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On October 1st, 1949, Mao Zedong established the People's Republic of China
On October 1st, 1949, Mao Zedong established the People's Republic of China
Before the proclamation of the People's Republic of China (PRC), China's economy had been destroyed by eight years of war against Japan and four years of Civil War. Thus, the Communist regime looked towards the U.S. which, at the time, possessed 1/2 of the world's wealth and technology (Chen 1006, 170).
Americans were conflicted about this; some wanted to punish China's Communist regime and wanted a trade embargo to bring about the collapse of socialism. On the other hand, some asserted that by economically but not politically supporting China, the U.S. could influence the "development of a healthy Chinese nationalism and lure Beijing away from Moscow's orbit" (Chen 2006, 171).
Another positive aspect of American foreign investment in the budding Chinese economy would be high returns and little competition for foreign investors.
On June 25th, 1950, the Korean War began and the prospect of and Chinese-American economic relationship was squashed.
The Korean War: 1950-1953
The Korean War: 1950-1953
At its core, the Korean War was a conflict of political ideologies, communism vs. capitalism. The United States and China were at odds with each other in an attempt to influence the future of Korea. Because China was the U.S.'s opponent, President Truman established a trade embargo, and the UN followed suit, enforcing a trade embargo for the duration of the Korean War (until June 1953).
China's economy greatly suffered because of these punishments and was forced to rely on its ally, the Soviet Union, for support. China had a massive trade deficit, which was especially troublesome for a country with "millions of poverty-stricken people and no foreign reserves" (Chen 2006, 175).
With a heavy reliance on the Soviet Union, China was overwhelmed when Moscow unexpectedly and suddenly pulled out of many construction and investment projects. Because of this, "China resolved never again to become dependent upon any single foreign country" (Chen 2006, 176). This unexpected action from the Soviet Union heavily influenced China's restriction on imports and push to increase its manufacturing and export industries.
The Cultural Revolution: 1966-1976
The Cultural Revolution: 1966-1976
The Cultural Revolution was a politically and socially chaotic time in China. The focus was on domestic development rather than foreign trade, but ultimately, Chinese officials realized that modernization could not occur without heavy industrial equipment and technology from abroad.
China turned to the U.S. for support and, in 1972, President Nixon decided to lift the trade embargo on China. This decision occurred because of compromise on both sides: Beijing "relaxed then abandoned its policy of self-sufficiency...and was learning the lesson of the market driven economy" (Chen 2006, 186). On the other hand, the U.S. relaxed its policy on "punishing" China for its socialist governance in return for investing in an emerging capitalist market.
The end of the trade embargo:
The end of the trade embargo:
Before officially lifting the economic sanctions, China and the U.S. needed to ease tensions after having zero communication for over twenty years.
Small diplomatic steps were taken before Nixon fully normalized relations, marking the start of China's journey to modernization and the re-establishment of a Chinese-American partnership.
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