China, the United States, and the Global Economy / Edited by Shuxun Chen and Charles Wolf, Jr
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China, theUnited States, and the Global Economy EDITED BY SHUXUN CHEN AND CHARLES WOLF, JR. R Library of Congress Cataloging-in-Publication Data China, the United States, and the global economy / edited by Shuxun Chen and Charles Wolf, Jr. p. cm. “MR-1300-RC.” ISBN 0-8330-2963-0 1. China—Economic conditions—1976– 2. China—Foreign economic relations—United States. 3. United States—Foreign economic relations—China. I. Chen, Shuxun. II. Wolf, Charles, 1924– III. Rand Corporation. IV. Rand–CRF Conference (1999 : Santa Monica, Calif.). HC427.92 .C464449 2001 330.951—dc21 00-068329 RAND is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND® is a registered trademark. RAND’s publications do not necessarily reflect the opinions or policies of its research sponsors. © Copyright 2001 RAND All rights reserved. No part of this book may be reproduced in any form by any electronic or mechanical means (including photocopying, recording, or information storage and retrieval) without permission in writing from RAND. Published 2001 by RAND 1700 Main Street, P.O. Box 2138, Santa Monica, CA 90407-2138 1200 South Hayes Street, Arlington, VA 22202-5050 RAND URL: http://www.rand.org/ To order RAND documents or to obtain additional information, contact Distribution Services: Telephone: (310) 451-7002; Fax: (310) 451-6915; Internet: [email protected] FOREWORD This book contains the edited papers presented by Chinese and American scholars and practitioners at the second of four annual conferences organized by RAND in Santa Monica, and the China Reform Forum (CRF) in Beijing. The second conference was held at RAND on November 9–10, 1999, with about 30 participants including the authors and their discussants. The list of participants appears at the end of this volume. The second CRF–RAND conference and the editing and other requi- sites for readying the original papers for publication could not have been accomplished without the generous support of several organi- zations and individuals. These include—besides the China Reform Forum and RAND—the Committee of 100 and Henry Tang, the Hoover Institution and John Raisian, the Capital Group Companies and Gina Despres, Lombard Investments and Joseph Chulick, the UCLA Center for International Studies and Richard Rosecrance, the Zhejiang Gateway International Investment Company and James Bitonti, and the Overland Group and Fred Liao. It is a pleasure to acknowledge and express our appreciation for their support. It goes without saying that none of these organizations or individuals bears any responsibility for the content of the wide- ranging views and policy suggestions presented in the book. Charles Wolf, Jr. Santa Monica, California iii CONTENTS Foreword ....................................... iii Acronyms ....................................... xi Chapter One CHINA, THE UNITED STATES, AND THE GLOBAL ECONOMY: INTRODUCTION AND OVERVIEW Shuxun Chen, China Reform Forum, and Charles Wolf, Jr., RAND ...................... 1 Part I: Outlook for the Global Economy Chapter Two TRENDS AND PROSPECTS IN THE GLOBAL ECONOMY Gary Hufbauer, Institute for International Economics ................................ 11 Chapter Three WORLD ECONOMIC RESTRUCTURING AND CHINA’S ECONOMIC TRANSFORMATION Yuanzheng Cao, BOC International Holdings Ltd. ... 25 Discussant: Benjamin Zycher, RAND ............. 45 Part II: Outlook for the U.S. Economy Chapter Four CAN THE UNITED STATES’ ECONOMIC SUCCESS CONTINUE? Gail Fosler, The Conference Board ............... 49 v vi China, the United States, and the Global Economy Part III: Trends and Prospects in the Chinese Economy Chapter Five CHINA’S ECONOMIC GROWTH: RECENT TRENDS AND PROSPECTS K. C. Yeh, RAND ............................ 69 Chapter Six THE CHINESE ECONOMY IN PROSPECT Angang Hu, Chinese Academy of Sciences ......... 99 Chapter Seven THE ROLE OF FOREIGN-INVESTED ENTERPRISES IN THE CHINESE ECONOMY: AN INSTITUTIONAL FOUNDATION APPROACH Yasheng Huang, Harvard Business School ......... 147 Chapter Eight CHINA’S MACROECONOMY: EXPANDING DOMESTIC DEMAND AND INTERIM REFORMS Xiaomin Shi, China Society for Research on Economic System Reform ..................... 193 Discussant: Alice Young ...................... 205 Part IV: U.S.-China Economic and Security Relations Chapter Nine CHINA AND THE WORLD ECONOMY: THE SHORT MARCH FROM ISOLATION TO MAJOR PLAYER Harry S. Rowen, Asia Pacific Research Center, and Hoover Institution ....................... 211 Chapter Ten AMERICAN INTERESTS IN AND CONCERNS WITH CHINA John Despres, Private Consultant ............... 227 Discussant: Shuxun Chen ..................... 233 Chapter Eleven SINO-U.S. ECONOMIC AND TRADE RELATIONS Xianquan Xu, MOFTEC ...................... 237 Discussant: Hang-Sheng Cheng................. 253 Contents vii Chapter Twelve U.S.-CHINA: BONDS AND TENSIONS Hui Wang, First China Capital ................. 257 Conference Agenda................................ 289 List of Participants................................. 291 Biographical Summaries of Chapter Authors ............. 295 ACRONYMS BEA Bureau of Economic Analysis COEs Collectively owned enterprises CPE Centrally Planned Economies CPI Consumer Price Index CTOEC China Tianjing Otis Elevatory Company FAW First Automotive Work FDI Foreign direct investment FIEs Foreign-invested enterprises FSU Former Soviet Union GDP Gross domestic product GNP Gross national product ICI Investment Company Institute IO Industrial organization IPF Institutional and policy factors IT Information technology LEI Leading economic indicators MNCs Multinational corporations MOFTEC Ministry of Foreign Trade and Economic Cooperation ix x China, the United States, and the Global Economy NAFTA North American Fair Trade Association NIEs Newly industrialized economies OECD Organization for Economic Cooperation and Development P/Es Price earnings ratios PPI Producer Price Index PPP Purchasing power parity RMB Renminbi (yuan) S&P Standard and Poor’s SAIC Shanghai Automotive Industrial Corporation SEZs Special Economic Zones SOEs State-owned enterprises SPC State Planning Commission SSB State Statistical Bureau TEC Tianjing Elevatory Company TFP Total factor productivity TVEs Township and village enterprises Chapter One CHINA, THE UNITED STATES, AND THE GLOBAL ECONOMY: INTRODUCTION AND OVERVIEW Shuxun Chen and Charles Wolf, Jr. ABOUT THIS BOOK From 1998 through 2000, the China Reform Forum (CRF) in Beijing and RAND in Santa Monica have jointly organized an annual confer- ence of experts from China and the United States, focusing on eco- nomic and security subjects of mutual concern. Venues of the three conferences alternated between Beijing and Santa Monica, and con- ference participants included practitioners as well as scholars from both countries. This book contains the papers delivered at the 1999 conference in Santa Monica, California, whose theme, “China, the United States, and the Global Economy,” provides the book’s title.1 The conference agenda and list of participants appear at the end of this volume. The broad theme was deliberately chosen to provide ample scope to address both economic and security interests and concerns of the United States and China. While the theme was overly ambitious, it allowed participants to address both quantitative and qualitative as- pects of the subject: quantitative data relating to trade and invest- ment, both bilaterally between China and the United States, and multilaterally between them and the rest of the world; and qualita- tive considerations such as those relating to China’s (and Taiwan’s) ______________ 1The subject of the conference held November 16–17, 2000, in Beijing was “The Challenges of Globalization.” 1 2 China, the United States, and the Global Economy membership in the World Trade Organization (WTO), as well as the convergent and divergent security interests of China and the United States. The principal objective of the 1999 CRF–RAND conference was to compare analysis and judgments from both sides about the eco- nomic outlook for each of the three entities referred to in the confer- ence title—China, the United States, and the Global Economy. Associated with but subsidiary to this aim, the conference papers and accompanying discussions considered the extent to which the economic outlook in each of the three entities is dependent on, or independent of, that for the other two. OVERVIEW OF THE CHAPTERS In Chapter Two, Dr. Gary Hufbauer examines the outlook for the global economy. He projects relatively rapid growth in some coun- tries and regions, but not in others. These differences he ascribes to four principal “drivers”: macroeconomic stability, the rule of law, privatization and the market economy, and international trade and investment. Hufbauer’s “bottom-line” assessment is that East Asia is likely to be the world’s most rapidly growing region, while the rich Organization for Economic Cooperation and Development (OECD) countries will sustain reasonably good rates of growth, (about 1.8 percent per capita per year). He concludes that “one thing that will not happen . is a blissful convergence between rich and poor countries.” Some of the poorer countries in East Asia will move to- ward convergence, but most will not. It is no surprise that Dr. Hufbauer finds that sustained growth and prosperity in the American economy will redound to China’s benefit through its stimulus to China’s exports to the United States. However, he also suggests that China’s economic development will be more affected by factors other