As Japan falls into recession, China has the potential to become a new powerhouse for the Asian economic growth in the coming two decades, benefiting all the nations in the region, economists said in Hong Kong on Monday.
"It is certainly valid to argue that life will not be the same for most regional economies after China joins the WTO, but we believe that the changes are for the better," Huang Yiping, vice-president in Asian Pacific economic analysis of the Hong Kong-based Salomon Smith Barney (SSB), a leading multinational investment bank.
Over the coming decade or two, China is likely to be one of the world's fastest-growing economies and soon China may become one of the world's largest markets, Huang said, noting that SSB analysts see this as a rare opportunity for the Asian economies to continue their collective growth success.
Assuming the Chinese economy grows at 7.5 percent for the next 20 years and world economy grows at 3.5 percent, China's share of global GDP would rise to 8 percent in 2020, Huang said. Such a growth rate is phenomenal and brings significant changes to the global economy, he added.
A recent report by Roberto Romulo, chairman of the Philippine Pacific Economic Cooperation Council, showed that Japan and China' s influence on the Asian economy will grow stronger to dim the US role in the region.
However, Huang argued that the United States will continue to exert major influence in the Asian economies by virtue of their being the region's major source of markets for its exports and source of investment.
"The United States will likely remain a global leader, politically and economically, for at least the next half century, "Huang said, but China will possibly replace Japan to become an engine for Asia's economic growth, for Japan's economic decline during the past decade caused a loss for most of the East Asian economies.
Economic observers here also believed that the increasing bad loans have thrown Japan into recession and it will continue to lack strength to be the locomotive for the regional growth in the coming years, though its share of global GDP in the 1980s had already amounted to 12.9 percent.
Analyzing the recent worries over the emerging Chinese economy and China's accession into the WTO, Huang affirmed that China's WTO accession provides an opportunity for Asia to build on its collective growth success, and for most Asian neighbors, the key challenge is not China but their own domestic reforms.
It was wrong to say that China's WTO membership could divert investment and trade opportunities away from other Asian economies and cheap Chinese imports would flood Asian markets, the SSB analyst noted. In fact, he said, post-WTO China will probably import more before it can export more.
During interview, Pu Yonghao, senior economist for Asia Equity of Nomura International Ltd., said that it is true China's increased growth after WTO entry will force restructuring both at home and in neighboring economies.
With the help of cheap labor and WTO reform, China will develop comparative advantages in a number of new industries, mainly labor-intensive sector, but China's share of labor-intensive export is falling with its declining proportion of young workers and domestic diversified economic structure, Pu said.
In terms of foreign direct investment, Huang admitted that prospective WTO membership stimulated large financial flows into China, particularly in the IT industries and financial sectors. However, he pointed out, foreign investment into China and other Asia economies have been proved to be complementary rather than substitutable.
"It's inevitable that Asia's economic structure has to adjust, regardless of China's WTO entry, and the country's WTO entry probably just made the adjustment task more urgent," Huang concluded.
(China Daily December 18, 2001)