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The Historical Significance of China's Entry to the WTO

CAMBRIDGE: Yesterday, America joined Europe in agreeing on the principles of economic reform in China that will permit China to enter the World Trade Organization. This sets the stage for China's membership in the WTO by the end of 2000. China's addition to the WTO brings 1.3 billion people - more than one-fifth of humanity - formally into the mainstream of the international economy. This is an epochal change of direction for China's relations to the world that trace back to events five centuries ago.

For economists and historians with a long view, China's situation in the world poses a puzzle. Simply put, why is China so poor today? GNP per person averages around $3,200, compared with around $25,000 on average in the US and Europe, when such calculations are made at a standardized set of prices. The puzzle is that, from 550 to 1500 AD, Chinese civilization once led the world in technology and probably in economic well-being. China's relative decline for the last 500 years is one of the greatest themes of world history.

Turn the clock back six centuries, to the early 1400s. China could boast technological wonders - the compass, navigational abilities, the printing press, fireworks and explosives - that barely touched the rest of the world. China's state had been unified for more than 1500 years; its statecraft was considerably sophisticated. Chinese fine arts, exemplified by its porcelains that would be craved by the world for centuries to come, were remarkable by the standards of any age. Perhaps the greatest symbol of these accomplishments in the early years of the 15th century were the great naval expeditions of the Chinese fleet, in which ships of monumental proportion sailed the routes of Southeast Asia, to India, and even to East Africa during the years 1405 to 1431. Archeologists today find Chinese porcelain shards in Kenya and Tanzania.

Then China's dominance faded. While economists, historians, political theorists, and demographers, can all add something to the puzzle, my view is that, more than anything, China turned its back to the world. In the 1430s, China abandoned naval expeditions, dismantling its fleet. The imperial court, under a financial squeeze and threatened by nomadic incursions from Central Asia, canceled the naval expeditions in the 1430s, moved the capital inland to Beijing, and began isolating China for centuries to come. Decree followed decree, eliminating the shipyards, closing ports, and forbidding Chinese to leave the mainland. Trade and exchange continued only at a trickle.