The chief dynamic of China's entry to the WTO isn't the boost in exports it will foster, but rather the boost in imports, Salomon Smith Barney (SSB) analysts said Monday in Hong Kong.
China's trade policy to date has fostered exports, through special processing zones and tax and tariff rebates or exemptions, Yiping Huang, SSB's senior analyst said in an Asian economics weekly report.
The fundamental change that begins shortly is more uniform access to China's markets, he added.
Huang noted that most forecasts for China's economy after the WTO based on macroeconomic modeling show the country moving into a current account deficit in the next five years. "In the case of the most recent IMF forecast, this occurs in 2002," he said.
Huang's comment came after an article, entitled "Chinese Deflation Creates Fears Throughout Asia," was published in the latest issue of Asian Wall Street Journal.
Huang said that the article is misleading and has little to do with deflation. Clearly Asian competitors to China will face greater competition from China brought about by the increase in China's exports, but China's presence in the export market is not anything new, the analyst argued.
China's exports were already 17 percent of the region's total ( not including China) in 1993, and after seven years of growth 50 percent higher than the average for the rest of the region, China' s exports now equal 25 percent of the rest of Asia's.
Huang said that during this period of export growth, Asian producers have had to adjust to the new competitor, meaning real changes in production structure, but it is precisely this adaptability in the face of competition that has allowed Asia to generate strong average GDP growth rates for three or four decades.
The senior analyst stressed that China's entry to the WTO is a momentous event, and it will mean stiffer competition for Asia. Seeing the challenge for what it is, and what it is not, will go some way to ensuring that China and Asia together gain from future trade, Huang concluded.
(China Daily November 27, 2001)
