The Uruguay Round and Beyond
Edited by Ramesh Adhikari and Prema-chandra Athukorala
Chapter 8: Export competition in Asia and the role of China
Yongzheng Yang Policymakers have become increasingly concerned about export competition among Asian developing countries since the 1997 Asian financial crisis. Those engaged in analysing the causes of the crisis have often cited export competition among the developing Asian economies and the resultant export slowdown as a main source of the vulnerability of the crisis-affected countries. In particular, they view China’s strong competitive position in labourintensive manufactured goods as an important negative shock to other Asian economies. Some even predict that the emergence of other large developing countries, such as India, as competitors in export markets could also lead to further competition in labour-intensive goods and result in crisis in the region (Choi 2000). The issue of export competition among Asian developing countries is also at the heart of current concerns about economic recovery in the crisis-affected countries. Export expansion has a key role to play in the recovery, because these countries have to repay their larger foreign debt following the collapse of their pegged exchange rates. If competition among Asian developing countries is a zero-sum game, then the recovery will not be sustainable, at least in some countries. Indeed, if China decides to devalue the renminbi (the Chinese national currency) as it tries to boost aggregate domestic demand, the possibility of another crisis cannot be ruled out. Should smaller Asian economies be worried about China’s growth and rapid export expansion? In general, do developing countries face a ‘fallacy of composition trap’, that is, will attempts by many countries to pursue...
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