East Asia braces for 'Chinese shock'

East Asia braces for 'Chinese shock'

Philippe Ries, Agence France-Presse, Hong Kong

China's imminent entry to the World Trade Organization has
left the rest of East Asia bracing for the "Chinese shock" with
the Asian giant attracting foreign investment like a magnet.

The only country still posting growth in a region languishing
in the doldrums amid the global economic downturn, China is seen
as a formidable competitor.

And the world's most populous country will become all the more
attractive once it enters the multilateral trading system --
possibly by the end of the year.

Since 1997 the region has "suffered four shocks: the Asian
shock, the IT shock, the Sept.11 shock and the China shock,"
South Korean Deputy Prime Minister Jin Nyum said on Tuesday.

There was "a trend toward the hollowing out of industry,
technologies and markets to China," Jin, who also holds the
economy and finance portfolio, told the members of the World
Economic Forum meeting in Hong Kong for the East Asia Summit.

"Multinationals are in the process of relocating manufacturing
facilities out of Japan, Korea, Europe and the U.S. into China,"
added Gordon Orr, Greater China director for consultants McKinsey
and Company.

And that is not just for low value goods.

Japan is already experiencing the pressure on prices exerted
by the competitiveness of products imported from China and the
major macro-economic implications.

"China is going to be the ultimate source of deflation," said
Alasdair Morrison, president of Morgan Stanley Asia.

That will benefit the consumers, as the Americans and
Europeans have already found, but it will also mean that whole
sectors of Asian industry will have to adapt or die.

For those Asian enterprises which have the means and
technology that means joining the stampede towards China.

Douglas Tong Hsu, chairman of the Taiwanese Far Eastern
Textile group, said: "In the past, Taiwan has been second to
Japan in investing in Southeast Asia. But we see a vast change
toward investing in China."

"The four Tigers have been quite successful in integrating
with the Chinese economy," said Chu, referring to South Korea,
Taiwan, Singapore and Hong Kong.

In fact "China's entry into the WTO is conducive to industrial
restructuring in a global context," argued Chinese Trade Minister
Shi Guangsheng, saying Beijing was confronted with a major
problem in restructuring its burdened state enterprises.