Economic integration drives growth in Asia

Asian countries may have to put aside their differences and work on a louder, more united voice as they grow in economic and political power.

"The western voice is much louder... The Asian voice is much lower... and I think this is not fair. I think we have to change this situation. Asian media plays an important role to provide accurate reports and also a positive attitude," said Long Yongtu, secretary-general of the Boao Forum for Asia last Friday during China Daily's CEO Roundtable.

About 40 executives and CEOs met in Beijing for the 13th instalment of the roundtable, which has also been held in Shanghai and Hong Kong in the past. This time around, the lunchtime gathering was built into the Asia News Network annual conference, attended by top editors and CEOs from 14 newspapers from 12 countries in Asia.

"As Asia's influence grows, driven in part by China's economic growth, it is facing new challenges both within and without. One of the toughest is adjusting to the new realities of trade brought on by China's entry to the World Trade Organization and its shift to a market economy," Long said.

"Another is protectionism and the potential for countries in the region to close themselves in. We think Asia should be developing in an open international environment," Long said.

"All but 20 of the Fortune 500 are already in China. Transnational corporations are perhaps the most active players in the so-called economic globalization. A more joint economic voice may simply be part of a trend towards supply and manufacturing chains that span the continent. An auto manufacturing (plant) of an American company based in Beijing may have spare parts from Korea, Japan, Malaysia, the Philippines and so on," said Long.

At the same time, strong domestic demand from China and strong trade ties with the rest of Asia is helping neighbouring economies and improving regional trade. Trade among Asian countries increased substantially over the last two decades boosted by China's strong economic growth. China can help provide a more stable legal framework to further open markets.

However, economic co-operation can be threatened and some delegates, like Giorgio Magistrelli, executive general manager of the European Chamber of Commerce, wondered about them, particularly in the face of difficulties with Japan.

Long, however, said the differences with Japan are not a serious and practical threat to economic integration. "Despite the political differences we've had with Japan, trade and investment are still very, very, very strong. In the first five months of this year, China-Japan trade was more than US$70 billion," Long said.

China's willingness to open up further may help eliminate some of the fears around the region.

"The trade surplus of Asian countries with China has grown past the US$20 billion mark," he said. "At the same time the existing competition is a sign of strength. Competition can be healthy and manageable," Long said.

Around Asia, however, China's rapid industrialization and globalization may be causing fears, said Felix Soh, deputy editor of The Straits Times. "Every day we are being told that China is eating your lunch," Soh said. "While other countries are left behind fighting for the crumbs."

"The fears may be unfounded," said Long, as other countries in Asia have trade surpluses with China. "China imports a lot of products from these countries," he said. "Such as palm oil, spare parts and electronics."

What is happening now, he said, is a readjustment of all the regional economies.

"As bilateral co-operation grows, however, the WTO may be weakened from within, one representative feared. Countries are now starting to make bilateral free trade agreements irrespective of WTO provisions," said Wong Sulong, group chief editor of The Star in Malaysia. "How can countries make this organization more relevant in the context of growing protectionism?"

The answer may just be patience, said Long. Although he acknowledged the growing frustrations with the delays of negotiations around the WTO, he said it was still the most efficient way to deal with trade issues.

"I believe the WTO is the best answer because you have to have a legal framework." He said trade disputes may be high profile news, but they represent a miniscule part of trade. The trade surrounding anti-dumping cases against China in 2003 amounted to 0.5 per cent of all trade. In 2004, that number was 0.3 per cent.

China's strategic adjustment under globalization

"Labour, industry capacity and capital surpluses are potential risks for instability for China's economy. Our GDP has grown 10 times and energy consumption 40 times since the 1950s There is a need for strategic adjustments to deal with rural reform, diverse central-local interest, rising unemployment, aging population, urbanization, inflation, excess investments, sustainable development and also quite importantly, international capital crisis," said Professor Wen Tiejun, dean of the School of Agriculture and Rural Development at Renmin University.

"In the years to come, China's sheer size may challenge its financial growth. The country has a lot of people. The working population is 800 million. We have a very serious oversupply of labour... Total labour in China is two times the total of other developed countries," said Wen, also a top researcher at a handful of top economic think tanks and policy centres. He was one of six experts who made presentations on topics ranging from the future of China's political relationships to changes in newspaper readership.

The same numbers that make China such an attractive market may also pose challenges for the country. "China has 800 million people of working age - 500 million in rural areas, creating a potential migrant labour force of 300 million people," Wen said.

The country also has a large industrial surplus, with oversupplies of 70 per cent of its industrial products since the mid 1990s. At the same time, there may just be too much cash kept in domestic banks.

China is in a period of industrialization, also in a period of globalization, Wen said. Economic growth must rely on foreign trade. China also faces a period of adaptation as it moves, step by step, towards a market economy and will face two challenges. At home, it will have to deal with diverging central and local interests.

On the world stage, the challenge for Asian countries will be to reduce losses caused by drops in the US dollar. As China's GDP continues to grow year after year, the country will have to look more and more towards the international arena to maintain the trend. Although GDP growth is not at the 35 per cent rate of the mid 90s, it is also well above the 4.8 per cent low of 1999. Dealing with the challenges of a market economy has meant trying to compensate for very high economic growth, given the cyclical nature of the market economy, by working to smooth any depressions as much as possible. "China is dealing with a very typical capitalist problem, that it has cyclical crisis," said Wen. At the same time, said Wen, globalization is underlined by such successful experiments as the North American Free Trade Agreement and the European Union. With these trading blocks in place, Asia, internationally, faces very serious challenges. One thing that will be required - not just for China but all its trade partners in the region - is a plan to adapt to world trade.

"We've got to have a new strategy jumping out from this regional integration. If we want to have Asian integration, we need to have a new project. The question left for Chinese: What is the essential meaning of globalization and free trade in deed?" he said.

The crystal ball for China's future

One particular difficult problem for China is predicting the future. We might be better off looking at a crystal ball, said Anthony Saich, professor of international affairs and chair of the Asia programme at the Centre for Business and Government at the John F. Kennedy School of Government at Harvard University. Saich opened the day of discussions on Friday and presented his views on China - Asia Political Relations.

China and the rest of Asia will have to face a challenge: The lack of a regional apparatus to combine very different and even competing nations. Asia is a diverse continent without the similarities in background and even religion that have made the European Union possible, said Saich.

"I would say those conditions in Europe are still missing in Asia. Aside from the economic challenges China faces at home, the country will also have to deal with challenges outside its borders and work towards ever smoother political relations within the region, continue to put emphasis in its economy and look towards the future. China needs to demonstrate that its growth will benefit, and not be detrimental, to its neighbours," said Saich.

China's exports will continue to expand, he said, but the growth is bound to slow down. As China's influence grows, challenges may come from different and unexpected areas, such as the United States. "Although it is unlikely any country may surpass it in military might, regional alliances may be able of opposing the world's only superpower. I think it's going to be difficult for the US moving forward," said Saich. "After the Cold War, it has been very lazy in developing a new strategic vision. However, it may also be a challenge for China to develop a strategy to increase its influence in the regional and international arenas on the one hand without hurting US influence on the other.

"In summary, considering the challenges ahead for Asia as a whole, we need far more thinking and perhaps new frameworks," Saich concluded.

The last panel of the day focused on the ongoing changes in the media industry in the country, including issues such as newspaper readership, the impact of the Internet and new approaches to journalism. ANN delegates actively participated at the questions and answers session and posed lots of questions and ideas relating to media industry development in China and its impact with the rest of Asia. Xiong Lei, executive editor of China Features at Xinhua News Agency, Shen Yin, executive director of research company CTR, and Hu Shuli, editor-in-chief of Caijing Magazine, led the discussion.

For enquiries, please email Alexander Wan, executive editor, China Daily CEO Roundtable, at alexwan@chinadaily.com.cn.

(June 28, 2005)

 
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