Pax Sinica: Geopolitics and Economics of China's Ascendance

10: China and the Prospects for Economic Integration within APEC

In the last few years, it has been widely argued that the world’s centre of gravity for economic activities will inevitably shift from the Atlantic to the Asia-PaciÀc region in the twenty-Àrst century. This popular perception has clearly been prompted by the spectacular economic growth of China in the past Àfteen years, following accelerated domestic reforms and, in particular , her “opening up” to the outside world. There is no doubt that the “China factor” has greatly assisted in sustaining the growth dynamism of the newly industrialized economies in Asia (notably Taiwan and Hong Kong, but also— and increasingly—South Korea). The strength and global importance of the Japanese economy lends further weight to the emerging scenario for the twenty-Àrst century. There are two dimensions to the rising expectation of the emergence of an “Asia-PaciÀc era”. The Àrst, reÁecting a broader consideration, relates to the involvement of the countries of the East PaciÀc (above all the United States). The second—a narrower consideration—embraces the likelihood of self-sustaining development by Asia-PaciÀc economies into a fully integrated regional economic entity, with China and Japan as the critical core by virtue of their industrial status and market size. It has become a foregone conclusion that the perspective of the “Asia-PaciÀc era” is already imminent. After all, “intra-regional” trade among a number of * Reprinted from “China and the prospects for economic integration within APEC”, in Joseph C. H. Chai, Y. Y. Kueh, and Clement A. Tisdell (eds.), China and the Asia PaciÀc Economy, Brisbane (Australia): The University of Queensland Economics Conference Monograph No. 3, 1997; published by New York: Nova Science Publishers, 1997, pp. 29–47. 10 ChinaandtheProspectsforEconomic Integration within APEC* 256 Pax Sinica countries of the Asian PaciÀc Economic Cooperation (APEC), including the US and other North and South American economies facing the PaciÀc Ocean already accounted for 47% of total world trade in 1993. In addition, APEC economies are responsible for the overwhelming share of global GNP, with the US and Japan ranking Àrst and second, and mainland China approximating (after Germany) fourth in terms of purchasing power parity (PPP) estimates of GNP made recently by the World Bank. Against this background, we propose to conÀne our analysis to “APEC proper”, by excluding countries on the American side of the PaciÀc. We do not, however, assume the view of Premier Mahathir of Malaysia, whose radical concept of the East Asian Economic Caucus (EAEC) excludes Australia and New Zealand, as well as Taiwan and Hong Kong. Several major issues follow in respect to the economic potential of the “narrower ” APEC, or APEC proper, as just deÀned. It is as well to emphasize that it is not this chapter’s intention to examine the domestic growth prospects of individual member countries. Our major task is to address the overall potential for intra-regional trade, as opposed to trade with outside world. The main focus is, then, on trade and related investment issues. It is clear that China holds the key to many of these issues: after all, while APEC proper constitutes countries with economies which are already open and marketorientated , and whose potential for growth is marginal, the Chinese economy remains in a state of Áux. Any relaxation in market access restrictions, in terms of adjustments of tariffs and non-tariff barriers and the removal of impediments to foreign investment, promises to alter substantially the patterns of trade, service, and capital Áows within the APEC region, in accordance with fundamental patterns of regional comparative advantage. We shall therefore focus on China in order to show how, as an emerging economic power, it may help to promote economic integration in the Asia PaciÀc. In what follows, we Àrst give a brief review of the relative strengths of the Chinese economy in terms of its GNP size, output structure, degree of industrialization and trade volume, relative to that of the various APEC economies . This provides a background for assessing possible future patterns of economic interaction between China and other APEC economies. In the second section, we examine the changing trends in China’s trade within APEC, vis-à-vis trade with countries outside the region since the early 1980s. This serves to reveal the impact of China’s economic and trade reforms China and the Prospects for Economic Integration within APEC 257 in...