China in the World Economy: The Domestic Policy Challenges: Synthesis Report/China's Economic Globalization through the WTO

Article excerpt

China in the World Economy: The Domestic Policy Challenges: Synthesis Report. Paris: OECD Publications, 2002. 72 pp. US$19.00/euro20.00/£12.00 (paperback).

China's Economic Globalization through the WTO, edited by Ding Lu, Guanzhong James Wen and Huizhong Zhou. Aldershot: Ashgate, 2003. xiv + 225 pp. £49.95 (hardcover).

The titles of these two books suggest that one deals with domestic policy issues while the other is confined to China's integration into the global market. In fact, the common theme throughout both books is that is impossible to separate one from the other.

The synthesis report of China in the World Economy: The Domestic Policy Challenges summarizes the findings of a study comprising 22 detailed reports prepared by nine OECD directorates. The long-winded, bureaucratic style of writing ensures that many sentences will need to be read at least twice before their meaning can be deciphered. The hope that the time spent will be rewarded with new insights is not met, despite some interesting points.

The key message is that China's reforms have become increasingly interdependent and that further success in one area is contingent on progress elsewhere. An implicit message is that the reforms must focus on economy-wide policies to promote more efficient resource allocation and to bolster the effectiveness of markets. This point provides a valid basis for the report, which highlights three key objectives for success in China's overall reforms over the next decade: improving the utilization of resources; strengthening the institutional framework for the market to function; and enhancing the government's capacity to support development.

Numerous examples highlight the increasing interconnectedness of China's ongoing reform process. For example, in the early reform years decollectivization led to marked increases in agricultural productivity, which helped to raise rural incomes and spur the development of rural enterprises. These enterprises successfully absorbed millions of surplus rural workers. More recently, the performance of rural enterprises has deteriorated sharply, and there is no way they will be able to absorb the estimated 70 million additional workers who can be expected to exit agriculture between 2000 and 2010. Without further reforms to the hukou system of household registration and the poorly integrated domestic labor market, these surplus workers will have nowhere to go. Reforms within the agricultural sector can no longer provide a solution.

According to the report, the prospects for industry are grim. While the opening to international trade and investment has increased competition, widespread inefficiencies stem from policy burdens and government interference, inadequate technology, limited innovation capacity, poorly skilled management, weak legal and regulatory frameworks, discriminatory treatment depending on enterprise size, ownership and location, and more. Regarding industry, agriculture, finance, banking and foreign capital, a key message is that trade and investment liberalization offers opportunities but cannot guarantee that domestic problems will be appreciably reduced. Presumably, this obvious point is dealt with in greater detail in the specific reports of the full study.

The one-page subsection "Making better use of land and environmental resources" is indicative of a major criticism that can be made about this monograph: that it becomes an endless list of what needs to be done, without providing any concrete advice on how to go about doing it. The subsection first establishes that phasing out government control over grain procurement prices and related interventions ought to raise agricultural productivity. It then identifies numerous complementary policies, such as the development of marketing channels, improvements in product standards, infrastructure investment, improved rural credit networks, and so on. The subsection then shifts to the positive impact that resource reallocation can have on the environment, in terms of water use and air and water pollution. …