China is becoming the determining factor for Asia's regional economy, as countries become increasingly dependant on China's manufacturing abilities and incredible buying power, while simultaneously worrying about the potential collapse of the Chinese economy, analysts said yesterday.
"China is now the world's largest manufacturing center, producing about 90 percent of the world's goods," Cheng Chu-yuan (
China's population now exceeds 1.3 billion, which supplies the country with a huge pool of low-wage workers, Cheng said. The low cost of labor, as well as an "open-door" investment policy begun in 1979, have helped China become the largest recipient of foreign direct investment (FDI) in the world, Cheng added.
From 1978 to last year, China attracted US$447.97 billion in FDI, which was almost 15 percent of China's total capital investment.
China's increasing economic strength makes it an irresistible business partner for Asian countries that are seeking to expand trade relations.
"One of the FTAs [free trade agreements] involving ASEAN that has received the most attention recently is that with China," Shujiro Urata, a social science professor at Japan's Waseda University, said at the seminar.
China signed a framework agreement on comprehensive economic cooperation with ASEAN in November last year, offering various schemes to attract ASEAN members, such as economic cooperation with new ASEAN members and trade liberalization for agricultural products, Urata said.
In addition to ASEAN, China has also proposed signing FTAs with Japan and South Korea.
While acknowledging China's importance to global trade, Eric Teo (張子超), council secretary to the Singapore Institute of International Affairs, suggested that governments should be wary of putting all their eggs into one basket.
"Indeed, China's influence on the global economy is irreversible, but its social and economic structures and policies are still not stable," Teo said. "The question we need to ask here is, is there any room for resilience if there are any accidents during `China fever?'"
Teo used the SARS outbreak earlier this year as an example of the kind of problems that might occur in the future. ASEAN member countries were worried that a potential embargo imposed by the Chinese authorities might severely damage their economies.
"Many economists are now speculating that the Chinese economy may collapse, following the pattern of what occurred in the USSR, if China fails to adjust to its economic transition," Teo said.
To safeguard Asian economies from the havoc the Chinese juggernaut could wreak on other countries should its economic development go awry, Wu Rong-i (吳榮義), president of the Taiwan Institute of Economic Research (台經院), suggested the formation of a regional multilateral economic cooperation organization, such as an East Asian FTA or an Asian Monetary Fund.
Wu is not the first official to make such a proposal. The East Asia Vision Group, which was created during a summit meeting of "ASEAN+3" (ASEAN, China, Japan and South Korea) in 1998 to study long-term ideas for economic cooperation, previously suggested establishing an East Asian FTA.