Routledge Handbook of Asia in World Politics

Teh-Kuang Chang, Angelin Chang

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781317404262
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: International Relations
• Index: Politics & International Relations

Asia is a complex and diverse continent, which has seen the scope and pace of transformation increase rapidly over the past 30 years. In turn, the economic growth and social change seen in the region, combined with new global security profiles and environmental challenges, have contributed to placing Asia at the forefront of international affairs.

This Handbook brings together leading scholars of different disciplines, including Politics and International Relations, Security Studies and Law, to provide a comprehensive analysis of both the prospects and problems which have emerged from Asia's rise. Examining how developments across the continent have influenced global politics and how the region has responded to the international community in the modern era, the sections cover:

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• Major actors in Asian politics, especially China, Japan and India,

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• International relations in Asia and intra-Asian tensions

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• Special issues of world politics in Asia including modern conflicts in and attitudes towards the Middle East

The Routledge Handbook of Asia in World Politics will be useful to students and scholars of Global Politics, International Relations and Asian Studies.

PART I

Major actors in Asian politics

1
CHINA IN THE GLOBAL POLITICAL ECONOMY

Thomas G. Moore

Introduction

Few subjects have received as much scholarly and popular attention over the past decade as China’s deepening participation in the world economy and its myriad implications for international politics. Prior to the era of “reform and opening” that began shortly after long-time leader Mao Zedong died in 1976, China was a marginal actor in international economic affairs. Today, however, its relationship with the world economy is one of substantial reciprocal impact. Not surprisingly, there is a vibrant literature documenting and analyzing China’s emergence as a major force in the world economy. Distinct threads have examined subjects such as China’s behavior in international economic organizations and the making of its foreign economic policy (Lardy 1999, 2002; Pearson 1999a, 1999b, 2001, 2006, 2014). One subject that has received less sustained attention is how the pattern of China’s ties to the world economy has evolved over time, both in general and with respect to specific actors (individual countries, regions, groups). Accordingly, this chapter examines China’s rapid ascent as an international trader and participant in foreign investment activities – the two most prominent aspects of China’s involvement in the world economy – for insight into how the nature of China’s economic ties has changed in the past and continues to develop.

In addition to complementing the existing literature, this chapter’s focus on how the pattern of China’s economic ties has changed addresses several issues of contemporary scholarly and policy-oriented interest. For more than a decade, observers have discussed the prospect that a China-centered economic order might emerge in East Asia, one in which the influence of the United States (US) would almost by definition be diminished, not only economically but also politically and militarily. While this possibility has sparked a huge, multi-layered research agenda at the nexus of economics and security affairs, one that exceeds the scope of this chapter, the question of whether China’s regional economic ties are intensifying relative to its global economic ties is a fairly straightforward empirical matter.

Along the same lines, some analysts in East Asia (and beyond) openly wondered – both prior to, and in the wake of, the 2008–2009 Global Economic Crisis – whether the region was beginning to “decouple” (or should at least be trying to decouple) economically from North America and Western Europe, to whatever extent that was possible. On a related note, beginning in 2009 it was reported that China was trying to orchestrate a “massive surge in trade among BRIC countries” as part of a decoupling strategy designed to reduce its vulnerability to the weaknesses in the US-led, G7-dominated international economic system that the Global Economic Crisis had exposed (Ng, 2009).¹ Around the same time, the eminent historian and public intellectual Niall Ferguson predicted that the symbiotic US-China economic relationship he had previously dubbed as “Chimerica” was headed for a divorce (Ferguson, 2009).

With these issues as context, this chapter examines the evolution of China’s trade and foreign direct investment (FDI) ties with a wide variety of actors in the world economy – not only individual countries but also groups such as the Association of Southeast Asian Nations (ASEAN), the BRICS (Brazil, Russia, India, China, and South Africa), the European Union (EU), and the North American Free Trade Agreement (NAFTA). The basic finding is that China’s trade and FDI ties have not been decoupling over time from partners outside East Asia; in fact, China’s economic ties have in some ways become more concentrated on countries in North America and Western Europe, while also diversifying in certain respects toward countries outside of North America, Western Europe, and East Asia. Even where China’s reliance on partners in East Asia has increased, as it has most significantly in the case of imports, this shift is consistent with the familiar narrative of an ever-deepening transnationalization of manufacturing in which so-called Factory China imports intermediate goods from its neighbors to produce finished goods for export to North America and Europe. In this sense, the main dynamic is globalization rather than regionalization, with the primary result being greater economic interconnectedness in almost every direction.

One final note before proceeding: any examination of China’s participation in the world economy must explicitly address the issue of what “China” is. For purposes of this chapter, China is Mainland China as identified by major international organisations such as the World Trade Organization (WTO), International Monetary Fund (IMF), World Bank (WB), United Nations Conference on Trade and Development (UNCTAD), and Organisation for Economic Co-operation and Development (OECD). These entities treat Mainland China, Hong Kong, Macao, and Taiwan as distinct customs territories in recording international trade and foreign investment. Although Hong Kong and Macao are Special Administrative Regions of the People’s Republic of China (PRC), they are generally treated as distinct economic actors. The individual sections below on China’s trade and foreign investment provide more detailed explanation of how transactions involving Hong Kong and Macao are handled in this chapter. With respect to China’s regional relations, however, it is worth noting that “East Asia” is composed solely of Japan, South Korea, Taiwan, and ASEAN.

International trade

China’s trade in international context

International trade is the exchange of goods and services across national or other internationally recognized territorial borders. China became the world’s leading trading country in 2013 when it surpassed the US with total trade (imports plus exports) of US$4,159 billion. China’s top-ranked share of world trade in 2015 was 12%, which was especially striking given that it had accounted for only 2% of world trade in 1980 at the beginning of the post-Mao Zedong era of reform and opening. In addition to becoming the world’s largest trader, China has also become – much more controversially, in fact – the world’s largest trade surplus country. After being ranked 7th in both 1995 and 2000, China rose quickly to 4th in 2005 and 1st in 2010, when it amassed a trade surplus of US$182 billion. After a brief dip in 2011, the upward trend continued through 2015, when China’s world-leading US$593 billion trade surplus was larger than the combined surpluses of the countries ranked 2nd through 5th (Germany, Russia, South Korea, and the Netherlands.)

Due to Hong Kong’s status as a vibrant entrepôt in the international economy, to say nothing of its distinctive commercial ties with the Chinese mainland more generally, the question of how to handle trade between China and Hong Kong raises especially nettlesome analytical issues given both the size of their trade relationship and the significant role that transshipment plays in it. The main problem concerns the treatment of finished (or essentially finished) goods produced in China that pass through Hong Kong (occasionally but not always for some final packaging or other perfunctory processing) before being re-exported to a third-party country (the true final destination). In reporting its trade flows, China has typically registered these transactions as exports to Hong Kong in order to minimize the magnitude of its larger export relationship with the third-party country, thereby making its trade balance with that country appear less favorable. Not surprisingly, these third-party countries often classify these products as Chinese rather than Hong Kong goods, recording their imports accordingly. Thus, significant discrepancies can exist between Chinese-reported trade data and partner-reported trade data.

Regardless of whose statistics are used, China’s trade with Hong Kong has surely been inflated to some extent over the past several decades due to transshipment-related issues. Given that China and Hong Kong are also genuinely sizable final markets for each other, however, it would be also be distorting to ignore their trade in analyzing China’s trade with the world. Accordingly, this chapter treats China’s trade with Hong Kong in keeping with the latter’s status as a separate customs territory in international trade. (The same approach is also taken with Macao.) In an effort to maximize the accuracy of its analysis, the chapter does, however, use partner-reported data (that is, import and export data reported individually by China’s trade partners) rather than Chinese-reported data. Although partner-reported data on China’s trade is not vastly different in the aggregate from Chinese-reported data, and therefore still likely overstates Hong Kong’s importance to China as a trade partner, the use of partner-reported data should at least reduce any distortion.

China’s total trade with the world²

As mentioned earlier, China first eclipsed the US in becoming the world’s leading trader in 2013; it retained the top spot in 2014 and 2015 as well, with the US trailing narrowly in 2nd place all three years. Although trends in China’s total trade certainly merit examination, this chapter emphasizes separate analyses of China’s exports and imports (International Monetary Fund, 2016), as these two domains of trade are characterized by different dynamics in China’s global, regional, and bilateral relations.

Before engaging in more detailed analysis of China’s imports and exports, let’s briefly examine the changing importance over time of China’s key partners in total trade (imports plus exports). In order to highlight recent trends, China’s total trade is reviewed only from 1995 to 2015.

Although the US’s share of China’s total trade fell slightly from 15.93% in 1995 to 15.55% in 2015, it moved from 2nd to 1st place as a precipitous decline in Hong Kong’s share (from 33.72% to 13.16%) dropped the latter into 2nd place. Japan retained 3rd place despite the fact that its share declined by more than half, from 15.29% to 7.01%. South Korea’s share grew from 4.37% to 5.91%, enough to switch spots with Germany as the latter fell from 4th to 5th place as its share of China’s total trade declined from 4.91% to 4.06%. Taiwan (3.00%), Australia (2.90%), Vietnam (2.46%), Singapore (2.35%), and the UK (2.30%) rounded out China’s top ten total trade partners in 2015.

Looking beyond individual countries, the EU’s share of China’s total trade increased from 14.04% in 1995 to 15.02% in 2015, while NAFTA saw a similar increase, from 17.68% to 19.55%. The share of East Asia (comprising Japan, South Korea, Taiwan, and ASEAN) inched upward (25.85% to 26.20%), as the strongly rising shares of ASEAN and Taiwan (5.27% to 10.28% and 0.92% to 3.00%, respectively) and South Korea’s modestly rising share (4.37% to 5.91%) combined to offset Japan’s declining share (15.29% to 7.01%). The BRICS’s share of China’s exports almost tripled from 2.03% in 1995 to 6.04% in 2015, but it is notable that no individual member of the BRICS ranked among China’s top ten total trade partners in 2015.

Given that East Asia’s share of China’s total trade crept up from 25.85% in 1995 to 26.20% in 2015, the extra-regional share of China’s total trade thus by definition declined slightly (from 74.15% to 73.80%). By the same token, it is striking that East Asia’s share of China’s total trade was essentially flat over the two decades in which China truly became an economic force in its home region. Given that the combined share of the EU and NAFTA increased by 2.85%, in addition to East Asia’s increase of 0.35%, the share of China’s total trade with the rest of the world (that is, countries outside the EU, NAFTA, and East Asia) decreased by 3.20%. That the BRICS’s share grew from 2.03% in 1995 to 6.04% in 2015 means that the non-BRICS portion of the rest of the world actually saw their combined share of China’s exports drop significantly (by 7.21%). These countries’ total trade with China grew impressively in absolute terms, but their relative position among China’s trade partners weakened.

Exports

China’s exports to the world³

According to the WTO’s Statistics Database (World Trade Organization, 2016), China’s US$18.1 billion of exports represented only 0.9% of the world’s total in 1980, ranking 27th. By 2015, China ranked 1st with US$2,275.0 billion of exports, accounting for 13.8% of the world’s total. In 2015, therefore, the value of China’s exports in current US dollars was more than 125 times greater than it had been in 1980. In order to put this astonishing increase into greater perspective, we should compare China’s export growth in current US dollars to its growth in constant US dollars. 1985 and 2013 have to be used for this comparison, as they are the earliest and latest years, respectively, for which export data in constant dollars is available from the WB’s World Development Indicators at the time of this writing (World Bank, 2016).

In current US dollars, China’s exports grew from US$27.4 billion in 1985 to US$2,209.0 billion in 2013, or by a factor of slightly more than 80. By contrast, world exports as a whole grew by a factor of slightly more than 10 between 1985 and 2013 in current US dollars, from US$1,953.0 billion to US$19,082.1 billion. According to constant 2005 US dollars, China’s exports grew from US$53.6 billion in 1985 to US$2,033.4 billion in 2013, or by a factor of almost 38. By contrast, world exports as a whole grew by a factor of almost 5 between 1985 and 2013 in constant 2005 US dollars, from US$3,845.4 billion to US$18,373.3 billion. In other words, Chinese exports – whether measured in current US dollars or constant US dollars – grew approximately eight times faster than world exports between 1985 and 2013.⁴

As this comparison indicates, the growth in China’s exports has been striking in constant 2005 US dollars as well as in current US dollars. Both methods, of course, focus on the growth of China’s exports in absolute terms, which is undeniably an important feature of China’s rapidly deepening participation in the world economy. An equally if not more important aspect of China’s rising profile, however, is its growing share of world exports. The latter perspective, which focuses on changes in China’s position as an exporter relative to other countries, effectively controls for the absolute growth of world exports. For example, China’s share of world exports more than tripled in just the period between 2001 (the year China joined the WTO) and 2015, rising from 4.3% to 13.8%. China’s 13.8% share of world exports in 2015 was higher than the share any country had achieved in nearly 50 years. (The last country with a higher share of world exports was the US in 1968, when its share was 14.7%.) In 2015, China’s share was more than half again as large as the US’s share and larger than the combined share of the world’s 3rd- and 4th-ranked exporters, Germany and Japan.

It’s useful, therefore, to review the ascent of China among the world’s exporters. From 1980 to 1990, China leapt halfway up the rankings from 27th to 13th, doubling its share of world exports from 0.9% to 1.8%. Between 1990 and 2000, China’s share again doubled, from 1.8% to 3.9% as its rank correspondingly rose from 13th to 7th. (As context, the world leader – usually the US but occasionally Germany – typically held a share of world exports in the 11–12% range from 1980 to 2000.)

By 2001, the year China joined the WTO, its 4.3% of world e...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• List of illustrations
• List of contributors
• Introduction
• Part I Major actors in Asian politics
• Part II International relations in Asia
• Part III Special issues of world politics in Asia
• Index