China Programme • Volume 13 • Number 37 • 28th October 2009

Experts Debate China’s Role in Global Trade, Economic Governance

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China - the world’s fastest-growing major economy - has recently emerged as a major player in global economic governance, and not without some controversy.

The country’s newly prominent role on the world stage was the topic of much discussion and debate among a group of experts who gathered for a conference in Geneva earlier this week.

Discussions at the ‘Bridges China Dialogue’, held on 26 and 27 October in Geneva ran the gamut from climate change and eco-tourism to investment and currency valuation to protectionism and the WTO’s Doha Round of world trade talks. The meeting brought together a mix of government officials, academics, and private sector leaders, who debated and delved into technical discussions at the two-day meeting. WTO Director-General Pascal Lamy gave the keynote address on Monday afternoon.

(The conference was sponsored in part by the International Centre for Trade and Sustainable Development (ICTSD), a Geneva-based independent global think tank and the publisher of Bridges Weekly.)

Economic growth

The Chinese economy, now the fourth-biggest in the world (after the EU, the US and Japan), is expected to grow by 8 percent this year. Meanwhile, the economy of the United States continued to shrink through the second quarter of this year, although some early estimates suggest it may have begun growing in the third quarter, which ended at the end of last month. Economists predict that

Chinese exports will register a year-on-year drop of between 16 and 20 percent for 2009, said Yutai Zhang, the head of China’s Development Research Centre. But overseas shipments will bounce back in 2010, he added, noting that current models predict an uptick of between 8 and 10 percent for next year. China recently surpassed the United States to become the world’s second-largest exporter, after Germany. Some early estimates predict that the Asian Giant may even outpace Germany in exports of goods and services after the final numbers for 2009 are tallied; at the mid-year mark, the two countries were nearly equal, according to figures from the WTO.

A renewed demand for Chinese goods is already being felt in some manufacturing regions of China, Zhang told the meeting. Factories in some parts of the country are even struggling to recruit enough workers, especially skilled workers, to respond to the volume of new orders, Zhang said.

But China is importing too, and Chinese demand for goods from abroad is having significant impacts on other regions of the world, experts at the meeting said. Booming demand from within China is driving growth in African economies, said Martyn Davies, the executive director of the Centre for Chinese Studies at South Africa’s Stellenbosch University. Africa provides roughly a quarter of all of China’s foreign energy supplies, he said, noting that the Afro-Sino trade relationship was bolstered by African leaders’ strong political support for Chinese investment. The economies of all African countries - except South Africa, the continent’s richest nation - will grow this year, thanks in part to demand from the Chinese, Davies said.

In Africa and beyond, China is looking to boost its cross-border commerce with the world’s poorest nations. One fifth of all goods exported by least developed countries end up in China, said Chinese WTO ambassador Sun Zhenyu. That trade relationship should continue to grow as Beijing expands duty-free and quota-free access to goods from LDCs, Sun added.

Pressure to further open Chinese economy

A Monday afternoon session witnessed a mild confrontation between the Chinese and European ambassadors to the WTO.

European ambassador Eckart Guth kicked off the session on global economic governance with a charge that Chinese policies have driven away European investors. Beijing does not do enough to protect intellectual property rights, Guth argued, adding that the country has erected unfair barriers to foreign investment and that its government procurement policies wrongly discriminate against foreign firms.

But China’s ambassador Sun countered that European and other foreign investors do not seem to have been scared away, noting that the country attracted US$ 90 billion in overseas investment last year. China was required to take drastic, and sometimes painful, measures to open its economy before it joined the WTO in 2001, Sun noted, adding that the international community should not forget how far the country has already come. China is getting there, he said, and in the meantime other countries should be patient.

But such a shift in attitude among Beijing’s major trading partners seems far from imminent. China is now the most popular target of other countries’ retaliatory trade measures, such as anti-dumping duties and safeguard measures, noted Simon Evenett, the co-founder of the website Global Trade Alert, which tracks protectionist policies that governments have implemented amid the ongoing economic downturn. That trend is likely to continue, Evenett added, even as the global economy gets back on its feet.

More information

The Global Trade Alert website is available here: http://www.globaltradealert.org/

A publication of the full proceedings of the meeting will be available on the Bridges China website in November.

ICTSD reporting.