Comparative advantage and trade liberalization in China

The relevance of Ricardo's theory of comparative advantage to the design of trade policy by developing and socialist countries is the subject of heated argument, particularly among Marxists who have yet to produce a satisfactory theory of international exchange based on value analysis. The debates among economists in China on their country's 'open-door' policy revealed the complexity of the central and related issues. Besides the possibility of being exploited and becoming dependent on developed economies, on which theorists of unequal exchange have sounded a good many warnings, developing countries also face other problems and dangers when they allow themselves to be guided by Ricardo's doctrine in conducting external trade, as the Chinese experience of trade liberalization in 1979-85 vividly demonstrated. This paper first presents an interpretative summary of the debates among the Chinese economists and then analyses what went wrong in the process of liberalization.