Rethinking economic openness and macro control in developing countries

The Chinese economy is at a critical point in both state-owned enterprises (SOEs) reform and WTO accession. Both events challenge the stability of Chinese economy. After the hit of Southeast Asian economic crisis, policies toward economic openness and macro control need be considered carefully. This paper provides a review of economic opening policies adopted in developing countries and a review of causes and consequences of the Southeast Asian economic crisis. Lessons for Chinese economy are summarized. A major conclusion of the paper is that although the Southeast Asian type of economic crisis due to the high foreign debt ratio may not happen in China, the internal debt and smoothness of transformation of the economic system to meet the demand of an open economy may be the major challenge. I thank Dr. Xiaobo Hu for his suggestion in restructuring the paper in early stage. Thanks also go to the two anonymous reviewers for their valuable comments. The remaining errors are mine. Early vision of the paper was presented at the Conference of Social Science Development for 21^st Century in China in June 1998 in Beijing. He received his Ph.D in Economics from Ohio State University in 1993. His research interests are in economic development in rural China, international trade policies in Asia, and urban economics. His recent articles are published in journals such asEconomic Development and Cultural Change, Quarterly Review of Economics and Finance, China Economic Review, andASEAN Economic Bulletin.