Trade has become an increasingly important part of China’s overall economy, and it has been a significant tool used for economic modernization. The direction of China’s foreign trade has undergone marked changes since the early 1950s. In 1950 some three-fourths of the total was accounted for by trade with noncommunist countries, but by 1954—one year after the end of hostilities during the Korean War—the situation was completely reversed, and communist countries accounted for about three-fourths. During the next few years, the communist world lost some of its former importance, but it was only after the Sino-Soviet breach of 1960—which resulted in the cancellation of Soviet credits and the withdrawal of Soviet technicians—that the noncommunist world began to see a rapid improvement in its position. In 1965 China’s trade with other socialist countries made up only about one-third of the total.
A significant part of China’s trade with the developing countries has been financed through credits, grants, and other forms of assistance. At first, from 1953 to 1955, aid went mainly to North Korea and North Vietnam and some other communist states; but from the mid-1950s large amounts—mainly grants and long-term interest-free loans—were promised to politically uncommitted developing countries. The principal efforts were made in Asia—especially to Indonesia, Burma (Myanmar), Pakistan, and Ceylon (Sri Lanka)—but large loans were also granted in Africa (Ghana, Algeria, Tanzania) and in the Middle East (Egypt). After Mao Zedong’s death in 1976, however, the Chinese scaled back such efforts.