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The Dual Structure of the Economy

In: China and the Global Economy Since 1840

Author

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  • Lu Aiguo

    (Chinese Academy of Social Sciences)

Abstract

Foreign investment followed in the footsteps of foreign trade. At first, the involvement of foreign capital in China took the form of bank loans. Between 1861 and 1894, the Qing government borrowed money to meet military needs, pay war indemnities and cover government spending on projects such as palace construction and river conservation. Before the Sino-Japanese War in 1894, government borrowing was on a limited scale, and direct foreign investment remained officially illegal. The Treaty of Shimonoseki, signed by the Japanese and Chinese governments in 1895 after the war, granted Japanese nationals the right to establish factories and engage in manufacturing in China.1 The right acquired by the Japanese to establish factories was automatically extended to all other treaty powers in accordance with the most-favoured-nation clause, a step that formally legalized foreign direct investment in China.

Suggested Citation

  • Lu Aiguo, 2000. "The Dual Structure of the Economy," Palgrave Macmillan Books, in: China and the Global Economy Since 1840, chapter 3, pages 42-54, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-62440-9_4
    DOI: 10.1007/978-1-349-62440-9_4
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