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~--------------------------------~ The Implications of China's Admission to the WTO for Greater China Yun-wing Sung INTRODUCTION The opening of China coincided with the emergence of severe labour shortages in Hong Kong and Taiwan and the need for the latter two economies to restructure. The export-oriented, labour-intensive industries of Hong Kong and Taiwan have moved to Guangdong and Fujian on a large scale. The economic integration of Greater China has been largely market-driven, and occurred without a multilateral institutional framework. The very intense trade and investment flows among the trio (China, Taiwan and Hong Kong) has led to the emergence of Greater China, which in turn has had dramatic impacts on world trade and investment. Hong Kong accounted for around 60 percent of the total inward foreign direct investment (FDI) in China and Taiwan was a distant second with a share of B percent. Such investments have generated huge trade flows. In 1994, enterprises with foreign investment (including processing operations and foreign invested enterprises), mostly operated by investors from Hong Kong and Taiwan, accounted for 44 percent of China's exports. In the same year, Hong Kong's re-exports of goods made in Guangdong under outwardprocessing contracts were US$51.6 billion, vastly exceeding the domestic exports of Hong Kong (that is, exports of goods made in Hong Kong) of US$2B.7 billion and also Thailand exports of US$45 billion. It is no exaggeration to say that the synergy of China's cheap labour with Hong Kong and Taiwan knowhow and capital is the main factor behind China's spectacular export drive. In terms of the degree of economic integration, there are three concentric layers in the China Circle, with the Hong Kong-Guangdong economic nexus or Greater Hong Kong as the core; Greater South China (GSC) covering Hong Kong, Guangdong, Fujian and Taiwan as the inner layer; and Greater China covering Hong Kong, Taiwan and China as the outer layer. Within GSC, Hong Kong and South China are much more tightly integrated than Taiwan and South China. This is a result of both geography (there is no land bridge 182 Yun-wing Sung connecting Taiwan with the Mainland) and Taiwan's policy of no direct business links with China. Hong Kong is the pivot for the integration of the China Circle as most Taiwan-Mainland transactions occur via Hong Kong. Table 9.1 shows the basic economic indicators of Greater China. Guangdong's 1994 exports of US$50.2 billion surpassed Hong Kong domestic exports of US$28.7 billion and also exports from Thailand of US$45 billion. Fujian was a distant second to Guangdong in terms of economic strength. Macau's economy is much smaller than that of Hong Kong and canbe regarded as an appendage of the Hong Kong economy. Table 9.1 Basic Indicators of Greater C!1ina, 1994 and 1995 Indicators Hong Kong Taiwan Macau China Guangdong Fujian 1994 1995 1994 1995 1994 1994 1995 1994 1995 1994 Area 1068 - 35961 - 19 960000 - 177 901 - 121 400 (sq.km) Population 6.01 6.19 21.13 21.30 0.41 1199 1211 66.91 - 31.8 (million) GOP 130.3 142.0 243.7 257.2 6.5 522.3 691.4 49.2 65.1 19.6 (US$bn) Per Capita 21 501 23019 11 520 12490 15878 436 571 736 - 614 (US$) GOP growth +5.4 +4.6 +6.1 +6.3 +4.0 +11.8 +10.2 +18 +15 +21 rate (%) Exports 151.48 172.3 93.0 111.7 1.87 121.7 148.8 50.2° - - (US$bn) 28.7b 30.0 - - - - - 47.0d 56.6d 8.1 Note: a Total exports (including re-exports) b Domestic exports c China Customs Statistics d MOFERT (Ministry of Foreign Economic Relations and Trade) statistics Source: Statistical Yearbook, various issues; Hong Kong Monthly Digest of Statistics; Monthly Bulletin of Statistics of Republic of China; Far Eastern Economic Review: Asia Yearbook. Taiwan should be able to join the World Trade Organizaton (WTO) after China's entry. The entry of China and Taiwan into the WTO would promote the integration of the trio in many ways. To qualify for WTO membership, China must radically reform its trading system and Taiwan has to further liberalize its trade. This would allow greater scope for market forces to strengthen the integration of the trio. WTO membership would also give China and Taiwan some recourse against protectionism. This would facilitate the relocation of...

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