Edited by Suiwah Leung, Ben Bingham and Matt Davies
Chapter 3: The Rise of China: Implications for the Mekong Countries
Matt Davies1 INTRODUCTION AND BACKGROUND 1 This chapter concentrates on the effects of China’s rapid economic growth on the Mekong countries. It focuses on the post-1995 period, which covers emergence from conflict and intensive reform in the Mekong, and the meteoric period of China’s rise, including its World Trade Organization (WTO) entry in 2001.2 Section 2 provides a brief overview of the nature of China’s rise. Section 3 looks at how China’s presence has affected the Mekong countries’ exports to third markets. Section 4 looks at how China’s rise has provided an opportunity for the Mekong countries as a market for exports and a source of external finance. It also reviews how China’s impact on world markets has affected their terms of trade. Section 5 looks at the likely future implications of China’s continuing growth and Section 6 draws tentative conclusions and identifies policy priorities for the Mekong countries. 2 THE RISE OF CHINA3 Driven by an export-led development strategy, China is now the world’s third largest exporter. This growth appears dramatic but is similar in magnitude to the surges in trade associated with earlier integration of other rapidly growing East Asian economies into the global trading system. More reliant on foreign finance than its East Asian predecessors, foreign-financed firms account for around half of China’s exports as compared to 20–25 percent of Taiwan POC and South Korea’s manufactured exports in the 1970s. By 2003, China’s Asian trading partners collectively accounted for about 70 percent of the cumulative FDI...