An Overview of China ’ s Emergence and East Asian Regional Trade to 2020 David Roland-Holst Mills College and University of California Visiting Scholar, ADBI 12 July 2002 Asian Development Bank Institute Tokyo
Contents 1. Introduction 2. Methodology 3. Baseline Projections 4. Trade Policy Scenarios 5. Conclusions and Extensions 6. Discussion 12 July 2002 ADB Institute D. Roland-Holst Tokyo
Introduction China ’ s accession to the WTO is a watershed event, for the n global economy generally and for East Asia in particular. China has already established new standards for sustained n growth and dynamic resource allocation by a large economy, and further Chinese domestic and external liberalization will redefine trade relations in ways that are only beginning to be understood. Initial reactions of regional partners, who perceive China as n a strong export competitor and magnet for FDI, have been somewhat defensive. These sentiments could undermine multilateralism and n retard the dramatic historical progress of regional trade and economic growth. Our research reveals a more complex picture of China ’ s n emergence, however, one that may present as many opportunities as threats to East Asian policy makers. 12 July 2002 ADB Institute D. Roland-Holst Tokyo
Methodology: The ADBI Global Model Analytical Economic Model GTAP Global CGE Trade and Aggregation Forecasting Input-output Facility Model Database Satellite Accounts 12 July 2002 ADB Institute D. Roland-Holst Tokyo
Analytical Economic Model n A GE growth model detailing real interactions between 18 countries/regions. n Supply (18 sectors): firm-level production technology with Leontief intermediate use. n Demand: domestic consumption functions by household and commodity type. n Dynamic specification of factor growth and demographic transitions. n Extensive accounting for transfer relationships between institutions (fiscal, capital flows, remittances, etc.). 12 July 2002 ADB Institute D. Roland-Holst Tokyo
The Global Trade Analysis Project (GTAP) Database This dataset contains, for 66 countries/ regions and 57 sectors, 1. National income and product accounts 2. Social accounting matrices 3. Bilateral trade flow tables 4. Protection and support estimates for more information, see www.gtap.org 12 July 2002 ADB Institute D. Roland-Holst Tokyo
Satellite Accounts n Productivity trend estimates n Structural parameters n Demographic and resource data n Monetary and financial data (future version) 12 July 2002 ADB Institute D. Roland-Holst Tokyo
Forward-looking Policy Analysis Policy Scenarios CGE Projections for East Asia and the Global Forecasting Economy to 2020 Model Baseline Economic Conditions 12 July 2002 ADB Institute D. Roland-Holst Tokyo
Baseline Projections to 2020 The model is calibrated to country and regional real GDP growth rates, obtained as consensus estimates from independent sources (DRI, IMF, Cambridge Econometrics). Using exogenous rates of implied TFP growth, the model computes supply, demand, and trade patterns compatible with domestic and global equilibrium conditions. 12 July 2002 ADB Institute D. Roland-Holst Tokyo
The Mechanism Productivity Supply Prices Income Domestic Demand Imports Real ER Exports External Global External Supply Equilibrium Demand 12 July 2002 ADB Institute D. Roland-Holst Tokyo
Selected Macroeconomic Indicators: Baseline Scenario (percentage annualized growth, 2000-2020 unless otherwise indicated) Real GDP Absorption Exports Imports Exp PI Imp PI Real ER China 7.10 6.94 6.27 5.85 -.22 -.18 -.04 Japan 2.20 2.12 2.37 3.15 .22 -.13 .35 NIE 4.34 4.42 4.01 4.21 -.09 -.08 -.01 ASEAN 4.75 4.55 4.46 4.25 -.26 -.13 -.13 USA 2.62 2.61 3.07 2.94 .12 -.09 .21 EU 2.52 2.63 2.37 2.60 .13 .01 .13 ROW 3.65 3.65 3.69 3.40 -.19 -.09 -.11 12 July 2002 ADB Institute D. Roland-Holst Tokyo
Real GDP Growth (Normalized to 100 in 2000) 450 400 350 China 300 Japan 250 200 NIE 150 ASEAN 100 50 0 2000 2005 2010 2015 2020 12 July 2002 ADB Institute D. Roland-Holst Tokyo
Real GDP (billions of 2000 USD) 7000 6000 5000 China 4000 Japan NIE 3000 ASEAN 2000 1000 0 2000 2005 2010 2015 2020 12 July 2002 ADB Institute D. Roland-Holst Tokyo
Real Exports (billions of 2000 USD) 1200 1100 1000 China 900 Japan 800 700 NIE 600 ASEAN 500 400 300 2000 2005 2010 2015 2020 12 July 2002 ADB Institute D. Roland-Holst Tokyo
Real Imports (billions of 2000 USD) 1200 1100 1000 China 900 Japan 800 700 NIE 600 ASEAN 500 400 300 2000 2005 2010 2015 2020 12 July 2002 ADB Institute D. Roland-Holst Tokyo
Bilateral Trade Growth: Baseline Scenario (percentage annualized growth rates, 2000-2020) Importer Exporter China Japan N IE ASEAN USA EU ROW Total China .0 5.5 7.6 7.1 6.2 6.3 6.4 6.4 Japan 4.7 .0 2.8 2.6 1.4 1.5 2.0 2.4 N IE 6.2 3.9 4.3 4.3 2.3 2.6 3.4 4.0 ASEAN 7.4 3.6 4.7 5.2 2.9 3.6 5.0 4.5 USA 5.7 2.3 4.2 3.7 .0 2.6 2.9 3.1 EU 5.0 2.1 3.8 3.6 2.2 2.0 2.6 2.4 ROW 6.3 2.8 3.9 4.6 2.8 3.5 3.8 3.5 Total 5.8 3.1 4.2 4.3 2.9 2.6 3.3 3.2 12 July 2002 ADB Institute D. Roland-Holst Tokyo
Bilateral Trade Balances: Baseline Scenario (Year 2020 in Billions of 2000 USD) Importer Exporter China Japan N IE ASEAN USA EU ROW Total China 0 -5 -135 -41 166 66 71 122 Japan 5 0 39 20 23 -15 -50 21 N IE 135 -39 0 19 -32 -32 -12 40 ASEAN 41 -20 -19 0 18 8 12 41 USA -166 -23 32 -18 0 48 -40 -168 EU -66 15 32 -8 -48 0 34 -41 ROW -71 50 12 -12 40 -34 0 -16 Total -122 -21 -40 -41 168 41 16 0 12 July 2002 ADB Institute D. Roland-Holst Tokyo
Selected GDP and Trade Shares (Baseline, 2020) 100% 90% 80% China 70% Japan 60% NIE 50% ASEAN usa 40% EU 30% ROW 20% 10% 0% GDP X+M China China Japan Japan Exports Imports Exports Imports 12 July 2002 ADB Institute D. Roland-Holst Tokyo
Japan: Export Shares by Destination (Baseline) 100% 90% 80% China 70% Japan 60% NIE 50% ASEAN usa 40% EU 30% row 20% 10% 0% 2000 2005 2010 2015 2020 12 July 2002 ADB Institute D. Roland-Holst Tokyo
Japan: Import Shares by Origin (Baseline) 100% 90% 80% China 70% Japan 60% NIE 50% ASEAN usa 40% EU 30% ROW 20% 10% 0% 2000 2005 2010 2015 2020 12 July 2002 ADB Institute D. Roland-Holst Tokyo
Scenarios 1. Baseline: Business as Usual – Consensus international forecasts for real GDP growth. 2. China WTO – China proceeds with WTO accession, ROW follows the Baseline 3. AFTAPC – AFTA Plus China 4. GTL – Global Tariff Liberalization 12 July 2002 ADB Institute D. Roland-Holst Tokyo
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