Macroeconomics

1
Macroeconomics in the Global Economy China and
the WTO Why China Should Exit Now
Group 7 Nagendra Bommadevara Tom Connell Michael
de Greiff Adam Jay Keisuke Kirimoto
2
Why China Should Leave the WTO NowOverview

• WTO membership is too early for China
• There are a number of reasons
• Economic
• Social
• Political
• China should exit now and re-enter when it is
  ready to do so

3
Why China Should Leave the WTO NowEconomic
Reasons

• WTO membership exacerbates economic and social
  divide
• Chinese labour force not as mobile as necessary
• Key sectors such as financial institutions are
  not ready
• FDI will focus on East Coast and high-growth
  industries
• Strict rules prevent Chinas reaction to external
  shocks
• Increased FDI may lead to overheating of economy

The required changes are too much, too fast
4
Why China Should Leave the WTO NowChinas
Economic Landscape
5
Why China Should Leave the WTO NowSocial Reasons

• Social tensions and unrest are likely
  consequences of the imbalances
• The population is not well-prepared for the
  changes, especially in the rural areas
• This is likely to further increase the social
  divide in the country (2003 per-capita income in
  urban areas 9.3, in rural areas 4.3)
• The hukou-system restricts mobility between rural
  and urban areas

The required changes are too much, too fast
6
Why China Should Leave the WTO NowPolitical
Reasons

• WTO agreements are biased towards interests of
  the West
• China had to make concessions that no other
  country had to make before
• Social imbalances will produce anti-west,
  anti-globalisation feelings, and weaken the
  political reform process
• WTO requires a radically new approach to policy
  making

The required changes are too much, too fast
7
Why China Should Leave the WTO NowPolitical
Reasons Contd.
8
Why China Should Leave the WTO NowConclusion

• The changes imposed on China by the WTO is too
  much, too fastCrossing the river by feeling
  the stones (Deng Xiaoping) ? Forces China to
  Run through the river
• China does not need WTO to get all the advantages
• Leaving the WTO gives China more freedom to set
  its own change agenda, allowing for a more
  balanced development
• China should exit now and re-enter, once it has
  concluded the necessary internal reforms at its
  own pace

The required changes are too much, too fast
9
Why China Should Leave the WTO NowBackup
BACKUP
10
Why China Should Leave the WTO NowBackup

• Chinas Trade Balance has shown a surplus for a
  number of years, and the impact of WTO accession
  is not clear