DEEPAK NAYYAR The External Sector in Chinese Economic Development THE STRATEGY and the tactics of economic development in China have undergone a profound change in recent years. This transformation, which began at the end of the 1970s, three decades after the revolution, represents a radical departure from the past, even if we compare it with the 1950s when capital accumulation was perceived as central to the process of economic growth and industrialisation was seen as synonymous with development. The contrast is that much sharper when juxtaposed with the Maoist conception of the 1960s which stressed human resource mobilisation and self-reliance. Indeed, the pendulum has swung a long way from the thrust of the Cultural Revolution to the quest for Four Modernisations. It has transformed not only the means but also the ends of development. The wide range of economic reform spans, in descending order of significance, the production responsibility system and decollectivisation in the agricultural sector, the open door policy in the external sector, the decentralisation of decisions and improved incentives in the industrial sector, and market orientation combined with private initiative in the services sector. In the management of the economy, the emphasis is shifting, slowly but surely, from centralised planning implemented through direct controls to decentralised decisions based on prices and profits. These changes have been introduced, as also implemented, at a rapid pace and the architects of the economic reform regard the present conjuncture, where the old and the new coexist, as a transitional phase in the move to an economic system that would rely far more on the market mechanism and its signals. The reform in external economic relations, though part of a wider canvas, is of particular significance. For one thing, it implies a fundamental change in China's development strategy, from self-reliance in a relatively closed economy to interaction and integration with the world market in a relatively open economy. For another, the management of the external sector in the years to come would be an important determinant of the pros-