China's Growth Benefits Neighbours

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Last updated at: (Beijing Time) Sunday, January 19, 2003

China's Growth Benefits Neighbours - ADB

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China's rapid economic upswing will offer unprecedented market opportunities for neighboring economies in East and Southeast Asia in the coming two decades, said a senior expert with the Asian Development Bank (ADB).

China's growth has induced a variety of dramatic adjustments in East Asia, but the benefits for every regional partner will outweigh the costs if accommodating multi-lateral trade policies are developed, said David Roland-Holst, a senior expert with the ADB Institute.

Roland-Holst wrote a report, released on Friday, concerning China's emergence and East Asian trade patterns through 2020.

With a PhD in Economics from the University of California at Berkeley, Roland-Holst is also the James Irvine Professor of Economics at Mills College and director of the Rural Development Research Consortium at U.C. Berkeley.

"While China won't become the region's largest exporter until 2010, it will be the largest East Asian importer by 2005," said Roland-Holst, adding that the growth of China's internal market will accelerate other East Asian economies' exports and income growth and create historic opportunities for regional investors.

According to the report, China will outperform Japan to become East Asia's largest trading country by the year 2020.

"During the upcoming two decades of sustained and dynamic growth, China will develop a structural trade surplus with Western economies," Roland-Holst said. ``But a deficit of about the same magnitude with East Asia will arise, and most of the net benefits of China's export successes will ultimately accrue to its regional neighbors.''

According to the report issued yesterday, China will play two roles in the region due to its sheer size and stage of development. It will stiffen regional export competition in a broad spectrum of products.

``However, the other side of the coin is that China's long-term growth trajectory will make it a prominent importer in East Asia,''Roland-Holst said. This aspect has attracted less attention because China's internal economy is still emerging, he added.

China's economic emergence over the last two decades, and in particular its recent accession to the World Trade Organization, portends a dramatically changed landscape for East Asian trade.

With more than US$50 billion in foreign direct investment (FDI), China outperformed other economies to receive the most FDI in the world in 2002, and its foreign trade hit US$600 billion for the first time.

This has aroused concern around the region, where China's success as an exporter is perceived as a threat to other economies that rely on external demand as an essential source of growth.

This report presents an empirical analysis of China's regional economic emergence, intended to improve long-term visibility for policy makers, help overcome the threat-bias and better identify the opportunities for other East Asian economies on the horizon.

"The future benefits and costs for individual East Asian economies will depend upon the extent to which they adapt to more open multi-lateralism," said Roland-Holst, adding that only in this way can they avoid being crowded out of their established export markets and fully capture new export opportunities.

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