Possible results of China's accession to wto:
Restructuring of state owned industries and a possible
exodus from the countryside may create an immense pool
of unemployed labor (the push factor acting like
accumulation through forced expropriation). Also there
may be a shock to capital markets and an erosion to
state authority as the financial and telecom sectors
become liberalized. As to the labour market shock, a
quick adjustment to this in the Chinese context is not
likely. Chinese wages may plummet. In China, one
might say that there is development with infinitely
elastic rather than a finite supply of labor (the
specificity of China) and, consequently, relative
wages will not, sui generis, adjust to halt the pull
pressures on agricultural labor or labor in state
owned industries. Furthermore, the waning of macro
policies as a result of public sector shrinkage or the
governments authority over finance, will not allow a
quick readjustment of employment, which is by the way
a very sensitive issue in China. In a word, unless
there are a commensurate number of jobs created in the
industrial sector to absorb surplus labor, the hold
exercised on economic libelralism under communist
control may not last. Given the numbers.. and since
certain economists estimate that there are presently
some 80 to 100 million floating workers in China-
lingering unemployment from the first structural
adjustment, accession for china may mean cessation.
The impact for the developing world as the chinese
will displace exports to the centre from many
developing countries is no better.
--- Stephen E Philion <[EMAIL PROTECTED]> wrote:
> Business Times - 9 Feb 2001
>
http://business-times.asia1.com.sg/5/focus/focus21.html
>
> Vigorous, yet vulnerable
> Despite its robust performance last year, China's
> growth prospects for 2001
> and the next few years are still underscored by
> uncertainty, says JOHN WONG
> HINA
>
> China ended 2000 with a strong 8 per cent economic
> growth, compared to the
> 7.1 per cent of 1999. The Chinese economy, like most
> Asia-Pacific economies
> in the post-crisis period, has rebounded with higher
> growth; but China's
> performance in 2000 is more remarkable in that it
> has arrested a seven-year
> trend of declining growth.
>
> Not long ago, some commentators started to speculate
> that the Chinese
> economy, after 20 years of hyper-growth, might have
> exhausted its growth
> potential and could well be in the transition to a
> more moderate growth
> regime. The strong upturn in 2000 has put an end to
> such lower-growth
> speculation.
>
> Growth in 2000 was fuelled by exceptionally strong
> external demand with
> foreign trade chalking up a record 32 per cent rise.
> Rising exports were
> buoyed by strong economic growth in the US and the
> recovery of the regional
> economies.
>
> But for a large and inward-looking economy like
> China, domestic demand
> (which accounts for nearly 70 per cent of its
> overall economic growth) has
> been even more crucial. The growth of domestic
> demand in 2000 was the
> result of the sustained proactive fiscal stimulus
> plus various government
> measures to boost consumer spending.
>
> In fact, Premier Zhu Rongji, who was widely credited
> for his efforts in
> subduing the 1992-96 inflation by bringing the
> economy to a successful soft
> landing, can now claim extra credit for having
> successfully reined in the
> deflation of 1997-2000 as well.
>
> For 2001, the Chinese economy has been variously
> estimated to grow at
> 7.5-8.0 per cent. But growth prospects for 2001 and
> possibly for the next
> few years are underscored by considerable
> uncertainty. As China has now
> been more integrated with the global economy, it has
> become vulnerable to
> the ebb and flow of the international economy,
> particularly the rising
> spectre of an economic downturn in the US, which is
> China's largest export
> market (absorbing 21 per cent of China's total
> exports in 2000).
>
> The Chinese economy is also susceptible to the
> looming global oil crisis.
> Since 1995, China has become a net oil importer. In
> 2000, China imported 70
> million tons of oil, or about 30 per cent of its
> total consumption. By
> 2005, China's import dependency for oil may well
> reach 50 per cent.
>
> GOING GLOBAL
>
> The greatest uncertainty surrounding the Chinese
> economy for the next few
> years, however, is associated with its imminent
> accession to the World
> Trade Organisation in 2001. The economic effects of
> WTO membership can work
> two ways. Over the longer run, China's economy will
> clearly stand to gain
> in terms of greater efficiency due to further
> economic liberalisation and
> faster progress in domestic economic reform. But all
> eyes will be on the
> short-term adjustment costs, including the political
> and social costs.
>
> Specifically, both exports and imports may go up;
> but China's annual trade
> surplus (which fell 17 per cent in 2000 to US$24
> billion) may well shrink
> further. The inflow of import-substitution type of
> foreign direct
> investment (FDI) may be reduced while
> export-complementing type of FDI is
> expected to go up. So would certain strategic,
> high-tech FDI. This explains
> why some electronic and high-tech firms from Taiwan
> and elsewhere have
> recently rushed to establish beach-heads in China.
>
> China's WTO entry will expose all the major economic
> sectors -- banking and
> finance, agriculture, and state-owned enterprises
> (SOEs) -- to the
> challenges of the open market. But the actual
> sectoral responses will be
> different, depending on their adjustment and
> preparedness.
>
> What appears to be rather odd is that with WTO entry
> already on its
> doorstep, the central government has still not
> mounted concerted efforts
> (beyond paying lip service in the form of various
> directives) to actively
> prepare its potentially exposed economic sectors to
> the coming WTO challenges.
>
> Why such an apparent ineptitude on the part of
> Beijing? Firstly, the
> half-reformed Chinese economy has developed
> considerable institutional
> rigidity, which is further aggravated by the
> proliferation of many special
> interest groups. It will not be easy for Beijing to
> introduce real changes.
> Secondly, most of the adjustment will be borne by
> the provinces, which
> control most of China's economic activities.
>
> The outcome should be sufficiently clear. WTO
> membership is likely to
> sharpen the political tension between the centre and
> the provinces. When
> the crunch of the WTO dispute finally comes, Beijing
> will be at loggerheads
> with the affected provinces and the special
> interests involved.
>
> For the time being, however, Beijing can only wait
> and see. Basically, it
> is still relying on its time-honoured but effective
> strategy of "touching
> the stones to cross the river" (ie, a flexible trial
> and error approach) to
> cope with all WTO-related contingencies. In any
> case, no real WTO effect
> can be expected for the year 2001.
>
> EXPORT-LED RECOVERY
>
> In the meantime, Beijing's economic policy makers
> must be pleased to see
> that most economic sectors (except for agriculture)
> are shaping up pretty
> well in the recovery. Exports are surging;
> contractual FDI (though not
> actual FDI) is rising; consumer confidence is
> returning; fiscal revenue is
> expanding; and many SOEs are making profits for the
> first time in many years.
>
> Above all, while most stock markets in the world
> have plunged, the Shanghai
> and Shenzhen bourses remain the sole exception,
> soaring 125 per cent and 58
> per cent respectively in 2000. Not surprisingly, the
> IMF, in its recent
> forecast, has put China's economic growth in 2001
> the highest among the
> major economies.
>
> Even if the US economy were to experience a hard
> landing this year, China
> could still fall back on its domestic economic
> dynamics for much of its
> economic growth. China's industrial output in 2000
> grew at 11.4 per cent
> (the highest since 1997), compared to 8.9 per cent
> of 1999. This translates
> into 8 per cent GDP growth for 2000. Industrial
> growth was mainly driven by
> the rapid expansion of the IT industry (namely,
> electronic and
> telecommunications industries), which grew at 17.2
> per cent to 583 billion
> yuan (S$119 billion).
>
> China's IT industry has now become the main pillar
> of its manufacturing
>
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