Quoting Anthony D'Costa <[EMAIL PROTECTED]>: "I share some of Marty's concerns and Doug is right that small countries in an era of integration can't do much. But when speaking of China how much growth and development is export-led?"
My reply: As for China�s export dependence, according to the World Bank, before 1978, China�s foreign trade was negligible, but, since then, the ratio of trade to GDP has quadrupled�from a mere 8.5 percent in 1978 to 36.5 percent in 1999. That is a pretty significant gain for export activity. Moreover, that activity is becoming more central to China�s growth. According to Stephen Roach, chief economist at Morgan Stanley, exports now account for 74 percent of the growth in the Chinese economy in 2002. Thus domestic demand accounts for only 26 percent of the growth. And much of this demand has been driven by state infrastructure investment and foreign direct investment. And the share of foreign companies in exports has grown rapidly, from less then 2 percent of total Chinese exports in 1986 to 48 percent in 2000; their imports rose from less than 6 percent to almost 52 percent. As for some of the consequences of this rise in Chinese export orientation, according to the Bank of International Settlements: �China is already a major producer of labour-intensive manufactures. Moreover, as a result of its accession to the WTO, it is expected to capture a large share of the liberalised global market in textiles and apparel when the WTO Agreement on Textiles and Clothing expires in 2005. China thus poses major challenges for current producers of textiles and other labour intensive manufactures in Southeast Asia. In addition, the country has moved steadily up the value added chain, and its exports of machinery and high-tech products have increased rapidly. China�s share in Asia�s total electronics exports has more than doubled during the past five years to 30% in 2002. In contrast, the shares of Malaysia and Singapore have fallen off sharply. Anecdotal accounts also suggest that production facilities in high-tech sectors are being relocated to China from emerging East Asia as well as Japan.� Looking at more high end electronics exports, a report by the Japan Electronic and Information Technology Industries Association notes that China will be the largest electronics exporter in the world in 2003 with the highest market share in 8 out of 12 major export items. These include mobile phones, color TV sets, laptop computers, desktop PCs, PDAs, DVD players, DVD drives, and car stereos. This represents a steady climb for china reflecting its growing importance as a platform for advanced transnational corporations. Thus it was number one in only two categories in 2000, three in 2001, five in 2002, and expected 8 in 2003. This rise comes at the expense of other countries, representing a shift in production. Korea did not have a single number one. And in four items, Korea suffered a decline in market share: color TVs, DVD players, VTRs, and car stereos. Among four items not dominated by China, Japan is expected to lead in digital cameras, and car navigators, Indonesia in VTRs, and Singapore in HDDs, respectively. However, according to the report, China is likely to catch up with Indonesia and Singapore within two years as production of VTRs and HDDs is showing rapid growth. Japan had the highest rank in four items until as late as 2000. This year China is expected to overtake Japan in DVDs and DVD drives. Looking just at Japan, according to the Far Eastern Economic Review: �In the last decade, Japanese investment in China has doubled, to the point where more than half of China-Japan trade is conducted among Japanese companies. At the same time, Japan�s trade with China, including Hong Kong, more than tripled, to $115 billion last year... China is luring away billions of dollars� worth of Japanese investment, the argument goes, contributing to a 20 percent drop in Japanese factory employment during the 1990s. The Japanese, justifiably or not, feel helpless against Chinese wage rates that are 5 percent of Japanese levels. Adding to Japan�s despair, China is quickly moving past bicycles and basic TV sets into the same high-technology, high-value products where Japan has long staked its claims. This year, for the first time, machinery displaced textiles as the leading sector of Chinese products imported by Japan.� As for some of the ASEAN countries, China�s rise is far more threatening. For one thing these countries tend to produce products similar to ones produced by China. And they are more dependent on FDI to sustain that production. So, as China develops its industries thanks to FDI, it becomes harder to imagine continuing economic progress in these countries. In terms of export similarity, according to the World Bank, �The correlation of exports, even at the five-digit (SITC) level between China and middle-income countries such as Indonesia and Thailand is significant and has been increasing.� The World Bank highlights the dangerous situation as follows: �The risk to exports to third-country markets is confirmed by a market-by-market and product-by-product analysis for sample countries. For this analysis we identify �exports at risk� to the U.S. and Japan markets based on their importance to the exporting country and the extent to which they compete with similar products from China. Exports in product categories that are characterized by both a high share of Chinese imports (at least 5 percent) and unit values close to those of competing imports from China are deemed to be most at risk. For Thailand and Indonesia, the results show that 15-25 percent of exports to the United States and Japan are at risk from growing competition from China.� So, in short, China is now attracting more FDI then any other country in the world. Companies from Japan, the U.S., South Korea, etc. are all establishing production bases in China to better low costs and compete in global trade. This is coming at the expense of production in other countries, including third world countries. The result is that the governments in these countries desperate to hold on to investment and production are engaged in actions designed to intensify work and lower wages to the detriment of their workers. More globally, we have a new level of the same problem that helped to generate the 1997-98 economic crisis. A regional export process that is aimed at exporting outside the region. China runs a major surplus with the U.S. and deficits with other regions, especially East Asia. So the focus of the export activity is on the U.S. and other countries are finding their production integrated into a structure that includes more and more production located in China. The process is not positive for workers in any of the countries in the region as they are increasingly been drawn into direct competition to offer the most attractive conditions for TNCs. Marty Hart-Landsberg
