Explaining China's Evolving Trade Structure Group2 Ho Hsia, Wen-Yun Tu, Chih-Mei Shen

The development of export - general trend Accession to WTO in FTAs Astonishing growth of 26.9% annually in real goods and services exports during the Trillion

The development of export – Stage1 Era of “resource-intensive products” As late as 1984, 50% of the country's exports were in crude oil, coal, food, animals and other base materials Resource-intensive products

The development of export – Stage2 Era of “Labour-intensive product” Exports of textiles and clothing exceeded crude oil in 1986 Labour-intensive product

The development of export – Stage3 Era of “assembling non-traditional labour-intensive products” Export of machinery and electronics exceeded textiles and clothing in 1995 “Assembling” non-traditional labour-intensive products

The development of export – Stage4 (present) Complete integration in global supply chain Top 5 Products exported by China in 2012 Top 5 Products exported by China in Computers (9.9%) 2.Broadcasting Equipment (5.2%) 3.Telephones (4.3%) 4.Office Machine Parts (2.2%) 5.Integrated Circuits (2.0%)

The development of export - Export v. GDP (1/2)

The development of export - Export v. GDP (2/2) The view of "exports are better than imports" or "exports are better for economic growth" has lost its popular support

The development of import Top 5 Products imported by China in Crude Petroleum (14%) 2.Integrated Circuits (7.6%) 3.Iron Ore (5.3%) 4.Gold (3.6%) 5.Cars (2.9%) 1.45 Trillion

The development of import Intra-industry trade is of growing importance which indicates China is very much an important part of the global supply chain, engaging in the "supply chain trade" or "import for export" model

Trade in service

China’s production and trade structure Product composition has shifted significantly for both exports and imports, as China has continued to upgrade its production capability while demanding increasingly more sophisticated products from abroad.

Commodities prices collapse

What did china do last 12 months Shanghai-Hong Kong Stock Connect May,2015: The Prime Minister Keqiang visited Brazil, Colombia, Peru, and Chile, signed an agreement with Brazilian and Peruvian Governments to build more than 5,000 kilometers of railway lines which shall connect the Atlantic and the Pacific with the aim of increasing the size and speed of trade with China. central bank cut its benchmark lending rate to a record low and lowered reserve-requirement ratios. NOT FOCUS ON LABOR INTENSE PRODUCTS ANYMORE

China’s PMI

Early to tell if china is successful

One example of the integration of global market - RCEP

China's Rapid Economic Expansion (1/2) Late 1970s: Outbound trade and inbound foreign direct investment served as the twin engines of growth. China access to the WTO in 2001 : lower tariffs, fewer trade restrictions and by reducing its own restrictions on trade. China became the ‘factory of the world’.

China's Rapid Economic Expansion (2/2) 2008: The global financial crisis hit developed countries which the most important markets for Chinese export. External demand for Chinese products has not rebounded to pre-GFC levels. On the supply side, wage gains in China are making labour- intensive production more expensive.The ‘world’s factory’, therefore, faces overcapacity within many export-oriented industries.

Changing Dynamics of International Trade Rules Since stalemate of the WTO’s multilateral Doha Round negotiations in 2005.Reform current trade rules through mega-regional negotiations. Multilateral approach Regional Comprehensive Economic Partnership (RCEP) negotiations include 10 Association of South-East Asian Nations (ASEAN) members and Australia, China, India, Japan, New Zealand and South Korea. These are big trading partners within the region.

TPP v.s.RCEP The negotiation agenda covers an extensive range of issues, such as tariff reduction, services, investment and intellectual property rights protection. RCEP’s aim is to further reduce tariffs among member countries, to grant more market access within service sectors and to create a liberal, facilitative and competitive regional investment environment. In the 2015 Boao Forum for Asia, Chinese President Xi Jinping re-emphasised the significance of concluding the RCEP deal by the end of In the Pacific Rim, while RCEP and TPP complement each other in terms of their membership scope and issue coverage, they are in competition to be the first to offer an update to the international trade rules of the WTO.

How about FTA bilateral approach

Conclusion Thanks! 35