Libmonster ID: JP-1433

Jiang Chengzong, Yang Zezhui bianzhu. Beijing: Shijie zhishi chubanshe, 2005. 326 p.*

China's economy cannot but be one of the largest in the world simply because of the huge population of this country. Even with relatively low labor productivity and other factors of production due to the number of people employed in the national economy, Chinese GDP will still represent a very significant amount in comparison with the economies of most countries in the world. In the pre-reform period, this circumstance did not manifest itself in an obvious way due to the very nature of the command and administrative system, which made it difficult to compare the economic indicators of China and other countries: if in market economies GDP is the value of goods and services sold, then in the traditional planning system, voluminous macroeconomic indicators were the value of manufactured products distributed by directive methods. The closed, autarkic nature of the Chinese economy at that time also affected: the country's exports and imports were measured in just a few billion dollars, and the yuan's administrative exchange rate had little relation to economic realities.

In the context of reforms and the policy of "openness", high rates of economic growth in China naturally led to a progressive increase in the country's share in the global economy. Back in the mid-1990s, many experts who used the method of calculating national GDP at purchasing power parity came to the conclusion: China has become the second largest economy in the world after the United States. In the middle of the current decade, a number of studies proved that China has also become one of the main "locomotives" of the world economy, and its contribution to global economic growth in recent years has also been second only to that of the United States. China's presence in international commodity and financial markets is becoming increasingly visible. In 2003, the People's Republic of China, ahead of Japan-


China's economic growth and its impact on the world. Ed. Jiang Chengzong and Yang Zezhui. Beijing: Publishing house "World Knowledge", 2005. 326 p.

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It ranked third in the world in terms of foreign trade after the United States and Germany. The inflow of foreign direct investment to China has stabilized at a high level. Taken together, all this suggests a new level of its relations with the outside world, which is qualitatively higher not only in relation to the pre-reform period, but also in comparison with the mid-1990s.

These fundamental changes were largely stimulated by changes in the foreign economic policy of the Chinese authorities. Until the end of the 1990s, under all official guidelines for "openness", the access of national enterprises to foreign trade activities was strictly metered out, in most cases it was carried out through state intermediaries. But at the turn of the century, the Chinese leadership proclaimed the strategy of "Going Outside", which provided for the development of world markets not only through export expansion of goods, but also by exporting national capital abroad and creating production sites in other countries. As part of the adaptation to the norms of the World Trade Organization (the PRC became a member in December 2001), there was a transition from the permissive procedure for entering foreign markets to the registration one, and companies of all forms of ownership were granted the right to carry out export-import operations. At the same time, the fulfillment of obligations to WTO partners implies a whole system of measures to further liberalize the access of foreign goods and capital to the domestic market of the PRC. As a result, China's role is rapidly growing not only as a source of commodity exports, but also as an importer.

Nevertheless, forecasts of future developments can hardly be based on a simple extrapolation of current trends. China's transformation into one of the largest players on the global economic scene has taken place at a time when the country's fundamental domestic economic problems remain unresolved. China is still a developing country undergoing industrialization and urbanization. In terms of per capita GDP, it is in the second hundred countries in the world, and the structure of its population is still dominated by the peasantry, most of them poor. The national scientific and technological potential remains weak, and it is not necessary to say that China is one of the technological leaders shaping global development trends. The market transformation of the Chinese economy is relatively slow, and many key economic blocks remain under-reformed (the state sector in industry, the banking system, rural land relations, control over internal migration, etc.). If at first market reforms were perceived by the population as a process that improves the material situation of the absolute majority of society, then in the last decade the progressive property stratification has become a source of constant social tension.

In the current circumstances, China's increased interaction with the outside world leaves a wide field for interpretation and encourages us to think about a number of issues. Does the current state of affairs mean that China is actually increasing its influence in the global economy, or is it being drawn into the global economy as a subordinate, dependent "player"? Given the many economic and social risks involved, can the Chinese economy even be expected to maintain its current growth rate? And if not, and it is likely to see a decline in momentum or even a crisis, what does China's economic growth represent for the rest of the world - additional opportunities for economic cooperation or a source of threats to the stability of the entire global economy? These issues are actively discussed by the international expert community.

The reviewed book is a collection of materials from a symposium held in Beijing in April 2004 as part of events related to the meeting of the executive committee of the international non-governmental organization Pacific Economic Cooperation Council (TEC). The symposium was organized by the Chinese National Section of the TSE and the Institute of Problems of the Asia-Pacific Region of the Academy of Social Sciences of the People's Republic of China. Both Chinese and foreign experts, including those from English-speaking countries in the region, took part in the discussion. Thus, the book gives an idea of how the situation is viewed both from within the country and from China's foreign partners.

The question of the sustainability of economic growth in China has become particularly relevant due to the obvious change in the macroeconomic situation in the country at the turn of 2002-2003. After several years of deflationary easing in business activity, the Chinese economy is still growing.

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In 2003-2004, the economy began to grow again at an annual rate of 10%. Experts began to discuss whether the newly emerged situation is another "overheating" of the economy and, accordingly, whether such high rates of economic growth can continue to be maintained. Well-known Chinese economists Fan Gang (Director of the Institute of National Economy of the Reform Foundation of China) and Yu Yunding (Director of the Institute of World Economy and Politics of the People's Republic of China) made presentations on this topic at the symposium.

Their opinions did not coincide in describing current trends. According to Yu Yongding, the new acceleration of economic growth indicates the success of the authorities ' anti-deflation policy. There is no need to talk about "overheating", there is a healthy development of the economy (pp. 69-70). On the contrary, according to Fan Gang, the economy has already entered a state of "overheating" since the end of 2002, and the current rate of economic growth is obviously unstable. He believes that the general reason for excessively high rates remains the same as in the past "overheating": These are specific relations between the state and enterprises that minimize investment risks and generate a micro-level craving for excessive investment growth. But there are also some new nuances. The economic dynamics were affected by the stimulating effect of the country's accession to the WTO. For the first time, one of the engines of "overheating" was the investment activity of private enterprises, which was facilitated by the recent provision of legislative guarantees to them. The idea put forward by the central political leadership a few years ago to accelerate urbanization prompted local authorities to more actively stimulate the development of manufacturing industry in their subordinate territories. As a result, the central government is now less able to contain "overheating" by cutting investment programs of local administrations. But, Fan Gang believes, it is still necessary to implement a restrictive policy: it is necessary to ensure a "soft landing" - to bring real growth rates in line with the potential of the economy (pp. 56-57).

At the same time, both Fan Gang and Yu Yongding were optimistic in their assessment of the prospects, stating that the Chinese economy can now grow steadily by 8-9% per year, i.e. the potential growth rates are in any case not far from the observed ones. Both economists noted that resources for maintaining economic dynamics exist due to the preservation of significant reserves of cheap labor; a very high savings rate; the flow of urbanization, which contributes to the expansion of effective demand, including through the formation of a middle class; and active infrastructure construction. These factors will remain in force for a long time, which means that China can develop at a high pace in the foreseeable future.

But both reports focused heavily on social and financial risks that threaten the stability of economic growth. Fan Gang noted that the surplus of labor resources in the village and the poverty of the rural population will continue for quite a long time. Moving hundreds of millions of people quickly to non-agricultural activities will obviously not work, and social conflicts will not decrease in the coming years. Yu Yundin pointed out that in China, the Gini coefficient, which measures the degree of social inequality, has long since, since the early 1990s, gone beyond 0.4, which is usually considered the "danger limit", and this does not fit well with the self-identification of the PRC as a socialist country. In the financial sector, both speakers identified the possible new accumulation of "bad debts" by the unreformed banking system as the main risk factor. But both economists ' forecasts are quite positive about China's ability to cope with all these problems. Fan Gang noted that a social explosion is unlikely, because incomes in rural areas are still growing, albeit more slowly than in cities; a serious financial crisis in China is also unlikely to threaten, since the situation in the fiscal system remains stable. He was supported by Yu Yongding, who stated that the state budget deficit in relation to GDP remains under control, and since 2003 this indicator has been decreasing (pp. 58-60, 77-78).

Somewhat surprisingly, neither Fan Gang nor Yu Yongding paid attention to another traditionally "bottleneck" of the Chinese economy - the imbalance between the rapid development of the manufacturing industry and the lagging fuel and energy complex, although this problem has worsened in recent years. Following a sharp increase in demand for energy resources in 2003 - 2004, most provinces of the PRC experienced power outages, and there were shortages in the oil products market. However, at the symposium, the following was presented:

page 191


several reports specifically devoted to the Chinese energy sector. Thus, Xia Yishan (researcher at the Chinese Institute of International Affairs) recalled that the energy balance of the PRC is still dominated by coal (it accounts for up to 2/3 of all energy consumption), which indicates China's backwardness in comparison with Western countries, where oil and gas became the main sources of energy back in the 1950s. However, in absolute terms, oil use has grown rapidly over the past 20 years, and China eventually replaced Japan as the world's second-largest oil consumer after the United States. Meanwhile, domestic oil production has been stagnating since the 1980s: China's oil production in 1978 was about 100 million tons, and in 2002 - 169 million tons, i.e., over a quarter of a century, it increased only by 69%, while GDP grew almost 10 times (p. 238).

China's recoverable oil reserves are relatively limited and are concentrated mainly in areas with unfavorable production conditions - in deserts and on the offshore shelf. Therefore, the rate of exploration of new fields is low, and the introduction of new capacities does not compensate for the decline in production in the oil fields that have been developed for a long time. It is not surprising that since 1993, China has become a net importer of oil, its imports have grown rapidly, and in 2003, imports already covered 38% of domestic demand. It is estimated that by 2020, domestic oil consumption may reach 400 million tons, and more than 50% of this value will be provided by external sources. Xia Yishan stated that the Chinese economy is becoming increasingly dependent on oil imports, and consequently on possible supply disruptions and price fluctuations on international markets (p. 239).

He was supported by Daniel Teo (Vice President of British Petroleum-China), who called the challenges that China faces in the field of energy supply unprecedented: nowhere else in the world has such large-scale tasks been solved. According to D. Teo, the demand for energy resources and petrochemical products will continue to increase, not only due to the growth of production in the Chinese manufacturing industry, but also due to the expansion of the country's automobile fleet, electrification and gasification of the housing stock that is taking place in the course of economic development (p.101). Among the measures being implemented to fill the shortage of domestic energy sources, and Xia Yishan, etc. Teo highlighted the active purchases of oil and gas assets by state-owned companies abroad (in Sudan, Gabon, Indonesia, Australia, Kazakhstan, and Peru). Xia Yishan noted that direct investment provides direct access to foreign fields, and this is preferable from the point of view of national energy security than simple import purchases of oil (p.240). However, D cautioned. Theo, there are some problems with implementing this strategy. As a rule, access to foreign deposits is possible only if you join consortia with leading Western TNCs, and in order to act as equal partners in such agreements, you need your own powerful technological and financial base, which Chinese companies still lack (p. 103).

In any case, D. Teo noted, Chinese demand for energy resources already directly affects the economic situation around the world: high world oil prices in recent years are largely a consequence of the new acceleration of the Chinese economy after 2003. This statement was supplemented by Pierre Allya (Executive Director of GORO Nickel-New Caledonia), who pointed out that the intensification of China's import purchases after 2003 contributed to a price warm-up in the world markets of ferrous and non-ferrous metals. In particular, all new nickel projects in New Caledonia are now being implemented specifically for supplies to China (pp. 94-95).

So, it turns out that the very continuation of Chinese economic growth now largely, if not decisively, depends on external conditions - the reliability of imported supplies of raw materials, primarily oil. But can we say that other countries are also dependent on China to maintain their own economic dynamics? The materials of the book show that something similar can already be stated, albeit with reservations, in relation to the countries and territories of East and South-East Asia.

Singapore-based researcher Tan Kong Em (senior economist at the World Bank office in Beijing) noted in his report that the share of electronic products in Chinese exports has increased rapidly since the mid-1990s, and in 2003, the share of electronic products in the World Bank's exports has increased rapidly. it reached 35% (p. 110). At the same time, China's imports of electronic components from other countries grew rapidly.

page 192


countries in the region. In Thailand, Malaysia, the Philippines, Taiwan, and South Korea, the share of electronics in their commodity exports to China has sharply increased and approached 50%. All this suggests the formation of an electronic cluster in the region, in which China acts as an assembler of computers, televisions, video players and peripherals for them, and high-tech components for assembly (equipment, semiconductors, integrated circuits) are supplied from other countries of the Asia-Pacific region. In other words, when applied to new-generation electronics and electrical engineering, the situation looks rather unconventional: China's backwardness is manifested not in the inability to produce finished products, but, on the contrary, in the fact that China uses cheap labor to carry out the final assembly, the components for which are supplied by more developed countries. Although, according to the forecast of Tan Kong Ema, high-tech production will be mastered in China in the next 10 years. He also drew attention to the recent increase in the share of supplies to China in the exports of neighboring Asian countries, as well as in their GDP. This shows that China has become a "locomotive" for the economy of the entire region (pp. 120-121).

Zhang Yunling (Director of the Institute of ATP Problems at the AOH of the People's Republic of China) asked whether China's economic rise has led to the formation of a fundamentally new model of development in the East Asian region. The previous "goose pack" model led by Japan, as is well known, was based on the gradual withdrawal of labor-intensive export industries from more developed countries to less developed ones: first from Japan to the newly industrialized countries, and then from there to the ASEAN countries. Sales of the products were mainly carried out in the United States. In theory, Japan was supposed to become another key export market for the countries of the region as it strengthened its position, but in reality this did not happen-first because of the strict protectionist policy of the Japanese authorities, and then because of the stagnation of the Japanese economy in the 1990s. Therefore, the developing countries of the region objectively needed another large market, which could reduce their dependence on the US market.

At first glance, China has also joined the regional division of labor as an exporter of low-tech labor-intensive products. But, Zhang Yunling stressed, the development trajectory of his country differs from the cases of Japan and the NIS/ASEAN: the scale of the economy and, accordingly, the domestic market in China is much larger, and therefore the role of import substitution for the growth of its economy is significantly higher. For the entire region, China has already become not only a place of concentration of export production, but also a major importer, as well as an investor. So far, according to Zhang Yunlin, it is too early to talk about the formation of a new development model, the situation of a "missing market"still remains. But if current trends continue, a new model may develop over the next 10 to 20 years. Mutual flows of direct investment between Asian countries contribute to boosting trade within the region itself, and not just between producing countries and export markets for end-demand products. As a result, Zhang Yunling concluded, the Asia-Pacific region can develop an economic mechanism with two "engines" - the United States and China, while international economic cooperation can be implemented both through pan-regional structures such as the Asia-Pacific Economic Cooperation Forum (APEC), and through free trade agreements in certain subregions (p. 153-157)..

In any case, China's attitude to regional economic integration efforts has indeed changed in recent years. According to Yang Zezhui (an employee of the Chinese national section of the TSE), this turn was prepared by the entire logic of the country's economic strengthening. As recently as the 1990s, China did not show any inclination to formalize its participation in regional trade agreements simply because the level of liberalization of its own foreign trade sector was low, and the country could not afford anything else. Now, the Chinese economy is ready to effectively participate in international competition and receive long-term benefits from it. The process of negotiations on trade liberalization at the global level, within the WTO, has been stalling since the late 1990s. As a result, there has been an increased interest in regional liberalization: in recent years, the Asia-Pacific region has seen a real boom in negotiations on the creation of bilateral or multilateral free trade zones. China has chosen to participate in this process, especially since in the context of Japan's relative economic weakness, it can compete with it for leadership in regional integration conditions.

page 193


China has already become a party to several trade liberalization agreements. In 2002, an agreement was reached on the formation of a China-ASEAN free trade zone by 2010, and in 2003, agreements were signed "on closer trade and economic relations" with Hong Kong and Macao. Yang also considers cooperation under the "ASEAN + 3" scheme (with the participation of China, Japan and South Korea) and the creation of a free trade zone within the framework of the Shanghai Cooperation Organization to be promising areas of regional cooperation for China. As for APEC, the goals stated by its participants in the 1994 Bogor Declaration (the creation of a free trade zone with the participation of developed countries of the Asia - Pacific region by 2010, and with the participation of developing countries-by 2020) seem less and less realistic. Within APEC, regionalization processes are underway, and this structure itself is gradually fading into the background in the economic diplomacy of the Asia-Pacific countries, including China (p.252-260).

Speaking at the symposium, Zhou Xiaochuan (Governor of the People's Bank of China) confirmed that China is ready to bear its share of responsibility for maintaining financial stability in the region. In 2000, China was one of the initiators of the Chiang Mai Agreement, under which central banks of Asian countries should help each other in the event of liquidity crises through a system of currency swaps. In 2003, he became one of the founders of the Asian Bond Fund, which aims to stabilize regional financial markets through mutual purchases of each other's treasury obligations by Asian states. The movement towards full convertibility of the Chinese yuan is still quite slow, and it cannot claim to be a regional currency. But China has already signed agreements with Russia, Mongolia, Vietnam and Myanmar on the use of national currencies in cross-border trade. Since November 2003, the yuan has been officially used as a second parallel currency in Hong Kong (pp. 21-22).

The importance of China's economic growth for the development of the entire region is thus already very great, and it is reflected in the country's growing influence in the institutional structures of regional cooperation. But can we say that at the global level, China has already become a "center of power", equal to the traditional leaders-the United States, the European Union, and Japan?

At the symposium, a skeptical point of view was expressed on this issue, and it is noteworthy that it came from the mouth of a Chinese specialist. Li Jing (a member of the Faculty of Political Science and International Relations at Beijing Normal University) noted that China's entry into the "top three" world leaders in terms of foreign trade does not mean that it has become a "trading superpower". Its exports are still growing due to the cheapness of goods, while indicators of value added remain low. The technological level of Chinese products is low, and even in light industry, China has almost no internationally recognized brands of its own. More than half of China's exports come from enterprises with foreign capital operating in the country. Foreign investors import raw materials and semi-finished products to China, process them here, and then export products marked "Made in China". But in fact, the Chinese side gets only a small part of the cost of the goods - processing fees and tax deductions. In general, according to Li Jing, the positive impact of foreign trade and foreign direct investment on the development of the Chinese economy is inevitably limited, since enterprises with foreign participation often do not have stable cooperative ties with the main body of the Chinese economy.

At the same time, the foreign trade quota (the share of a country's foreign trade in its GDP) reached 60.5% for China in 2003, while this figure did not exceed 25% for the United States and Japan (p.296). For a large economy like China, such a high degree of dependence on foreign trade is abnormal and fraught with danger. Fluctuations in the international environment can be multiplied by the Chinese foreign trade sector, and this can cause a crisis similar to that experienced by neighboring Asian countries in 1997-1998.

Overall, Li Jing concluded, China's foreign trade is a classic case of trade in a backward, dependent country (p. 297). Exports and imports can continue to grow at a high rate, and by 2010, China can become the second largest country in the world in terms of trade and even compete with the United States for the first place. But if the cash conditions are maintained, it will still not become a "trading superpower" based on the export of its own original products with high added value. The situation can only change over time, if there is a fundamental change in the situation.

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improving the competitiveness of Chinese enterprises, and this requires fundamental changes within the Chinese economy itself (pp. 298-299).

I will summarize some results. The points of view of specialists presented in the book, by and large, do not contradict, but complement each other, and allow you to get a fairly complete idea of the subject under study. They show that China's interaction with the outside world is bound to be difficult in the foreseeable future. Apparently, we can agree with those experts who argue that there is no strict predestination for the development of crisis processes in the Chinese economy; it really has the potential to continue maintaining high growth rates. But, I would add, in order to maintain them, harmonize growth, and get out of the series of constant fluctuations between "overheating" and deflationary decelerations, the Chinese economy needs further institutional reforms. And here we must admit that such transformations themselves are associated with significant risks, including social ones. Possible failures of the reform process, combined with increasing macroeconomic difficulties, can indeed lead to shocks that will be felt by both neighboring countries and the rest of the world.

In any case, the global economy will inevitably become increasingly tense due to China's increasing demand for raw materials. It is easy to say that to solve this problem, the country needs to move to a more intensive, resource-saving model of economic growth. But how can this be done in a situation where the PRC is faced with the need to provide jobs to the vast masses of the population? After all, until now, jobs were created mainly due to the expansion of low-efficiency, resource-wasting industries.

Finally, in the near future, if China really comes out on top in the world in terms of foreign trade, and possibly in terms of absolute GDP, a very non-trivial situation may develop when a relatively backward country becomes the formal economic leader of the world. And this, it seems, can change the entire architecture of international relations with a possible increase in their conflict, because purely economic rivalry will develop into deepening contradictions in the value orientations of the leading powers. It is necessary to think about the prospects of such a development of events right now, and the reviewed book provides extensive material for such reflections.


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