China will play a central role in the economic integration of East Asia as its mammoth economy is opened up following the country's entry into the mainstream of global trade, the World Bank said.
A freer trading environment resulting from China's accession to the WTO and its emergence as a key global player have raised opportunities and challenges for its neighbors as they strive toward closer trade and economic links.
"China's role in the region is unrivaled," the bank said in a study on East Asian integration released yesterday in Singapore.
PHOTO: AP
It noted that China accounts for half of Asia's economy when measured in terms of purchasing power.
China's share of global exports has tripled and its share of world imports has doubled from 1990 to last year. It is the world's largest host country for foreign direct investments and is the largest capital lender to developing countries.
"Looking ahead, China will continue to be an important driver for change in East Asia. With WTO accession, it will continue opening its markets to other countries' exports and improving its business climate," the bank said.
China aside, East Asia comprises Hong Kong, Taiwan, Japan, South Korea and ASEAN, which groups Brunei, Cambodia, Indo-nesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.
A proposed free-trade agreement between China and ASEAN -- which has already launched a free-trade zone based mainly on tariff cuts -- looks to be the most promising among several planned regional pacts.
Aimed for completion within the decade, the agreement would emerge as the world's biggest free-trade zone, covering nearly two billion people and a combined economic output of US$2 trillion dollars.
Homi Kharas, the bank's chief economist for the region and co-editor of the study, said the planned ASEAN-China accord could form the core of a broader East Asian economic zone.
"Clearly, the natural economic forces are now including China as an important part in these regional production networks [in East Asia]. China is now the only large economy in the world which has really taken a liberal approach to agriculture," he said.
In addition, China is emerging as an important absorber of exports from the rest of the region.
"The region's exports to China are growing so rapidly precisely because China is offering these opportunities which other countries have not offered," Kharas said at a news briefing.
Exports by East Asian economies to China accounted for 56 percent of their growth in exports last year, a trend that continued in the first four months of this year, he said.
The rest of East Asia's economies have shed their initial fears of the Chinese behemoth after realizing the huge business opportunities in dealing with their neighbor, he added.
Meanwhile, East Asian countries may gain as much as US$300 billion a year, or a tenth of their combined gross domestic product, by reducing barriers to trade with each other, a World Bank study said.
"The stakes involved are high," Jemal-ud-din Kassum, the bank's vice president for East Asia and the Pacific, was quoted as saying in a report released today. "If properly shared, this would mean 50 million fewer poor."
To reap those gains within a decade, East Asia must do more than reduce tariffs, the study said, suggesting that countries in the region simplify customs, improve transport and open trade in agriculture and services.
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