Asia must adjust to China: Experts

Asia must adjust to China: Experts

Francoise Kadri, Agence France-Presse, Tokyo

East Asian countries including Japan must face the reality
that China is a world power and learn to co-exist with their
giant neighbor by developing a network of free trade agreements
(FTAs), according to experts in Tokyo.

Such accords, mirroring those in existence elsewhere in the
world, would allow these countries, especially Japan and China,
to accelerate the structural adjustment of their economies to the
globalization of markets, agreed the expert commentators at a
symposium organized here by theYomiuri Shimbun daily earlier this
week.

"China's growth and competitiveness are already too big to be
ignored. It is also too strong to resist either for Japanese or
other Asian economies," said Steve Harner, an American consultant
who spent 12 years in Japan and has lived in Shanghai since 1994.

"Protecting themselves is not the answer. The answer is to
adjust to its presence in the region," he said.

Aspiring to a role as regional superpower, China surprised the
world with its proposal to its neighbors and competitors in
Southeast Asia in the ASEAN bloc for the creation within 10 years
of a vast free trade zone encompassing some two billion
consumers.

ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia,
Myanmar, Philippines, Singapore, Thailand and Vietnam.

Not to be outdone, Japanese Prime Minister Junichiro Koizumi
suggested the establishment of an economic "community" with the
Association of Southeast Asian Nations (ASEAN) during his tour of
Asia in January. And late last year, Tokyo concluded its first
FTA -- with Singapore -- and is discussing a bilateral accord
with South Korea.

"Capitalist mechanisms should be much stronger... We have to
strengthen our national fiscal situation, improve the investment
environment and liberalize investments. For that trade agreements
are crucial," said Hu Angang, the influential director of the
Center for China Studies, Chinese Academy of Sciences at
Beijing's Tsinghua University, who sits on a number of government
committees.

"Japan, (South) Korea, Hong Kong and China would be good
candidates for a free trade zone. The Chinese government is
contemplating that and ... is already moving with ASEAN to create
an FTA area."

Underlining the strong growth of intraregional commercial
ties, Hu pointed out that trade with Japan, South Korea and Hong
Kong now accounts for 37 percent of all Chinese trade.

"Besides NAFTA (North American FTA), AFTA (African FTA) and
the EU... there may be an Asian block but Asia is lagging behind
in terms of trade mechanism," he said.

As far as Japan is concerned, FTAs could help kickstart its
ailing economy, the experts said.

"If there are FTAs, we need to open up ourselves, we need a
mechanism to reform ourselves. Adjustments mean pain and
redirecting resources to new sectors," said Yasuhisa Shiozaki, a
ruling Liberal Democratic Party lawmaker and an advisor to
Koizumi.

Shiozaki acknowledged that Japanese agriculture which is
globally uncompetitive and protected would present some
difficulties, but FTAs would pose "a problem of competitiveness
for everybody," including China.

The participants stressed China's trump cards which help it
maintain a growth rate of around seven percent a year: an
enormous potential domestic market, labor costs among the lowest
in world and sufficient financial resources.

But they also pointed to chinks in the armor: the lack of a
system of private ownership of property, the communist party's
monopoly on power, its dependence on foreign investment which
accounts for 10 percent of total investment, the huge volume of
bad debts held by state-owned banks, and an aging population.

As a result, China need not inspire fear in its neighbors, the
experts agreed, rather the reverse, but it should encourage them
-- Japan in particular -- to deepen their ties with this emerging
economy.

Sakutaro Tanino, a former Japanese ambassador to China,
stressed that bilateral trade totaled US$81.1 billion last year,
largely thanks to a rapid shift to Chinese production by Japan's
leading electronics and textile manufacturers.

"Japan and China have become important trade partners that
cannot do without each other," even though "there is a shortage
of mutual trust," he said.

"I believe the future of Asia depends to a large extent on
Japan-China relations."