Opening Up, On China's Terms
Since 1978, China's experience has been interpreted as one of progressive "reform and opening up", an attractive prospect for many countries to emulate. However, does the concept of opening up really capture China's experience? This article argues that China never truly "opened up" but opened the doors to benefit itself and kept the others closed or opened only partially.
What does "opening up" mean?
An open economy refers to foreign firms being able to sell, invest and compete on relatively equal footing, as well as allowing the free movement of money, ideas and information. Thus, the simplest test is to see which doors did China open, and who got the benefit.
Doors that opened up
In 1980, China introduced Special Economic Zones such as Shenzhen, where foreign firms were given tax breaks and other incentives to set up factories, resulting in a influx of foreign capital, machinery and expertise and a flood of Chinese labor. In 2001, China joined the World Trade Organization which gave its exports free access to global markets.
Note how in all these cases, China reaped the benefits such as employment, technology transfer or foreign exchange, without having to sacrifice its strategic industries. Policies such as "Made in China 2025" actually go out of their way to single out industries for preferential treatment.
Doors that stayed closed
Consider the automotive industry. Until recently, foreign carmakers were not allowed to enter China on their own, and had to set up joint ventures with Chinese partners and be limited to a 50% stake. Critics would say that this is an example of "opening up" on China's terms, as foreign firms had to share their technology in order to operate in China. Today, China is the world's largest car exporter, a position it took from Japan in 2023, and its electric car makers compete with the same firms that had to partner with them previously. Critics allege that China pushed its firms to adopt foreign technology as a condition of partnership, and that a 2018 United States investigation into Chinese trade practices found evidence of this, which China rejected.
The same can be said of the Internet. Google, Facebook and YouTube are banned in China, and Google pulled its search engine from mainland China in 2010. With the competition from foreign firms barred, domestic firms such as Baidu, Tencent and Alibaba flourished at home before branching out to international markets.
The same could be said of money flows. The Chinese yuan is not freely convertible, and the government puts a cap on how much money may move in and out of the country, meaning individuals and firms may only send a limited amount outside the country. This allows the government to control the value and availability of its currency.
The big industries remain dominated by state-owned enterprises, and foreign participation in banking, energy and telecom remains limited. Furthermore, China restricts foreign investment in certain sensitive fields such as social surveys and humanities research.
What do the statistics say?
In 2025, China's trade surplus reached a record of about $1.19 trillion, crossing the trillion-dollar threshold for the first time. At the same time, its imports grew by only about 0.5% during the same period. A nation with an open economy should see its imports grow as its exports grow, but China's imports are a small fraction of its exports. Critics would argue that China's trade practices represent an opening that works only in one direction.
The same criticism applies to foreign investment. During 2024, investment into China dropped by 27.1% in yuan terms, the biggest drop since the 2008 crisis, and geopolitics played a part. However, foreign business groups have also long accused China of not providing equal competition.
A balanced article should consider the other viewpoint
China has opened up in many ways. The list of industries closed to foreign investment has been greatly reduced to only 29 items, and restrictions on manufacturing have also been lifted. Limits on foreign ownership of life insurance and car manufacturing, which have been in place for decades, have also been lifted. Although the amount of investment into China dropped by 9.5% in 2025, the number of new foreign-owned companies increased by about 19%.
Defenders would say that all nations open their economies selectively, and that certain industries such as farming and shipping are protected in the United States. Japan and South Korea also protected their emerging industries before becoming economic powerhouses. Chinese officials stress that China has the right to proceed gradually, and a large trade surplus reflects not only its openness but also its ability to create competitive products that command respect in international markets.
Did "opening up" really happen?
The strongest criticism of "opening up" is not that China never did it, but rather that it did it selectively, following its own interests. The critics' strongest argument is that China lowered its commitments to openness as it progressed, selectively lifted restrictions when it felt the need, and waited until it felt strong enough before doing so. For example, the cap on foreign ownership of carmakers was lifted only in 2022, when Chinese electric car makers were ready to compete with foreign rivals.
Depending on who you ask, China's actions may represent either prudent strategic planning or reneging on its promises, but either way, it has ramifications for everyone who believed that with economic growth, China will gradually change into a Western-style economy.
Sources:
- Yahoo Finance
- msadvisory
- letsdatasciencearise
- worldports
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