China: The Challenges and Opportunities for the British Economy: China: The Challenges and Opportunities for the British Economy Chris Milner (GEP, School of Economics, University of Nottingham)


China’s Entry into the Global Economy: China’s Entry into the Global Economy Prior to its WTO accession, China had one of the highest rates of trade protection in the world tariffs on imports averaged over 40% in 1992 and were complemented by an array of non-tariff barriers (licences, quotas & state trading restrictions) The extent and speed of China’s liberalisation and integration into the world economy has been dramatic


Slide3: Table 1 China’s Average (Trade-Weighted) Statutory Tariff Rates on Merchandise Trade (percent)


Slide4: Source: World Bank Table 2 Indicators for China (annual percentage change)


China in the Global Economy: China in the Global Economy Even with exceptionally high growth rates, China’s export growth is outstripping its output growth the Chinese economy is much more open and incomes (especially in the coastal regions) have grown rapidly Between 1990 and 2004 China’s exports grew 3.5 times more rapidly than world exports China is forecast to be world’s largest exporter by 2010 of particular interest because almost two-thirds of those exports are to the OECD countries China already represents a major market, but has enormous further potential (given population size and scope for income growth) the share of imports in GDP has more than doubled in 15 years as yet, most of the imports are in raw materials, capital goods and intermediate goods


Slide6: Table 3 Annual Percentage Change of World Exports of Merchandise Goods Source: WTO; own calculation


Slide7: Table 4 World Exports in Merchandise Goods Unit: US dollar at current prices (100 millions) Source: WTO


Slide8: Table 5 World Exports in Commercial Services (value) Unit: US dollar at current price(100 millions) Source: WTO


Slide9: Table 6 Indicators for China’s (% GDP) Source: World Bank


Role of FDI in China’s Transformation: Role of FDI in China’s Transformation China had a relative abundance of unskilled labour, i.e. a potential for exporting standardised, labour-intensive goods Inward FDI offered an opportunity to acquire capital (machinery, equipment) and technological know-how now about 6% of the world’s FDI goes to China FDI offered foreign firms both an opportunity to gain a platform in the host market, but also an opportunity to outsource labour-intensive stages of export production exports so far have been concentrated in labour-intensive activities, but upgrading (more apparent than actual) into higher value-added and skill – intensive exports (consumer electronics, transport equipment) is already occurring


Slide11: Table 7 FDI inward (stock value) Unit: US dollar at current prices (millions) Source: UNCTAD


Slide12: Table 8 FDI outward Stock Unit: US dollar at current prices (millions) Source: UNCTAD


Challenges to the British Economy: Challenges to the British Economy Strong expectation that globalisation increases average incomes in long-run, but that there may be some groups that lose and short-term adjustment costs China is increasing pace of adjustment required Types of adjustment issues: direct competition from Chinese imports to firms and workers, especially those involved in labour-intensive manufacturing outsourcing of activities to China in import-competing and export-oriented activities in both manufacturing and services direct export competition in the Chinese market from upgrading domestic firms and in third markets from ‘Chinese’ exporters and FDI in China


Slide14: Table 9 Indicators for China Unit: US dollar at current prices (100 millions) unless stated otherwise


Slide15: Table 10 China’s Structure of Exports (Commodities Only)


Opportunities for the British Economy: Opportunities for the British Economy Direct exports of goods (associated with rise in production, incomes and technological-intensity) and services Outward FDI opportunities in manufactures and services (platform for Chinese market and exporting) including outsourcing to increase cost competitiveness Inward FDI opportunities outlet for China’s substantial trade surpluses? platform for EU market? ‘tariff-jumping’ motives?


Slide17: Table 11 China’s Structure of Imports (Commodities Only)


GEP, Nottingham and China: GEP, Nottingham and China Many new research challenges posed by the scale and pace of China’s economic development GEP has a programme of research on ‘China & the World Economy’ New teaching needs and opportunities are also being stimulated by this new global giant the School of Economics offers a degree in ‘Economics and Chinese Studies’ New pressures to internationalise higher education Nottingham’s campuses in China and Malaysia