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This paper is to study the transformation of the Chinese
economic system from the standpoint of Sino-foreign contact
from 1842 to 1937. The essence of the Chinese economic
transformation in early modern period is considered to be the
process of learning the West and turning the peasant economy to
market economy (or capitalistic economy) through "free" trade
and "free" undertaking of manufacturing under the force
of gunboat and the constraint of unequal treaties.
The "free" trade between China and foreign countries from 1842
to 1895 formed the colonial type of trade that exported
primary products to finance the import of manufactured
consumer goods, and expanded "the Coastal China," the region
producing the exports and selling the imports. In addition to
cheap labor and materials, the brisk market of manufactured
consumer goods, the infrastructure centered in the treaty
ports, and the business operating environment protected by
unequal treaties all led to the demand for "free" undertaking of
manufacturing in the open ports.
The foreign direct investment supplied the package of capital,
technical know-how, managerial ability, and marketing
ability. Under the demonstration and oppression of foreign-
owned enterprises, both Chinese-owned and foreign- owned
enterprises contributed to the industrialization of China.
Meanwhile, the foreign exchange obtained from the export of
primary products was allocated to the import of capital goods
instead of manufactured consumer goods so as to build the
import-substitution industry which produced consumer goods to
replace the imported consumer goods in the domestic commodity
market. Take the most important imports-cotton pieces-for
example. They accomplished the most important industry-
textile industry. On the other hand, in the process of
establishing the domestic industrial sector, the domestic labor
market and financial market were established
concurrently. In the process
of economic transformation and learning, the step of learning
was from selling to manufacturing; the dimension of learning
consisted of participating in market, expanding market,
and setting up the market system; the subjects of learning
were the consumers, producers, workers, and savers/
investors of private sectors and the officials of public
sectors; and the contents of learning were refining the
kinship, localism, and political- economic relationship
of Chinese peasant economy and nourishing the market
culture of free competition and self-responsibility. In fact,
the contents of learning are also an endless task of all
the Chinese people.
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