THE previous chapter documented China's successful response to the MFA, a response marked by export upgrading, adjustments to the product mix, and market diversification among export destinations. This chapter will explore how that record of industrial restructuring was built, with special emphasis on the policy environment. It begins by reviewing the problems that China's textile industry faced as it sought to cope with quotas. It then discusses the various administrative measures and economic reforms that were taken in an effort to improve the industry's performance. Here, the main argument is that bureaucratic coordination gave way over time to market coordination as the primary means for pursuing economic adjustment in the textile industry, albeit only after administrative measures failed to produce the desired changes. Next, the chapter provides an overview of rationalization efforts within the industry. Lastly, it examines the system of quota allocation as a detailed case study of China's adjustment to life under the MFA.

HANGING BY A THREAD: CHINA COPES WITH THE MFA

Although legendary for their immensity, the problems affecting the textile industry are little different from the basic challenges that all Chinese industries have faced during the post-Mao era.