A Quick Look Back at China's Historical Trade Policy: From Tributary Trade to the Reform and Opening
Sovereignty, Self Sufficiency, and Strategy
In our previous two posts, we took a look at the U.S. historical tariffs and U.S. trade policy from GATT to trade wars. What about China’s trade policy history?
I’ve always found China’s historical approach to trade policy deeply compelling—perhaps because it has traversed so many different worlds, from imperial tributary systems and forced tariff concessions to modern free-trade agreements and targeted tariff hikes. Each shift in China’s trade strategy has reflected how the country views itself and its place in the international community.
Whether we’re talking about the imperial court of the Qing Dynasty or the halls of power in Beijing today, there’s a remarkable continuity in the idea that trade policy is about more than money; instead, it’s about sovereignty, national pride, and shaping global perceptions of China’s standing.
Today, we’ll explore China’s trade policy from the Ming Dynasty’s tributary system to the reform and opening-up in the 1990s. In our next post, we’ll examine China’s trade policy from its accession to the WTO to its strategy in the present day.
Imperial China: From Tributary Trade to Unequal Treaties
Let’s trace the policy back to the imperial era, particularly the Ming (1368–1644) and Qing (1644–1912) Dynasties. Back then, the primary framework for international exchange was the “tributary system,” in which neighboring states offered tribute to the Chinese court in exchange for trade rights and diplomatic recognition. China considered itself the Middle Kingdom, the cultural and political center of East Asia, and trade was heavily regulated. The imperial court set duties on imported goods—often sporadically or subject to negotiation—but it maintained a firm sense that foreign traders were guests on Chinese soil.
The famous maritime expeditions of the early Ming Dynasty under Admiral Zheng He, for instance, were not purely commercial missions. They served to impress upon foreign kingdoms the grandeur of the empire, leading many of them to accept tributary ties rather than engage in trade relationships governed purely by tariffs or customs duties.
During the Ming Dynasty, the tributary system expanded. To manage tributary exchanges, three major maritime trade offices were established in Ningbo, Quanzhou, and Guangzhou, facilitating regulated trade with Japan, Taiwan, the Ryukyu Islands, and Southeast Asia. The system also extended inland, incorporating Tibet and Mongol territories, with China receiving valuable livestock in exchange for textiles and other manufactured goods.
Despite its expansion, the tributary system began to decline due to rising costs, smuggling, and increased European trade presence. Maintaining diplomatic and military support for tributary states became increasingly expensive, while illicit private trade undermined the system’s exclusivity. European traders, beginning with the Portuguese in 1513, gradually established alternative trade networks. The Portuguese settlement in Macau marked a shift away from the tributary framework, as private commerce flourished outside Chinese control. These developments weakened China’s ability to regulate international trade strictly through the tributary model.
Under the Qing Dynasty, the system continued to lose significance as the government prioritized private trade over tributary exchanges. In 1684, the Kangxi Emperor opened all coastal ports to foreign commerce, ensuring that trade remained under Qing taxation and regulation. Asian states and European powers, including Great Britain, increasingly engaged in commercial exchanges through private channels rather than the tributary system. While the ritual aspects of tribute diplomacy persisted, the system’s economic relevance steadily diminished as private markets became dominant.
The Opium Wars (1839–1860) ultimately led to the collapse of the tributary system and China’s loss of control over its foreign trade policies. Defeated by Britain and France, China was forced into a series of unequal treaties, including the Treaty of Nanjing (1842) and the Treaty of Tianjin (1858), which granted foreign powers commercial privileges, territorial concessions, and extraterritorial rights.
These agreements undermined China’s ability to dictate trade on its own terms and imposed a fixed low tariff rate—often around 5%—on Chinese imports. Being forced into these unequal treaties and the standardized tariff was a huge blow to China’s sovereignty. The treaties relegated China to a passive recipient of foreign demands, and tariff revenues went to foreign-controlled maritime customs offices rather than directly to the Chinese government.
Republican China: Failure to Reclaim Tariff Autonomy
The humiliations of this period—often referred to as the "Century of Humiliation"—left a profound and lasting imprint on China's economic and political psyche, shaping its attitudes toward both trade and tariffs for generations to come. Even after the Qing Dynasty collapsed in 1912, successive governments struggled to reclaim sovereignty over their own trade policies, as they remained bound by a web of unequal treaties that had stripped China of tariff autonomy. These agreements ensured that foreign powers continued to dictate import duties, limiting the Chinese government's ability to protect domestic industries or generate much-needed revenue.
When the Nationalist government under Chiang Kai-shek sought to renegotiate tariff autonomy in the 1920s and 1930s, their efforts were met with significant challenges. International resistance, combined with the fragmentation of China’s political landscape, severely hampered progress. Regional warlords controlled large swathes of the country, each imposing their own levies and making centralized economic reforms nearly impossible. At the same time, Japan’s escalating aggression—culminating in the full-scale invasion of Manchuria in 1931 and later the broader Sino-Japanese War—further weakened the Nationalist government’s position, as military survival took precedence over economic sovereignty.
Foreign treaty ports, particularly in Shanghai, Tianjin, and Guangzhou, remained enclaves of extraterritorial control, where Western and Japanese interests dominated trade and customs regulations. These ports operated under separate legal and economic systems, with revenues from tariffs and trade duties largely benefiting foreign governments and businesses rather than the Chinese state. The inability to fully reclaim economic sovereignty during this era reinforced China's deep-seated determination, which persisted into the later Communist era, to assert control over its own trade policies and break free from foreign-imposed constraints.
New China: From Isolation to Openness
The Communist victory in 1949 marked another watershed moment in China’s economic history. Under Mao Zedong, the country embarked on a radical departure from the global capitalist system, opting for a centrally planned economy built on the principle of self-reliance. Trade was heavily restricted, and tariffs took on an almost symbolic role, serving as a tool to reinforce economic independence rather than to regulate trade in any meaningful way. Import duties were set deliberately high to discourage foreign goods, particularly consumer products and nonessential technologies. The ideological priority was to develop a self-sufficient economy, free from Western dependency and protected from perceived external threats.
During this period, China’s international trade was minimal, largely confined to exchanges with fellow socialist states like the Soviet Union and Eastern European countries. Even these relationships were not purely commercial but driven by ideological and strategic considerations. The government believed that high tariffs on Western goods would not only shield China’s fledgling industrial base but also prevent the infiltration of “bourgeois” values and capitalist decadence.
Economic isolation was part of a broader effort to consolidate communist ideology, maintain strict state control, and reduce vulnerability to external pressures. However, this rigid approach, coupled with internal mismanagement and political upheavals such as the Great Leap Forward and the Cultural Revolution, severely hampered industrial progress, leaving China technologically stagnant and economically isolated by the time of Mao’s death in 1976.
All of this changed under Deng Xiaoping, who recognized the urgent need for economic reform to modernize China and elevate it from decades of stagnation. Rising to power in the late 1970s, Deng launched the "reform and opening-up" policy, marking a dramatic shift from the autarkic policies of the Mao era. Tariff reforms became a key component of this transformation. Special Economic Zones (SEZs), such as those in Shenzhen and Zhuhai, were established to attract foreign capital and encourage technological transfer.
To facilitate this, tariffs on industrial inputs and machinery were reduced significantly to entice multinational corporations to invest in China and set up manufacturing operations. Meanwhile, consumer goods imports were still taxed at various rates, allowing the government to regulate market access while ensuring the domestic economy did not become overly dependent on foreign products.
The chart below illustrates China’s tariff trends during 1978-2000, which were characterized by several important milestones.
1978: Average tariff rates were 56%, reflecting China's highly protectionist trade policies.
1985: Tariffs declined to 43%, as early economic reforms took shape.
1990: Rates dropped further to 32%, as China aimed to attract foreign investment and boost exports.
1995: Tariffs fell to 23%, aligning with ongoing trade liberalization efforts.
2000: By the eve of China's WTO accession, average tariffs had dropped to 15%, signaling deep integration into global markets.
Trade liberalization played a pivotal role in China’s exponential trade growth. As seen in the chart below, the country's export value surged nearly tenfold from 1980 to 2000, reflecting its rapid integration into global markets.
This dramatic expansion was driven by tariff reductions, foreign direct investment (FDI) inflows, and the establishment of Special Economic Zones (SEZs), which provided incentives for export-driven industrialization. The chart below shows the export contributions of Special Economic Zones.
Imports also grew substantially, fueled by rising domestic demand for industrial inputs, technology, and consumer goods. But the balance between exports and imports shifted in the late 1980s. During this period, exports began to consistently outpace imports, leading China to maintain a trade surplus. This transition was a result of China’s competitive manufacturing sector, which leveraged low labor costs, increasing foreign investment, and improving production efficiency to become a dominant global supplier.
By the 1990s, China's trade policies had become increasingly outward-oriented, with expanded access to international markets and stronger trade relations with major economies. The reduction of tariff and non-tariff barriers further boosted exports, particularly in labor-intensive industries like textiles, electronics, and machinery.
This shift from economic isolation to selective openness was carefully managed. While China welcomed foreign direct investment and sought integration into global trade networks, it did so on its own terms. The government maintained strict control over key industries and foreign business operations, ensuring that economic engagement with the world did not undermine Communist Party authority.
The contrast between Mao’s vision of a closed, self-reliant economy and Deng’s pragmatic embrace of globalization highlights one of the most striking transformations in modern economic history. In just a few decades, China evolved from an isolated economy wary of capitalist influence to an economic powerhouse actively shaping the rules of global trade—while still maintaining an iron grip on political power.
By the 1990s, as China moved closer to integrating with the global trade system, further tariff reductions became an essential part of its negotiation strategy. This shift was driven by the country’s ambition to modernize its economy, attract foreign investment, and gain greater access to international markets. Chinese policymakers recognized that lowering trade barriers was a necessary step in securing membership in the WTO and becoming part of the global trade institution.
Our next article will examine China’s trade policy from its accession to the WTO to its trade strategy amid the ongoing trade war. Stay tuned!