The NBS reports said China had jumped to third place in world trade in 2004, a position it currently retains, from 32nd place during the beginning of the reform and opening-up policy.

The NBS reports also indicated that China had trade deficits during most of the years from 1978 to 1993. But since 1994, the country has been enjoying annual trade surpluses with ever-increasing values, boosting the country's foreign exchange reserves to the largest amount in the world.

Yin Zhongli, an economic researcher at the Chinese Academy of Social Sciences, told Beijing Review that China's rising status in terms of foreign trade and foreign exchange reserves had occurred mostly because of the government's wise trade policies during the reform and opening-up period. At that time, the government proposed focusing on developing the processing trade, which quickly turned China into a "world factory."

Yin said foreign importers took most of the profits created by this "world factory," but added that the processing trade had helped to enlarge China's foreign exchange reserves, so that the country could handle the current global financial crisis with ease.

Currently, the government has adopted a variety of policies, such as raising the export tax rebate to boost exports in a bid to counterbalance fluctuations in the Chinese economy caused by the global financial turmoil. Yin said he believes China's total foreign trade would keep expanding in the future.

Attracting FDI

Before 1992, China mostly borrowed money from foreign countries, especially through loans.

In 1992, the amount of foreign direct investment (FDI) the country received exceeded its foreign loans for the first time. From then on, FDI has become the most important channel for China to obtain foreign capital.

The NBS reports said China attracted only $916 million FDI in 1983, but the amount grew to $74.8 billion in 2007, rising 81 times. They also indicated that by the end of 2007, the aggregated amount of FDI over the years had surpassed $770 billion, growing 20.1 percent on average annually, far outpacing China's GDP growth rate. Since 1993, China has remained the most attractive destination for FDI among developing countries.

From 1978 to 2001, the year when China joined the World Trade Organization (WTO), FDI consisted mostly of greenfield investments, and major investment activities like mergers and acquisitions or financing were rare. But after 2001, China honored its commitment to the WTO, gradually opened its capital markets and improved related laws and regulations. The country now is advancing the internationalization of its capital markets.

The NBS reports said China took the initiative in adopting a qualified foreign institutional investor (QFII) system. Currently, the government has approved 54 foreign financial institutions as QFIIs, which can invest a total of $30 billion in the country's capital market. China also is opening securities brokerage services to Sino-foreign joint-venture financial institutions. As of April 2008, the China Securities Regulatory Commission has approved seven joint venture securities companies and 31 joint venture fund management companies.