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The Open Door Policy is a term in foreign affairs initially used to refer to the United States policy in the late 19th century and early 20th century outlined in Secretary of State John Hay's Open Door Note, dispatched in 1899 to his European counterparts. The policy proposed to keep China open to trade with all countries on an equal basis; thus, no international power would have total control of the country. The policy called upon foreign powers, within their spheres of influence, to refrain from interfering with any treaty port or any vested interest, to permit Chinese authorities to collect tariffs on an equal basis, and to show no favors to their own nationals in the matter of harbor dues or railroad charges.
The Open Door policy was rooted in desire of American businesses to trade with Chinese markets, though it also tapped the deep-seated sympathies of those who opposed imperialism, especially as the policy pledged to protect China's territorial integrity. While the policy was originally aimed to safeguard Chinese sovereignty and territorial integrity from partition, it was mainly used to mediate competing interests of the colonial powers without much meaningful input from the Chinese. Thus, the Open Door policy had little legal standing and created lingering resentment; it has since been seen as a symbol of national humiliation by many Chinese historians.
In more recent times, Open Door policy describes the economic policy initiated by Deng Xiaoping in 1978 to open up China to foreign businesses that wanted to invest in the country. This policy set into motion the economic transformation of modern China.
The "Open Door" was a principle, not a policy formally adopted into a treaty or international law. It was invoked or alluded to but never enforced as such. Starting with the Japanese seizure (1931) of Manchuria and the creation of Manchukuo, however, the Open Door principle was broken with impunity and increasing frequency. Technically, the term "Open Door Policy" can be only referred to as before the founding of the People's Republic of China in 1949. Regarding China's international trade policy introduced after Deng Xiaoping took office, it is termed as China's policy of opening up to the outside world. Although the Open Door is generally associated with China, it was recognized at the Berlin Conference of 1885, which declared that no power could levy preferential duties in the Congo.
In the First Sino-Japanese War in 1895, China at the time faced imminent threat of being partitioned and colonized by imperialist powers such as Britain, France, Russia, Japan and Germany. After winning the Spanish–American War of 1898, with the newly acquired colony the Philippine Islands, the United States increased its Asian presence and was expecting to further its commercial and political interest in China. It felt threatened by other powers' much larger spheres of influence in China and worried that it might lose access to the Chinese market should the country be partitioned. As a response, William Woodville Rockhill formulated the Open Door Policy to safeguard American business opportunities and other interests in China. In September 6, 1899, U.S. Secretary of State John Hay sent notes to the major powers (France, Germany, Britain, Italy, Japan, and Russia), asking them to declare formally that they would uphold Chinese territorial and administrative integrity and would not interfere with the free use of the treaty ports within their spheres of influence in China. The Open Door Policy stated that all nations, including the United States, could enjoy equal access to the Chinese market.
In reply, each country tried to evade Hay's request, taking the position that it could not commit itself until the other nations had complied. However, by July 1900, Hay announced that each of the powers had granted consent in principle. Although treaties made after 1900 refer to the Open Door Policy, competition among the various powers for special concessions within China for railroad rights, mining rights, loans, foreign trade ports, and so forth, continued unabated.
In 1902, the United States government protested that Russian encroachment in Manchuria after the Boxer Rebellion was a violation of the Open Door Policy. When Japan replaced Russia in southern Manchuria after the Russo-Japanese War (1904–05) the Japanese and U.S. governments pledged to maintain a policy of equality in Manchuria. In finance, American efforts to preserve the Open Door Policy led (1909) to the formation of an international banking consortium through which all Chinese railroad loans would agree (1917) to another exchange of notes between the United States and Japan in which there were renewed assurances that the Open Door Policy would be respected, but that the United States would recognize Japan's special interests in China (the Lansing–Ishii Agreement). The Open Door Policy had been further weakened by a series of secret treaties (1917) between Japan and the Allied Triple Entente, which promised Japan the German possessions in China on successful conclusion of World War I. The subsequent realization of such promise in the Versailles Treaty of 1919 angered the Chinese public and sparked the protest known as May Fourth Movement.
Since the policy in effect hindered Chinese sovereignty, the government of the Republic of China endeavored to revise related treaties with foreign powers in the twenties and thirties. Only after the conclusion of World War II did China manage to regain its full sovereignty.
In China's modern day economic history the Open Door Policy refers to the new policy announced by Deng Xiaoping in December 1978 to open the door to foreign businesses that wanted to set up in China. Special Economic Zones (SEZ) were set up in 1980 in his belief that in order to modernize China's industry and boost its economy, it needed to welcome foreign direct investment. Chinese economic policy then shifted to encouraging and supporting foreign trade & investment. It is the turning point in China economic fortune that truly started China on the path to becoming 'The World's Factory'.
Four SEZs were initially set up in 1980, namely Shenzhen, Zhuhai and Shantou in Guangdong, and Xiamen in Fujian. These SEZs were strategically located near to Hong Kong, Macau and Taiwan, but with a favorable tax regime and low wages in order to attract capital and business from these overseas Chinese communities. Shenzhen was the first to be established and it showed the most rapid growth, averaging at an astonishing growth rate of 40% per annum between 1981 to 1993, compared to the average GDP growth of 9.8% for the country as a whole. Further SEZs were later set up in other parts of China.
In 1978, China was ranked 32nd in the world in export volume, but by 1989, it had doubled its world trade and became 13th largest exporter. Between 1978 and 1990, the average annual rate of trade expansion was above 15 percent, and a high rate of growth continued for the next decade. In 1978 its exports in the world market share was negligible, in 1998 it still had less than 2%, but by 2010, it had a world market share of 10.4% according to the World Trade Organization (WTO), with merchandise export sales of more than $1.5 trillion, the highest in the world. In 2013, it was reported that China had overtaken the USA and became the world's biggest trading nation in goods with total for imports and exports reaching US$3.87 trillion.