Economic Analytical Unit - Department of Foreign Affairs and Trade

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China Embraces the World Market

Dr Frances Perkins Launch Presentation

26 November 2002
Download Slide Presentation, PDF (765KB)

[SLIDE 1]

We're optimistic China will continue to grow strongly because so many powerful forces are driving its growth:

[SLIDE 2]

1.     The private sector is growing rapidly

2.     Economy increasingly open to trade and investment and FDI inflows are increasing

3.     The Government is reforming and strengthening legal and economic institutions, although they still have a way to go

The major reforms the National People's Congress announced two weeks ago only confirm this optimistic outlook.

Looking quickly at some of the evidence

China's private sector is growing strongly and now contributes more to industrial value added than either state owned enterprises or collectives.

[SLIDE 3]

China's strong growth and liberalising foreign investment regime are drawing more FDI into China, boosting growth further. On current projections, China may pass the United States this year to become the world's biggest FDI destination. Meantime flows into ASEAN are declining.

[SLIDE 4]

China's markets also are becoming more open; average tariffs have declined from 40 per cent in the early 1990s to 12 per cent now. This is boosting China's productivity and growth and Australian export opportunities.

[SLIDE 5]

But what are the risks?

However, at least three major risks threaten this optimistic growth outlook.

[SLIDE 6]

1.     The banking system is the main risk.

[SLIDE 7]

2.     China's state owned enterprises themselves are a second major risk to growth. Their borrowing is threatening the banking system and soaking up most of China's savings.

3.     The third major risk to China's growthis its fiscal position. China's growing national debt is mainly due to its obligations to write off non performing loans and pay workers' pensions.

4.     Again, at this stage, China's debt problem appears manageable and the main threat is that firms could well face increasing tax burdens. For example, businesses already are paying additional levies of up to 50 per cent of their wage bills to fund pension payments to current retirees.

How will WTO effect the risks of doing business in China?

[SLIDE 8]

sectoral opportunities

The Minister already outlined some major commercial opportunities emerging; the report details many more. For traders and investors in agriculture, food processing, minerals and energy, manufacturing, infrastructure and services sectors the theme is similar. WTO entry should amplify the impact of ongoing market oriented reforms, boosting incomes and expanding export and investment opportunities.

major implications for business and government


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