An analysis of the reforms in China's foreign trade and investment reg
ime since 1978 tells us that the central government has been embedded
in discussions between fractions in the Communist Party, in ministeria
l sector interests, and in provincial interests, in drafting and imple
menting a development strategy. But the government has still been able
, through a step by step approach, to keep a firm hand on the developm
ent. China has on the one hand run an export-oriented development stra
tegy, but at the same time adopted an import-substitution strategy to
protect its state-owned enterprises. Foreign direct investments have t
o a certain degree been canalised to key industries. Restrictions on s
etting up wholly foreign-owned enterprises have guaranteed an importan
t transfer of technology and management skills through JVs. There have
been two very different systems for Chinese enterprises and foreign i
nvested enterprises (FIE) concerning trade rights, import duties, and
access to foreign exchange. This calls for extensive reforms when Chin
a needs to adopt its foreign trade and investment regime to the 'natio
nal treatment' clausul in the WTO.