Under China's prereform economic system, foreign trade was determined strictly within the national economic plan. Goods would be imported if planned supply fell short of planned demand, as might occur as a result of natural disasters, inadequate technology of production at home, shortage of domestic resources, or increases in domestic investment. Normally, imports would play the simple role of a shortage breaker; they would rise or fall substantially only if there was a rapid increase or decrease in the level of investment, which would call for a large increase or decrease in the supply of foreign technology and capital equipment.1 Once the level of imports was determined, planned surpluses would be created of those goods which were relatively abundant in supply so that they could be exported. The level of exports was thus determined indirectly by the level of imports. In the actual formulation of the foreign trade plan, the planners would, of course, take into consideration the export capability of the economy before determining the level of imports.

Since foreign trade was conducted strictly within the national economic plan, there was an obvious advantage in keeping the size of foreign trade small. By limiting its size, the planners would have to create only a comparatively small amount of planned surpluses out of a relatively small range of products in order to finance imports. Thus, fluctuations in the international prices of exports and imports could be easily dealt with and, therefore, would not cause serious disruptions to the economic plan. Partly for this reason, foreign trade was relatively small in prereform China.