FEER : Asia's Gains And Losses (China's entry into WTO ...) Vo+'i VN thi` sao ????

[Dao Van <daotb@yahoo.com>]

TRADE Asia's Gains And Losses

By G. Pierre Goad in Hong Kong Issue cover-dated November 25, 1999


China's entry into the World Trade Organization will heighten
competition with the rest of developing Asia for foreign direct
investment and export sales to the United States, Europe and Japan.  It
also will offer countries better access to the region's second-largest
economy. 

Looking at the impact of China's WTO entry economy by economy, Taiwan is
probably the biggest winner in Asia.  Many Taiwanese companies are
already using China as an export base.  WTO membership decreases the
risks of investing in China by eliminating the restrictions that can be
placed on nonmembers, such as import quotas.  It will also pave the way
for Taiwan to join the trade body itself; Taiwan's application is on
hold until China joins. 

Hong Kong will also benefit.  While some economists point to increased
trade flows through Hong Kong to and from China as a potential plus, the
biggest gains for the territory may be in financial services.  The
agreement signed in Beijing commits China to gradually open its
financial-services industry, which should yield spin-offs for Hong Kong
as foreign firms devote more resources to the China market.  Chinese
firms too will seek out sophisticated financial services and capital in
Hong Kong because the renminbi isn't freely convertible and likely won't
be for several years. 

The effects on South Korea and Southeast Asia are less clear.  Korean
manufacturers, especially of chemicals and other commodities, could face
more competition from China in third markets because foreign firms will
be able to build large plants in China that benefit from economies of
scale.  Exports of commodity manufactured goods into China could also
fall off as Chinese producers and foreign investors, freed of
restrictions, expand production. 

Southeast Asian exporters of low-end goods are already under pressure
from China.  The real question is how quickly will China expand into
electronics assembly, the No.  1 export industry in Malaysia, Singapore
and the Philippines.  Southeast Asian exporters of natural-resource
products such as Indonesia or agricultural products such as Thailand
could gain from greater access to the China market. 

China's entry into the WTO will increase pressure on the Association of
Southeast Asian Nations to broaden and deepen its regional free-trade
and investment agreements.  Those accords were designed to counter
increased competition from China for foreign direct investment and in
export markets.  China's WTO membership will likely encourage Asean to
move faster. 

China is already a formidable export competitor with the rest of
developing Asia in low-value manufactured goods such as toys and shoes,
and is rapidly moving up the technology ladder in electronics.  With the
help of WTO membership China will likely become even more formidable
faster.  But in the near term, China's imports could rise faster than
its exports. 

Economist Fred Bergsten of the Washington-based Institute for
International Economics says that the impact of WTO entry on economic
reform in China is more important than the pure trade effects of
reducing tariffs and other market barriers.  The most visible initial
side-effect will likely be an uptick in foreign direct investment in
China.  At first glance, more attractive terms for FDI into China might
seem to diminish the appeal of other Asian economies to foreign
companies.  However, in response to the regional economic crisis most
Asian countries are liberalizing their own FDI rules, which were in many
cases highly restrictive.  The upshot?  FDI could rise in China and the
rest of Asia. 

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