China 2002

China 2002: WTO entry and world recession

Ross Garnaut
Ligang Song
Copyright Date: 2012
Published by: ANU Press
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  • Book Info
    China 2002
    Book Description:

    In 2002 China enters the WTO. Long awaited by the world's trading economies, it now comes in a year of global recession. What effect will China's entry into the WTO have at a difficult time? The rapid expansion of China's trade has required large adjustment in its trading partners, and the expansion and adjustment will accelerate with WTO entry. The internal adjustment pressures in China from WTO entry are also immense. Recently dubbed Australia's Ambassador to the region by Rowan Callick of the Financial Review, Ross Garnaut was Australia's ambassador to China through an earlier exciting period when China took its first major steps towards opening to international trade and investment. He was instrumental in the development of China's thinking about the WTO. Ross Garnaut is Chairman of the China Economy and Business Program at The Australian National University. Australian members of the Program and their associates gather each year for the China Update. Ligang Song is leading authority on the internationalisation of the Chinese economy and on the development of the private sector in China. He has worked at Peking University and People's University in Beijing and at the International University in Tokyo.

    eISBN: 978-1-922144-53-9
    Subjects: Economics

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-v)
  3. Figures
    (pp. vi-vi)
  4. Tables
    (pp. vii-viii)
  5. Boxes
    (pp. viii-viii)
  6. Symbols
    (pp. viii-viii)
  7. Abbreviations
    (pp. ix-ix)
  8. Contributors
    (pp. x-x)
  9. 1 Catching up with America
    (pp. 1-16)
    Ross Garnaut

    In Australia and the Northeast Asian Ascendancy, I noted that the powerful sustained growth that had propelled first Japan and then Hong Kong, Singapore, Taiwan and Korea from poverty into the ranks of the medium or high-income economies seemed inexorable only in retrospect (Garnaut 1989). Along the way, the path of growth was strewn with barriers, many of which at the time had seemed as if they might be the one that brought the whole process to an end. In the end, at each hurdle the domestic interests that favoured growth turned out to be strong enough to break through,...

  10. 2 Cyclical growth rebound and secular consumption patterns
    (pp. 17-28)
    Yiping Huang

    2002 is a critical year for the Chinese economy not only because the growth trajectory may reverse its trend but also because a number of key events will take place during the year.

    First, the fourth generation of the leadership is ready to take over from the third at the forthcoming 16th Party Congress in September and the 10th National People’s Congress in March 2003. The transition is likely to be smooth despite the inevitable power struggles and infighting. Candidates from the younger generation are similar to those that they will succeed, but tend to be better educated, more open-minded,...

  11. 3 State-owned enterprise reform in China: has it been effective?
    (pp. 29-44)
    Xiaolu Wang

    Economic reform in China in the past two decades has significantly accelerated economic growth and increased people’s income. However, reform of state-owned enterprises (SOEs) during the major part of this period has basically been ineffective. The rapid economic growth in China during the reform period was mainly led by the rapidly growing non-state-owned enterprises (NSEs)—or later privately-owned or collective-owned enterprises, shareholding corporations, and foreign-invested enterprises. Meanwhile, the performance of the SOE sector has generally been unsatisfactory. Due to their lower growth rate, partly caused by the serious financial problems faced by many of them, the SOEs’ share in the...

  12. 4 WTO accession and regional incomes
    (pp. 45-62)
    Tingsong Jiang

    As observed by many authors (Wu 1999, Sun 2000, Sun and Parikh 2001), the income gap between China’s coastal and inland regions has widened since economic reforms began in 1978. The literature on regional income disparity in China has concentrated on two aspects: the measurement and pattern of regional disparity (Wu 1999) and its sources (Sun 2000, Bao et al. 2001, Démurger et al. 2001). Few authors have discussed the impact of WTO accession on regional incomes. This chapter discusses this issue explicitly, in addition to the exploration of new trends and sources of regional income disparity, using the most...

  13. 5 Competition, ownership diversification and industrial growth
    (pp. 63-80)
    Mei Wen

    The rapid economic development of China, with an average annual GDP growth rate of 9.7 per cent for more than two decades, has been attracting worldwide attention. In particular, among all sectors, China’s industry has achieved the highest average annual growth rate of 11.9 per cent from 1978 to 2000. The fast industrial growth has not only provided Chinese people with abundant manufactured goods and raised living standards, but has also enriched the world market with more variety of commodities at low prices. What makes China’s industrial growth so phenomenal?

    As market transaction, private ownership and freedom of contracts are...

  14. 6 The WTO challenge to agriculture
    (pp. 81-96)
    Xiaolu Wang

    Agriculture is very important in China because it is still the major source of income for half of the country’s 1.26 billion people. From 1952 to 2000, the share of agriculture in GDP decreased from 51 per cent to 16 per cent, whereas the share of agricultural workers in China’s total employment only decreased from 84 per cent to 47 per cent.¹

    The disparity between the share of agriculture in GDP and the share of agricultural workers in total employment indicates how low agricultural labour productivity is when compared with other sectors. In 2000, rural per capita net income (similar...

  15. 7 Entry to the WTO and the domestic private economy
    (pp. 97-110)
    Ligang Song

    China’s entry to the WTO on 11 December 2001 began a new phase in China’s economic transition as the terms of accession require further fundamental change in China’s economic system. Existing studies have focused predominantly on the impact of China’s WTO entry on different sectors of the economy or the economy as a whole. One area that has not been adequately discussed is how conforming with the WTO requirements will affect the development of the emerging domestic private economy in China.

    The challenges facing domestic private enterprises in the wake of the WTO entry are particularly pronounced because domestic private...

  16. 8 Services driving growth
    (pp. 111-122)
    Christopher Findlay and Mari Pangestu

    China has made substantial commitments to liberalisation in the service sector. At the time of full implementation, these commitments are generally more extensive than those that any other group of economies made during the Uruguay Round. Even at the time of accession, China’s commitments are substantial. Commitments of this extent suggest there will be substantial gains to liberalisation in the service sector and the dynamic effects of services liberalisation, we expect, will be an important driver of growth in China.

    The extent and impact of China’s service sector commitments are reviewed in this chapter. We outline the commitments made by...

  17. 9 The impact of WTO accession on FDI
    (pp. 123-148)
    Chen Chunlai

    FDI in China has been one of the most significant features of China’s economic reform and opening up to the outside world. The gradual liberalisation of restrictions on FDI since 1979, and the government’s commitment to further opening, have greatly improved the investment environment. Foreign firms have been attracted by the huge domestic market and pool of relatively well-educated, low-cost labour, making China one of the most attractive destinations for FDI in the world. By the end of 2001, China had attracted a total of over US$390 billion in FDI inflows, making it the largest FDI recipient among developing economies...

  18. 10 Insurance sector following WTO accession
    (pp. 149-158)
    Ken Waller

    Under the WTO accession agreement, China has undertaken to implement significant reforms contributing to the further liberalisation of the insurance sector over a five-year period. This will allow increased foreign participation in ownership in the sector and in the scope of business that foreigners may engage in—geographic limits on foreign operations will be eased considerably.

    One hundred per cent foreign ownership of a non-life subsidiary will be permitted within two years of accession; majority foreign ownership (51 per cent) of brokerages for insurance of large commercial risks, reinsurance and international marine, aviation and transport insurance will be permitted three...

  19. 11 Securities market development: assessing and improving market efficiency
    (pp. 159-170)
    Michael Hasenstab

    In 1978, China began a financial reform process that continues to grow in extent and impact, reducing the role of direct government credit allocation in favour of a market-driven allocation system (Table 11.1). While still in their infancy, these markets are providing an important means of channeling savings into productive economic uses. Under this new system, China’s securities markets take on an increasingly important role and within this framework foreign financial institutions have the opportunity to hasten the development of domestic financial markets and improve efficiency in the allocation of capital.

    These reforms have laid the initial groundwork for the...

  20. 12 Radical economic reform and income distribution
    (pp. 171-182)
    Xin Meng

    Economic reform has experienced two stages—a modest reform stage, and a radical reform stage. Before the mid 1990s the Chinese economic reform followed a gradual approach. During this period inequality in urban areas widened but the Chinese people as a whole were made better off (Zhao and Li 1999).

    Since the mid 1990s, however, economic restructuring has accelerated. The state and collective employment share has reduced from 76 per cent of total urban employment in 1995 to 49 per cent in 1999 and unemployment has increased significantly. Although official unemployment figures have been kept very low, at around 3...

  21. References
    (pp. 183-192)