China's past behavior in the global economy shows that the country is likely to conform to WTO norms
Debate rages over whether China will be a cooperative player in the World Trade Organization (WTO), or whether it will attempt to thwart the rules of the game established by the existing WTO members. As the world and the US Congress consider China's likely behavior in the WTO, it is often forgotten that post-Mao China does in fact have a track record in the global economy that dates back two decades. Rather than ignore that track record, it is instructive to examine it for both the confidence it can offer in predicting China's future behavior and the hints it provides as to where difficulties may arise. China has acted in its own interest...
It would be naive to think that China's rapid integration into the global economic system has been driven by anything but self-interest. As Yong Wang's article (see p.54) makes clear, even economic liberals in China believe that the first goal of economic policy should be to create a strong industrial economy that can carry China into the future. There is continual debate within the PRC, at all levels of government and society, over how best to achieve this goal. In this respect, China is no different from any other country, including the United States.
... but has not been a "system buster
Yet in its attempt to create a modern economy through economic integration with the outside world, China has not been a disruptive power. China has adapted to the existing system, not vice versa. Moreover, throughout the integration process thus far, the global trade, investment, financial, and institutional systems have remained stable, and have proven quite capable of handling this newcomer.
In understanding China's track record, it is useful to look at three distinctive types of interaction: business-to-business transactions, PRC policymaking on trade and investment, and the PRC's posture in international economic organizations.
A simple and powerful-but too-often overlooked-point can be made about China's commercial dealings: in merely 20 years, the volume of business-to-business transactions engaged in by PRC firms has risen from zero or nearly zero to among the highest in the world. Its annual foreign trade rose from a mere $21 billion in 1978 to $324 billion in 1998. Even more dramatic, the amount of incoming capital rose from zero in 1978 to a high of about $110 billion in 1993, though it has hovered around $50 billion in each of the past several years. In the early and mid- 1990s China was second only to the United States as a recipient of foreign direct investment (FDI).
Granted, a significant portion of this amount was (and to some degree still is) attributable to .round-tripping"--efforts by PRC firms to send money abroad and then reinvest it in China under the more favorable terms offered to foreigners. Yet the basic point-that the amount has increased dramatically-cannot be ignored. Chinas investment abroad has also risen from a handful of politically motivated aid projects to commercial business ventures.
In the last 10 years, China has become a commercial borrower of note in the financial markets, though it experienced some fallout from the Asian financial crisis. And China has participated in international capital markets by issuing both stocks and bonds overseas. In the 1990s it became one of the few transition economies with an investment-grade credit rating on its sovereign external debt, currently rated "BBB" by Standard and Poor's Corp.
Beyond the story told by the sheer volume of activity@ there is also evidence of the kind of actor China has been. The market is a natural, quick, and unbiased enforcer of its own rules. It is an enforcer that the Chinese, for the most part, accept; in stark contrast to the days of Mao, current Chinese leaders tend to view market norms …