CHINA AND GLOBAL POLITICS
,CLASS 1: IMPACTS AND POLICY IMPLICATION
IMPACTS AND POLICY IMPLICATIONS ACCESSION WTO
China’s accession WTO in 11/2001, after 15 years of preparation
Process of accession =
o massive process of reforming laws in trade issues
o Made apparent the gap between urban and rural income
o Gap becomes even greater after accession
Yet great interest in accession in joining WTO, set up in 1/1995, replacing GATT (General
Agreement on Tarifs and Trade)
Key driver in restructuring Chinese economy into a market economy
Long Yongtu, Vice-Minister of Foreign Trade and China’s chief global trade negotiator
“Countries with planned economies have never participated in economic globalization.
China’s economy must become a market economy in order to become part of the global
economic system, as well as to effectively participate in the economic globalization process.”
Domestic economic growth is the sine qua non for the legitimacy of CCP
China became integrated in the world economy Now major role in structuring global
economy
Main mission to reunite China and to make China stronger again
5 principles to assess the implication of China’s accession
1. Non-discrimination
2. Market opening
3. Transparency and predictability
4. Undistorted trade
5. Preferential treatment for developing countries
1. non-discrimination
o Basis of free trade
o Idea behind: to foster international trade
o WTO members give equal treatment to competing suppliers under the MFN (Most-
Favored-Nation) principle
o Non-discrimination between imported and domestically produced goods
2. market opening
o 1) Commitments by China to abolish non-tariff barriers, reduce tariffs, open service
sectors
o (2) Commitment by importing countries to abolish quotas on textiles and clothing
(major concession to China)
o (3) Agreement by US & other countries to impose MFN (most-favored-nation) tariffs
on China
3. transparency and predictability
o Need this in order to foster trade
o (need to publish trade rules; independent judicial review)
4. undistorted trade
, o Antidumping: 70% of China’s products (textiles, clothing & shoes) are vulnerable to
antidumping given nonmarket economy status for 15 years (until 2016). MES (Market
Economy Status) still not granted to China by major trade partners: US, EU, Japan
Safeguard measures: new form of protection against China during 12 years by the
use of special ‘transitional product- specific safeguard measure’
o to avoid disruption of domestic market of other WTO-members as result of
China’s import
5. preferential treatment for developing countries
o China sees itself as a low-income country but other WTO members reluctant to
accept the status of China as developing country because of its size and growth
performance
ACCESSION AND URGING ECONOMIC GROWTH
2001-2008 double digit annual growth
Since 2008 the growth rate became more volatile but never exceeding 10%
2018: 6.9%
2019: 6.1%
2020: 2.3% lowest since 1976 but only country with economic growth in COVID-19 year
Structural change of economy:
o share of agriculture decreases ò
o share of industry and service is increasing ñ
HOW TO EXPLAIN ECONOMIC GROWTH
GLOBAL CONTEXT
Global Liberal Economic Order
o The world embraced liberalization and globalization
o China became a major participant and beneficiary
o First major wave of global delocalization occurred in China
Asian Financial Crisis (1997)
o Many Asian economies collapsed due to fixed exchange rates
o China was largely unaffected
Currency stability
Strengthened China’s position in the region
2008 Global Financial Crisis
o Marked the end of hyper-growth
o Revealed huge economic imbalances
CHINA
China’s Growth Model: Export-Driven Development
o Growth relied heavily on exports
o Main consumers: United States and Western markets
, o Investment and consumption imbalances grew
o Presumption and accounting issues masked long-term risks
Two phases of growth:
1) Excessive growth (early phase)
2) Continuous but slower growth (later phase)
SUPPLY SIDE
Labour Transfer
o Massive movement from low-productivity agriculture
o Into high-productivity industry and services
o Key engine of growth
Rapid urbanization and growth of urban population
1978=17%
2001=37.7%
2006=43.9%
2018=58.5%
2030=70%
megacities (different from European cities) + vertical living
Industrial hubs (Chenzhen): smartphone production
Massive internal migration from countryside to the city
o 2018: ~250 million internal migrants
o Hukou (Household Registration) System
Migrants usually lack urban hukou, leading to:
No access to:
o Subsidized housing
o Public healthcare
o Education
Discrimination, sexism and insecurity
Yet migration seen as path to modernity and economic mobility (cf
‘Factory Girls’ Lesley Chang)
Important dynamics:
Hukou originally based on immobility
Economic development made immobility impossible
Hukou slowly loosened over time
,CLASS 1: IMPACTS AND POLICY IMPLICATION
IMPACTS AND POLICY IMPLICATIONS ACCESSION WTO
China’s accession WTO in 11/2001, after 15 years of preparation
Process of accession =
o massive process of reforming laws in trade issues
o Made apparent the gap between urban and rural income
o Gap becomes even greater after accession
Yet great interest in accession in joining WTO, set up in 1/1995, replacing GATT (General
Agreement on Tarifs and Trade)
Key driver in restructuring Chinese economy into a market economy
Long Yongtu, Vice-Minister of Foreign Trade and China’s chief global trade negotiator
“Countries with planned economies have never participated in economic globalization.
China’s economy must become a market economy in order to become part of the global
economic system, as well as to effectively participate in the economic globalization process.”
Domestic economic growth is the sine qua non for the legitimacy of CCP
China became integrated in the world economy Now major role in structuring global
economy
Main mission to reunite China and to make China stronger again
5 principles to assess the implication of China’s accession
1. Non-discrimination
2. Market opening
3. Transparency and predictability
4. Undistorted trade
5. Preferential treatment for developing countries
1. non-discrimination
o Basis of free trade
o Idea behind: to foster international trade
o WTO members give equal treatment to competing suppliers under the MFN (Most-
Favored-Nation) principle
o Non-discrimination between imported and domestically produced goods
2. market opening
o 1) Commitments by China to abolish non-tariff barriers, reduce tariffs, open service
sectors
o (2) Commitment by importing countries to abolish quotas on textiles and clothing
(major concession to China)
o (3) Agreement by US & other countries to impose MFN (most-favored-nation) tariffs
on China
3. transparency and predictability
o Need this in order to foster trade
o (need to publish trade rules; independent judicial review)
4. undistorted trade
, o Antidumping: 70% of China’s products (textiles, clothing & shoes) are vulnerable to
antidumping given nonmarket economy status for 15 years (until 2016). MES (Market
Economy Status) still not granted to China by major trade partners: US, EU, Japan
Safeguard measures: new form of protection against China during 12 years by the
use of special ‘transitional product- specific safeguard measure’
o to avoid disruption of domestic market of other WTO-members as result of
China’s import
5. preferential treatment for developing countries
o China sees itself as a low-income country but other WTO members reluctant to
accept the status of China as developing country because of its size and growth
performance
ACCESSION AND URGING ECONOMIC GROWTH
2001-2008 double digit annual growth
Since 2008 the growth rate became more volatile but never exceeding 10%
2018: 6.9%
2019: 6.1%
2020: 2.3% lowest since 1976 but only country with economic growth in COVID-19 year
Structural change of economy:
o share of agriculture decreases ò
o share of industry and service is increasing ñ
HOW TO EXPLAIN ECONOMIC GROWTH
GLOBAL CONTEXT
Global Liberal Economic Order
o The world embraced liberalization and globalization
o China became a major participant and beneficiary
o First major wave of global delocalization occurred in China
Asian Financial Crisis (1997)
o Many Asian economies collapsed due to fixed exchange rates
o China was largely unaffected
Currency stability
Strengthened China’s position in the region
2008 Global Financial Crisis
o Marked the end of hyper-growth
o Revealed huge economic imbalances
CHINA
China’s Growth Model: Export-Driven Development
o Growth relied heavily on exports
o Main consumers: United States and Western markets
, o Investment and consumption imbalances grew
o Presumption and accounting issues masked long-term risks
Two phases of growth:
1) Excessive growth (early phase)
2) Continuous but slower growth (later phase)
SUPPLY SIDE
Labour Transfer
o Massive movement from low-productivity agriculture
o Into high-productivity industry and services
o Key engine of growth
Rapid urbanization and growth of urban population
1978=17%
2001=37.7%
2006=43.9%
2018=58.5%
2030=70%
megacities (different from European cities) + vertical living
Industrial hubs (Chenzhen): smartphone production
Massive internal migration from countryside to the city
o 2018: ~250 million internal migrants
o Hukou (Household Registration) System
Migrants usually lack urban hukou, leading to:
No access to:
o Subsidized housing
o Public healthcare
o Education
Discrimination, sexism and insecurity
Yet migration seen as path to modernity and economic mobility (cf
‘Factory Girls’ Lesley Chang)
Important dynamics:
Hukou originally based on immobility
Economic development made immobility impossible
Hukou slowly loosened over time
