Part 2 of 2: The real economic strengths of Japan-China and ASEAN members
Part 2 of 2: The real economic strengths of Japan-China and ASEAN members
Lim Hua Sing, Professor, Institute of Asia Pacific Studies,
Waseda University, Tokyo
At current levels, the rate of economic development in China
is said to be about that of Japan in the 1960s. In other words,
if we assume that Japan's economy is standing still, China will
have to develop for another forty years to reach Japan's present
standard. China's per capita GNP is US$854 (year 2000) compared
to $32,585 (year 2001) for Japan. The former is a mere 2.6
percent of the latter.
China has become a "factory of the world". Chinese
manufacturing goods have penetrated into international markets
and Japan, together with Western nations, have begun to consider
China an economic threat. However, China's economic strengths
should not be overexaggerated.
Over the last two-and-a-half decades, how much technology has
been accumulated by Chinese enterprises in China? How many local
enterprises have been nurtured to become big enterprises or
multinational corporations? How many local enterprises in China
are run based on world-class managerial practices? In other
words, China's economic development has been relying heavily on
foreign direct investment, technology and managerial know-how.
Also some critics claim that China's legal system has not been
developed to match domestic economic development, nor to serve a
fast developing nation such as China.
China still has a long way to go. The GDPs of China, Japan and
the U.S. are $1.08 trillion (year 2000), $4.14 trillion (year
2001) and $8.35 trillion (year 1999), respectively. The ratios
are 1: 3.8: 7.7.
China has pledged to increase her GDP to about $5 trillion
within 20 years, as is the Japanese standard today. Obviously,
this will be a very difficult task for China, but the Chinese
people seem to have the confidence to fulfill it.
Some China watchers have even warned that the present bubble
economy will burst sooner or later. They also claim that the
"socialist market economy" (politically, it is a centrally
controlled socialist system, but economically it is a Western-
style free competition capitalist economy) will not last very
long.
However, as the Chinese like to say, China has pledged to
develop her economy with Chinese socialist characteristics.
Frankly, I am also rather optimistic about China's economic
development. Despite various economic distortions and
contradictory economic development strategies, by the year 2008
when China hosts the Olympic Games, and by the year 2010 when
China holds the World Exhibitions, China will by all means be
able to develop without drastic setbacks. Even after the year
2010, say for another further 10 to 15 years, it is unlikely that
economic development in China will have major retrogressions
caused by serious macroeconomic mismanagement.
In China, the following factors are contributory reasons for
economic development: Approximately 900 million peasants are
potential industrial laborers; there is a large supply of cheap
agricultural and industrial raw materials; the country has a
massive domestic market with a 1.3 billion population, of which
the middle class has been increasing rapidly; political and
social stability; and mechanisms are in place to proceed with
economic reforms and an open-door policy.
Japan and China are two important players in Asia; a declining
player and an emerging player (although Korea can be considered
as a recovering player with economic potential). Other than the
U.S. and the EU, Japan and China have had the most profound
influence in Asia.
ASEAN 10 is a well-organized entity with which Japan and China
have established increasingly important cooperation links. In
November 2001, China proposed the concept of a Free Trade Area
(FTA) with ASEAN to be set up within 10 years. This concept,
termed the China-ASEAN Free Trade Area (CAFTA), is being
materialized faster than expected. Meetings and feasibility
negotiations at governmental levels have been carried out
frequently to expedite the process of regional economic
cooperation and integration.
On the other hand, stimulated by China's initiative, Japan
proposed "comprehensive economic cooperation" with ASEAN in
January 2002. This proposal was later termed the Japan-ASEAN Free
Trade Agreement (JAFTA). At the beginning, it was criticized as
being without a definitive time frame. How long was it going to
take to set up? But recent sources indicate that Japan intends to
realize the JAFTA within a period that is even shorter than that
of China.
Obviously, economic cooperation and integration endeavors in
Asia are basically prompted by two factors. First, the formation
of the EU and NAFTA, with strong exclusive undertones, has
restricted the economic growth and cooperation of Asian countries
with these two blocs. Hence, the need exists for Asian countries
to set up their own trading entities.
Second, economic development within Asia has necessitated
intra-Asia regional economic cooperation and integration, with an
eye toward expansion into each other's trading markets.
With the initiatives of China and Japan and, most probably,
South Korea in the future, economic cooperation and integration
among Asian countries will be strengthened. Although China and
Japan are rivals, they need to work closely for the benefit of
Asia's economic development and intraregional integration. Both
CAFTA and JAFTA should be promoted accordingly, and eventually
ASEAN 10+1 (China, Japan and South Korea) should be materialized
under the concept of pan-Asia regional economic integration.
As an important economic power, it is hoped that Japan will
move to implement economic policies more resolutely and
consistently, in order to recover from her current economic
downturn as quickly as possible, before its leading role in Asia
is overtaken by China.
The writer is also director of the Institute of Chinese
Economies, Waseda University.