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Mixed Feelings: East Asia's Debate about China's Economic Growth and Regional Integration

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Despite Chinas sustained, rapid economic growth and the contrasting recession in Japan during the past decade, Japan still leads China in key economic indicators such as gross domestic product, outward investment, and trade volume. Chinas large and increasingly wealthy population provides an attractive market and base for exports, luring foreign direct investment away from other countries in Asia. China has started to reform its economic system to conform to WTO requirements, but implementation has been slow and considerable regulations on foreign investments and barriers against imports remain. Most of Chinas exponential trade growth during the past decade has resulted from trade with the United States and the European Union, whereas Japan and ASEANs proportional shares of Chinas trade have remained largely unchanged. For the ASEAN countries, China remains a secondary trade partner behind the United States and Japan. South Korea and Japan are deepening their economic interdependence with China, but liberalization of trade among the three countries lags behind the ASEAN-China Free Trade Agreement FTA. Despite the increasing competition from Chinese producers, most Asian countries share with China a fear about negative social and political consequences of rapid economic reforms and possible exclusion of their exports from the U.S. and EU markets. Asian incentives for regional integration are intended to form an enhanced negotiation bloc vis-a-vis the United States and the European Union. ASEAN countries see FTA negotiations with China as a catalyst to bring a reluctant Japan into FTA negotiations. Faced with the declining U.S. dollar, Asian countries with floating or loosely pegged rates see Chinas strict dollar peg as problematic because a declining RMB against their currencies diminishes their relative trade competitiveness with Chinese products.

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  • Economics and Cost Analysis
  • Government and Political Science

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