China is renowned for its exceptional growth, attributed to Deng Xiao Ping’s implementation of radical economic reforms to create a movement from a domestic focus to trade oriented efforts. The success of globalization is evident as China has retained high rates of economic growth. However, the consequence of integrating its economy so well into the global market comes in the form of ‘financial contagion’ where financial crises can be spread quickly from one economy or region to another. This concept is demonstrated in Figure 1, where the GFC in 2008-09 resulted in a dramatic …show more content…
From this, there was an adoption of the ‘open door policy’ - statement of principles initiated by the United States (1899, 1900) for the protection of equal privileges among countries trading with China and in support of Chinese territorial and administrative integrity - and employment of Special Economic Zones (SEZs). SEZs are geographical regions that have economic and other laws that are more free market orientated than a country’s typical or national laws . They were established in coastal regions where foreign investment in joint ventures or new firms became permitted, allowing for trade, foreign investment from international corporations and FDIs. This flexibility of economic policy decisions was accompanied by high supply of cheap labour, incentives to attract investors, including a tax concession scheme where foreign firms are not required to pay company tax until they have made a profit for two years, and high accessibility to the global economy. As a result of these reforms, China’s inflow of FDI increased from $430m at the beginning of the 1980s to $147.8b in 2008, seen in Figure