China’s Future Development and Economic Relations with Asia

and Latin America

Justin Yifu Lin

Peking University and

Hong Kong University of Science & Technology

China’s Growth Potential

• The current stage of China’s growth is about that of Japan in 1960. Table 1.doc

GDP per Capita, 1950-1992

0

5000

10000

15000

20000

25000

1950 1955 1960 1965 1970 1975 1980 1985 1990

Western Europe Western Offshoots Southern Europe

Eastern Europe Latin America Asia

Africa

The FDI to Developing Countries

-50000. 00

0. 00

50000. 00

100000. 00

150000. 00

200000. 00

250000. 00

300000. 0019

70

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

Year

Mill

ion

Devel opi ngcountr i esChi na

Lat i n Ameri ca

Asi a-

Is China’s Labor Cost Low?

• China’s wage rate is about 1/50 of that in U.S. and Japan

• Labor productivity is only 1/25 of U.S. and 1/26 of Japan

• US wage level is only 1/3 higher than China per dollar output

Share and Domestic Value Added of Processed Exports

0

10

20

30

40

50

60

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

Share ofProcessedProduct Export

Domestic ValueAdded ofProcessedManufacturedExport

China’s Trade Balance, 1980-2003

- 140

- 120

- 100

- 80

- 60

- 40

- 20

0

20

40

60

80 Total

Asi a Excl .Hong Kong

Lati nAmeri ca

NorthAmeri ca

Europe

Oceani c andPaci fi cI sl andsAf ri ca

China’s Trade Balances

• The pattern of China’s trade balance changed around 1992.Table 3.doc

Sources of FDI to China

• The changes in trade pattern is related to the relocation of labor-intensive manufacturing industries from East Asia to China through FDI. Table 4.doc

Concluding Remarks (1)

• China has the potential to maintain dynamic growth in the coming decades

• To realize the growth potential, China needs to complete the transition to market economy

• WTO accession will facilitate China’s transition to market economy

• China will continue to attract large inflow of FDI. However, the same will be true to other developing countries.

Concluding Remarks (2)

• More than half of China’s exports is processed manufacturing goods.

• The more is China export, the more China’s import of intermediate products from Asia.

• The dynamic growth in GDP and trade will increase China’s import of natural resources from natural resources rich countries in Asia Pacific and Latin American countries