Open Door Policy
The Open Door Policy is a term in foreign affairs initially used to refer to the United States policy established in the late 19th century and the early 20th century that would allow for a system of trade in China open to all countries equally. It was used mainly to mediate the competing interests of different colonial powers in China. In more recent times, Open Door policy describes the economic policy initiated by Deng Xiaoping in 1978 to open up China to foreign businesses that wanted to invest in the country. This later policy set into motion the economic transformation of modern China.
The late 19th policy was enunciated in Secretary of State John Hay's Open Door Note, dated September 6, 1899 and dispatched to the major European powers. It proposed to keep China open to trade with all countries on an equal basis, keeping any one power from total control of the country, and calling upon all powers, within their spheres of influence, to refrain from interfering with any treaty port or any vested interest, to permit Chinese authorities to collect tariffs on an equal basis, and to show no favors to their own nationals in the matter of harbor dues or railroad charges. Open Door policy was rooted in the desire of U.S. businesses to trade with Chinese markets, though it also tapped the deep-seated sympathies of those who opposed imperialism, with the policy pledging to protect China's sovereignty and territorial integrity from partition. It had little legal standing, and served in the main the interests of competing colonial powers without much meaningful input from the Chinese, creating lingering resentment and causing it to later be seen as a symbol of national humiliation by Chinese historians.
There was an essential conflict in the policy. The U.S. announced its Open Door Policy with the dual intentions of avoiding the actual political division of China and taking financial advantage, but only in a fair way, acknowledging equal rights for all nations to trade with China. All the imperial nations gave a green light to the American decision except Russia. The next result was that China remained undivided, but in the coming years the imperial nations continued to exploit China to a large extent.
A principle only
The Open Door Policy was a principle, never formally adopted via treaty or international law. It was invoked or alluded to but never enforced as such. Starting with the 1931 Japanese seizure of Manchuria and the creation of Manchukuo, however, the policy was broken with impunity and with increasing frequency.
The second Open Door Policy
Technically, the term Open Door Policy was only applicable before the founding of the People's Republic of China in 1949. After Deng Xiaoping took office in 1978, the term referred to China's policy of opening up to foreign business that wanted to invest in the country, setting into motion the economic transformation of modern China.
Formation of the policy
During the First Sino-Japanese War in 1895, China faced imminent threat of being partitioned and colonized by imperialist powers such as Britain, France, Russia, Japan, Germany and Italy. After winning the Spanish–American War of 1898, with the newly acquired territory the Philippine Islands, the United States increased its Asian presence and was expecting to further its commercial and political interest in China. It felt threatened by other powers' much larger spheres of influence in China and worried that it might lose access to the Chinese market should the country be partitioned. As a response, William Woodville Rockhill formulated the Open Door Policy to safeguard American business opportunities and other interests in China. On September 6, 1899, U.S. Secretary of State John Hay sent notes to the major powers (France, Germany, Britain, Italy, Japan, and Russia), asking them to declare formally that they would uphold Chinese territorial and administrative integrity and would not interfere with the free use of the treaty ports within their spheres of influence in China. The Open Door Policy stated that all nations, including the United States, could enjoy equal access to the Chinese market.
In reply, each country tried to evade Hay's request, taking the position that it could not commit itself until the other nations had complied. However, by July 1900, Hay announced that each of the powers had granted consent in principle. Although treaties made after 1900 refer to the Open Door Policy, competition among the various powers for special concessions within China for railroad rights, mining rights, loans, foreign trade ports, and so forth, continued unabated.
On October 6, 1900 Britain and Germany signed the Yangtze Agreement, providing that they would oppose the partition of China into spheres of influence. The agreement, signed by Lord Salisbury and Ambassador Paul von Hatzfeldt was an endorsement of the Open Door Policy proposed by the United States for free trade in China. However, Germany's failure to keep up the agreement led to the Anglo-Japanese Alliance of 1902.
In 1902, the United States government protested that Russian incursion into Manchuria after the Boxer Rebellion was a violation of the Open Door Policy. When Japan replaced Russia in southern Manchuria after the Russo-Japanese War (1904–05) the Japanese and U.S. governments pledged to maintain a policy of equality in Manchuria. In finance, American efforts to preserve the Open Door Policy led (1909) to the formation of an international banking consortium through which all Chinese railroad loans would agree (1917) to another exchange of notes between the United States and Japan in which there were renewed assurances that the Open Door Policy would be respected, but that the United States would recognize Japan's special interests in China (the Lansing–Ishii Agreement). The Open Door Policy had been further weakened by a series of secret treaties (1917) between Japan and the Allied Triple Entente, which promised Japan the German possessions in China on successful conclusion of World War I. The subsequent realization of such promise in the Versailles Treaty of 1919 angered the Chinese public and sparked the protest known as May Fourth Movement. The Nine-Power Treaty, signed in 1922, expressly reaffirmed the Open Door Policy.
Since the policy in effect hindered Chinese sovereignty, the government of the Republic of China endeavored to revise related treaties with foreign powers in the twenties and thirties. Only after the conclusion of World War II did China manage to regain its full sovereignty.
In modern China
In China's modern day economic history the Open Door Policy refers to the new policy announced by Deng Xiaoping in December 1978 to open the door to foreign businesses that wanted to set up in China. Special Economic Zones (SEZ) were set up in 1980 in his belief that in order to modernize China's industry and boost its economy, it needed to welcome foreign direct investment. Chinese economic policy then shifted to encouraging and supporting foreign trade & investment. It is the turning point in China economic fortune that started China on the path to becoming 'The World's Factory'.
Four SEZs were initially set up in 1980, namely Shenzhen, Zhuhai and Shantou in Guangdong, and Xiamen in Fujian. These SEZs were strategically located near Hong Kong, Macau and Taiwan, but with a favorable tax regime and low wages in order to attract capital and business from these Chinese communities. Shenzhen was the first to be established and it showed the most rapid growth, averaging at a very high growth rate of 40% per annum between 1981 and 1993, compared to the average GDP growth of 9.8% for the country as a whole. Further SEZs were later set up in other parts of China.
In 1978, China was ranked 32nd in the world in export volume, but by 1989 it had doubled its world trade and became the 13th largest exporter. Between 1978 and 1990, the average annual rate of trade expansion was above 15 percent, and a high rate of growth continued for the next decade. In 1978, its exports in the world market share was negligible, in 1998 it still had less than 2%, but by 2010, it had a world market share of 10.4% according to the World Trade Organization (WTO), with merchandise export sales of more than $1.5 trillion, the highest in the world. In 2013, China overtook the United States and became the world's biggest trading nation in goods with a total for imports and exports valued at US $4.16 trillion for the year.
- Boxer Rebellion
- New Imperialism#China
- Nine-Power Treaty#Open Door Policy
- Russian invasion of Manchuria
- Economic history of China before 1912
- Economic history of China (1912–49)
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