HONG KONG-With its economic
emergence, China has become the favored foreign
direct investment (FDI) destination, attracting
more than $40 billion each year for the past
5 years. In terms of trade flows and redirected
FDI, this has had a negative impact on the
other East and Southeast Asian economies.
"The
reality is you should be afraid of China, but there
are ways that you can benefit as well," said Peter
Lau, Chairman and Chief Executive Officer for Giordano
International, Hong Kong. "It is not all gloom
and doom-I think there are pockets of opportunities
that we can look at in terms of doing business with
China, selling to China, or bringing the Chinese consumers
to your part of the world."
It is not yet clear what China's accession to
the World Trade Organization (WTO) will mean for
every country in Asia. While there is no consensus
on who will be the winners and who will be the
losers, and undoubtably there will be losers, the
fact remains that there will be repercussions for
Asia.
These observations were made here during a three-day
meeting of the World Economic Forum.
"The economic growth of China does not pose
a threat to the region, or to the world; China
is after all a developing country," said Xi
Jinping, Governor of Fujian Province in China. "Our
economy has been developing quite fast, but compared
to many other East Asian countries, we are still
far behind."
But with an annual gross domestic product (GDP)
growth rate of 7.9 percent, some economies have
reason to fear China. With such fast paced growth,
the country's ability to attract FDI will only
increase after it joins the WTO. Opportunities
for potentially high-return investment abounds
in China, and Xi came to the summit to make sure
that potential investors were well aware of it.
"We have to build more infrastructure," said
Xi. "I have brought with me opportunities
representing billions of US dollars for consideration
by enterprises."
As
a developing country, China needs just about
everything. So,
as Xi told participants, there
are opportunities for investment in airports, highways,
railways, ports, public utilities, electricity
supply, television, and gas transport, just to
name a few. "We need a lot of capital so that
we will be able to achieve a high-level on the
technology," said Xi.
Xi said that his province, Fujian, has had a GDP
growth rate of 12.9 percent, and that he expects
the Fujian GDP to double in the next decade. Investment
opportunities in Fujian include two new railways
and three highways that need to be built for trade
services.
Contending
that the development of China will change the
division
of labor in the region, thereby
enhancing the region's overall competitiveness,
Xi said that China and East Asia "will be
able to help each other to achieve a win-win situation
and have a more beautiful tomorrow."
But a change in the division of labor, with labor
intensive manufacturing industries moving to China,
does spell trouble for some economies in the region.
"The low labor costs, the cheap land, and
the labor that is highly productive and skilled
have propelled China to become a major export oriented
manufacturing base in the world," said Vincent
H.S. Lo, Chairman and Chief Executive Officer of
Shui On Holdings, Hong Kong. "Most of these
gains will come at the expense of other Asian countries. "Malaysia,
Thailand, the Philippines and Indonesia have always
relied heavily on the foreign investment and technology
that are now streaming in to China. They do not
have the ability to move up the value added ladder,
so they are suffering a bit."
But
countries that are able to provide value added
goods to China's
population of 1.3 billion stand
to benefit from the economic emergence of China. "Japan
and Korea will find markets for their advanced
components, capital goods, heavy industrial products,
certain consumer items, and infrastructure.
"We in Hong Kong will find markets for our
service sector and Taiwan for its technology based
products. Other countries in Asia might find markets
for their resource based products, such as oil,
timber, agricultural goods, and perhaps in certain
niche manufacturing products," he said.
South East Asian economies, with the technical
capabilities to stay ahead of China, will benefit.
And those relying on foreign technology will find
their positions threatened.
"The impact is tremendous, lets not kid ourselves," said
Lau. "China is, especially after September
11, the work shop of the world."
But in looking at ways that countries threatened
by China can adapt to the changing economic order,
Lau called upon Southeast Asia to look toward its
own natural advantages in eduction, language, and
climate. With increasing numbers of Chinese with
disposable incomes looking to travel, Lau said
that countries should look to develop their tourism
industries, suggesting that everyone in the service
sector learn Mandarin.
"Southeast Asia provides the sun, the beaches,
good food, and hotels," he said. "So
turn yourself into a smokeless industry, that is
one thing that you can do in the short term. Take
advantage of the natural advantage that you have."
Another
advantage that Asian countries could tap into
is creating
uncomplicated, non-bureaucratic
institutions that make it easy for foreigners to
invest and do business. "If you can move faster,
liberalize your economy, open it to free trade
before China will, I think that you can get a lot
of headway, and attract FDI into your country," Lau
said.
The economies that certainly will be able to benefit
are those that can penetrate the growing Chinese
markets, develop complimentary relations with the
Chinese economy, attract investment from China,
and create development partnerships with China.
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