China's Trade Opening: Implications for Regional Stability

Article excerpt

Key Points

China's entry into the World Trade Organization could have a decisive impact on that country's long-term development as well as on its relations with Asian neighbors and the United States.

A best-case scenario posits a China confident of its role in the region, valuing stability and prosperity. A Chinese middle class could arise. Prospects would be good for mutually beneficial U.S.-China relations and for Chinese social and political reforms.

Although a strong China could become a regional aggressor, that prospect is unlikely. It is also unrealistic to expect that China will not modernize its military and use it to enhance its international influence. A strong, stable China is likely to cooperate with Asian neighbors to maintain regional peace and stability.

A worst-case scenario has Beijing failing at sustainable reform and finding itself hard-pressed to manage resulting economic and social ills and civil unrest. The leadership might encourage nationalism and military aggressiveness to ensure its survival. Internationally, China could become mired in a downward spiral of cheating, trade disputes, sanctions, and retaliation. U.S.-China relations overall would suffer, raising odds for conflict over sensitive issues such as Taiwan.

China will show little change in the short run. Encouraging domestic reforms ultimately serves U.S. interests, but strong doses of realism, clarity, consistency, and patience will be required.

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In late 2001, China entered the World Trade Organization (WTO), a dramatic step that marks not only the end of a 15-year odyssey for Beijing but also the beginning of a new phase in the country's internal development and its relations with the outside world. It may sound odd to suggest that joining the WTO--an organization focused on rules of conduct for trade and commerce--will influence not only China's economy but also its political, military, and social development, as well as its interaction with the United States. Yet China's efforts to play by WTO rules could affect its internal development far more extensively than has been the case with many new member nations.

Most WTO entrants must grapple with difficult economic and social issues at accession. But China will have to come to grips with such issues on a massive scale. Geographic size, infrastructure, and population will make adjustments more difficult, as will the unbalanced nature of the Chinese economy. China will have to reconcile conflicting economic systems (socialist versus market-based) and varying levels of domestic development (technologically advanced and internationally competitive versus Third-World) as it seeks to develop a new hybrid economy that can live by the rules of the global trading system.

Predicting how China will respond to domestic conditions created by WTO requirements is difficult. Beijing clearly will face numerous pressures from WTO benchmarks and timetables for achieving compliance; from the shocks that such compliance may create for the country's economic, financial, and social welfare systems; and from the near-certainty of rising domestic political opposition to WTO-mandated reforms, particularly at the regional and local levels.

Beijing's management of domestic politics during this turbulent phase will decisively influence its ultimate ability to transform China into a major economic power. Pockets of opposition to joining the WTO existed throughout the accession process, even among the leadership. Some opposition stemmed from political and ideological differences. But much was due to the regional grassroots economic and social issues dividing the "several Chinas" that exist in the People's Republic of China (PRC) today--eastern/western China, urban/rural China, rapidly developing/stagnating China--and the fears that WTO membership will make things even worse for those trapped in these several Chinas. …

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