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Asian Nations Fear China's Growing Economic Muscle, says Report - 2002-12-18

The Economic Strategy Institute, a Washington-based think tank, Tuesday issued a report on globalization, based on discussions at an October meeting of business leaders from Pacific rim nations. The growing economic muscle of China was a major focus.

The message from the Economic Strategy Institute is that Pacific rim countries are fearful of the rise of China and worry about their ability to compete with the world's most populous nation. The business meeting was held in conjunction with the APEC leaders gathering in Los Cabos, Mexico. Clyde Prestowitz, the head of the strategy institute, says China is soaking up most of the foreign direct investment going into the Asia-Pacific region. He says even U.S. owned textile plants in Mexico are closing and relocating to China. "The fact seems to be that even though Mexican wages are low, they're not competitive with Chinese wages," he said. "In many areas Mexico and other developing countries appear not to be competitive with China."

Senior fellow Hilton Root, who served briefly in the Bush Treasury Department, says the United States has not yet developed a strategy for cooperating with China on a regional basis to promote stability and development. "The Chinese are the ones who are pushing free trade in the region," said Mr. Root. "The Chinese are the ones who are increasing their market exposure to the products to the rest of the region, whereas we[the US] are not to the same extent. And so China by default is becoming the leader of the region."

Mr. Root, who spent several years with the Asian Development Bank in Manila, says because of corruption and weak institutions the ASEAN countries of southeast Asia are losing the economic competition with China. "There is some corruption in China but it is certainly not comparable to Indonesia or the Philippines or any other of these rival countries," he said. "And the fact of the matter is that ASEAN doesn't have its act together. It has not put into place strong, accountable, democratic institutions."

The strategy institute says China is an economic winner despite failing to embrace what are regarded as key elements of a successful globalization strategy. These include the rule of law and enforceable property rights. The researchers do say that China has embraced other elements of globalization, including trade liberalization and budgetary discipline.

Photos courtesy ESI