accelerate the inflow of foreign capital and technology. By 1990 China's trade volume was larger than all but a dozen of the most advanced industrial economies. China is the only socialist or former socialist country that became a more significant participant in the international economy in the 1980s.

Although China's growing role as an international trading country and as a site for direct foreign investment has been widely noted, much less has been written about the reforms that undergird the policy of openness that China has followed since the late 1970s. These reforms – including the adoption of a more realistic exchange rate and other measures that reduce the bias against exporting – in many respects are similar to policies pursued by other developing countries as they move away from policies of protection of domestic industries and import substitution toward more open, externally oriented development policies.

Yet, as this book seeks to show, the legacy of the system of economic planning adopted in the 1950s posed a special set of problems as China sought to enter the international trading system.