Effects of High Economic Growth of China on Asia-Pacific Economies

1
Effects of High Economic Growth of China on
Asia-Pacific Economies

• Koichi Ishikawa
• Institute for Asian Studies
• Asia University

2
How does Chinas economic growth affect
Asia-Pacific economies?

• Through trade
• Export supply of low-priced products ?
  beneficial to consumers but disadvantageous for
  producers (and employees)
• Import increase of manufactures and raw
  materials
• Through inward investment
• Through outsourcing
• By movement of natural persons

3
Rise of China in World Trade
( million)
Export 1990 1995 2000 2004
Rank 14 12 7 3
Value 62,091 148,700 249,203 622,808
Import 1990 1995 2000 2004
Rank 17 13 8 3
Value 53,345 132,084 225,094 581,727
(IMF,IFS)
4
Main Exporters to China
( million)
2001 2002 2003
Japan 30,941(7.7) 40,012(9.6) 57,474(12.2)
Republic of Korea 18,190(12.1) 23,753(14.6) 35,110(18.1)
USA 19,182(2.6) 22,128(3.2) 28,368(3.9)
EU15 26,649(1.2) 32,221(1.3) 44,984(1.5)
ASEAN5 14,991(4.1) 19,915(5.2) 28,212(6.7)
In parenthesis share of exports to China
5
Main Importers from China
( million)
2001 2002 2003
USA 102,278(9.0) 125,192(10.8) 152,436(12.1)
Japan 52,016(16.5) 55,694(18.3) 68,021(19.7)
Republic of Korea 11,561(9.1) 14,917(10.9) 19,718(12.3)
EU15 56,065(2.7) 64,798(3.0) 92,168(3.6)
ASEAN5 15,747(5.6) 21,261(7.3) 25,762(8.1)
In parenthesis share of imports from China
6
Net Exports to China(Trade Balance)
( millions)
2003
USA -123,068
EU15 -47,179
Japan -10,547
Republic of Korea 15,393
ASEAN5 2,450
Taiwan 11,514
7
FDI to China
( million)
1995 2001 2002 2003
Hong Kong 20,060 16,717 17,861 17,700
Japan 3,108 4,348 4,190 5,054
USA 3,083 4,433 5,424 4,199
EU15 2,131 4,183 3,710 3,930
Republic of Korea 1,043 2,152 2,721 4,489
Taiwan 3,162 2,980 3,971 3,377
World 37,521 46,878 52,743 53,505
8
Concentration of investment in China
()
2003
Hong Kong 55.2
Republic of Korea 15.0
Taiwan 6.8
Singapore 4.2
Japan 1.0
USA 0.3
UK 0.2
(Investment of Country A in China Total FDI in
China)(Outward FDI of Country A World outward
FDI)
9
Share of Main Exporters to USA
1990 2003
NAFTA 24.4 35.5
EU15 20.0 23.2
Japan 18.1 10.8
China 3.1 8.6
Republic of Korea 3.7 3.2
ASEAN5 5.5 6.1
Taiwan 4.6 2.4
10
USA(1)

• Trade deficit with China
• NAFTA and EU expand export share
• Trade diversion increased exports from China
  caused by trade diversion from other East Asian
  countries to China
• Trade diversion caused by FDI to China
• Exports by US firms investing in China

11
USA(2)

• Returns from investment in China
• Procurement of parts and components from China
• Outsourcing
• Infringement of IPR
• Industrial hollowing-out (Foundries in USA
  decreased from 6,150 in 1955 to 2,480 in 2004)
• Loss of customers

12
Japan

• China plus Hong Kong Biggest Trading Partner
  surpassing USA in 2004
• Trade with China records a surplus considering
  trade through Hong Kong in 2004
• Engine of economic recovery (Orders from
  ChinaIron Steel, Construction Machinery,
  Shipbuilding, Automobile, etc.)
• Complementation (Japan exports high value-added
  products and imports low value-added products)
• Trade with China prompts industrial restructuring
  
• Industrial hollowing-out and trade conflicts

13
Trade balance with China
( million)
Direct trade Trade (including through Hong Kong)
2001 27,014 15,317
2002 21,826 8,224
2003 17,974 1,042
2004 20,832 157
(JETRO)
14
ASEAN

• Competition for FDI
• Expansion of trade with China
• Share of manufactures 74 (exports) 86(imports)
• Intra-industry trade (electric machineries)
• Smuggling
• Low-priced, low-quality Chinese products meet the
  needs of low income people
• Increased FDI from China
• FTA with China

15
FDI to ASEAN and China
( million)
(UNCTAD)
16
ASEANs trade with ChinaValue and rate of
increase
( million)
2000 2001 2002 2003 2004
Exports 22,181 23,230 4.7 31,193 34.3 47,350 51.8 62,955 33.0
Imports 17,334 18,559 7.1 23,574 27.0 30,935 31.2 42,903 35.4
(China customs)
17
FTA of China

• 2001 Agreed to establish FTA with ASEAN in 10
  years
• 2003 Signed CEPA with Hong Kong
• 2004 Started Early Harvest program
• 2004 Started study of FTA with Republic of Korea
• 2005 Started tariff reduction from July
• 2010 Scheduled to establish FTA with ASEAN

18
Importer of Raw Materials
(rate of increase)
2003 2004
Crude oil 55.4 71.1
Iron ores 75.4 161.6
Copper ores 60.0 72.6
Cobalt ores 101.5 255.2
Lead ores 139.6 112.3
Chromium ores 91.3 150.6
(China customs)