During the last three decades China’s economy has grown at the phenomenal rate of 10% per year, sometimes even exceeding 12%. Can China maintain such high rates for at least another decade? I think it can. China is starting from a lower base, and its 1.3 billion domestic consumers will keep rates up because their disposable incomes are growing.
As its GDP has increased, China has become more assertive
regarding international issues. Those countries on its periphery–Korea, Japan,
Taiwan and the ten Asean countries (Brunei Darussalam, Cambodia, Indonesia,
Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam)–have
felt China’s growing influence. When these states make policy decisions they
now have to take China into account. There is no direct intimidation, but, by
denying access to its huge consumer market, China can punish those who are
against its interests. Therefore, none of these countries wants to be viewed as
antagonistic. Increasingly, this same pressure is being felt worldwide: The
balance of power has changed.
The U.S. realizes that China’s status has grown and that its views
must be accorded their due weight. Were it to feel slighted, China could make
its displeasure felt by being uncooperative on international issues or policies
that require its support.
Singapore has a special relationship with China.
We are 75% Chinese. As our second language is Chinese,
it is taught in our schools. Thus we share an ease in communication, which has been a factor in about 3,500 Chinese companies deciding to
base their operations in Singapore–155 of which are
listed on the Singapore Exchange. From Singapore the Chinese are
able to study the region and eventually enter the markets of Malaysia,
Indonesia, the Philippines, Thailand and Myanmar. Because Singaporean Chinese
speak Mandarin, our businessmen, when investing in China, have found it easy to
integrate China’s workers with ours. But lest Singapore–or any other country in
the area–forget that it is a smaller and younger country, Chinese officials
obliquely remind ours that their written history goes back 5,000 years to 3000
B.C., leaving unspoken the question: “How
old is your country?”
None of the countries on its periphery can resist the attraction
of China’s market. Slowly, but inexorably, we are
being drawn into China’s economic orbit. If you look at China’s
policies over the last three decades there is little doubt that it has every
intention of bringing its three northern neighbors–Korea, Japan and Taiwan–as
well as the Asean countries into its economic fold. Of course, at the same time
we do enjoy benefits in trade and investment.
China is a political and economic power the region cannot ignore.
But neither, indeed, can China ignore the U.S. Although it has a smaller
population–310 million versus China’s 1.3 billion–the purchasing power of
Americans is many times that of the Chinese. There is still time for the U.S.
to counter China’s attraction by instituting a free-trade agreement with other
countries in the region. This would prevent these countries from having an
excessive dependence on China’s market.
Unfortunately the U.S. Congress is against any new free-trade
agreements. If the next Congress continues to oppose FTAs, valuable time will
be lost, and it may be too late to try again. Congress must be made to realize
how high the stakes are and that the outlook for a balanced and equitable
relationship between the American and Chinese markets is becoming increasingly
difficult. Every year China attracts more imports and exports from its neighbors
than the U.S. does from the region. Without an FTA Korea, Japan, Taiwan and the
Asean countries will be integrated into China’s economy–an outcome to be
avoided.
A considerable counterbalancing force would be to add India to the
mix. Whether India would be willing to enter into an FTA with the U.S., Korea,
Japan, Taiwan and the Asean nations is the question. Singapore has a free-trade
agreement with India, but we are a small country, enjoy good relations with
India and do not present a threat to either its export or import market. If
India joined such an agreement the combined markets would be more than equal to
the pull from China.
