China’s economic rise ‘rife with contradictions’, trade policy expert says

OTTAWA, February 16, 2012 – China’s  recent economic growth is poorly understood by many Canadians, and much of what people think they know about the country is mistaken or misleading, says former Canadian trade negotiator Michael Hart.
 
“China is a tremendously complex country, rife with contradictions that would take a lifetime to appreciate fully,” Hart writes in a new paper titled, “Ambiguity and Illusion in China’s Economic Transformation: Issues for Canadian Policy Makers and Business Leaders.”
 
Today’s paper is the first in a new series of publications commissioned by the Canadian Council of Chief Executives (CCCE) to highlight Asia’s growing role in the global economy and the implications for Canada.
 
In the paper, Hart lists several examples of common misconceptions about China:

  • Although it is often assumed that economic decision-making in China is highly centralized, in reality the state has “neither the institutional nor human capacity for such a massive undertaking,” Hart says. Instead, provincial and municipal officials wield much of the day-to-day power, “adding to the difficulties that foreigners encounter when trying to do business in China”.
  • Similarly, Hart cautions against thinking of China’s economic development in monolithic terms. Although recent reforms have lifted more people out of poverty than all of western aid combined, China’s poor remain as numerous as the total population of North America.
  • While China has emerged as a major player in world trade, its trade numbers are deceptive because components imported from other countries make up more than three-quarters of the total value of Chinese exports. In many cases, China is simply the point of final assembly for products designed and engineered elsewhere. “The fact that many of the end products of these intricate global production chains are shipped from China gives the false impression that Chinese firms are the principal providers of this cornucopia of products, rather than relatively minor contributors.
  • According to Hart, it is “simplistic and misleading” to suggest that global corporations are moving capital and jobs to China at the expense of jobs and investment in Canada and other developed economies. In reality, the shift of labour-intensive activity to China generates economic benefits for both sides, enabling manufacturers to reap productivity gains and become more competitive.

On balance, Hart says, a prosperous China is in Canada’s – and the world’s – political and economic interests. Already, China is Canada’s fastest-growing trading partner, growing at a rate 10 times faster than trade with the rest of the world. Moreover, China’s rise has allowed Canada to diversify its trade at a time when exports to the United States have weakened.
 
“Even if [China’s economic] growth slows to half the pace of the past 30 years,” Hart concludes, “trade and investment opportunities will remain substantial for many years to come.”
 
A former official in Canada’s Department of Foreign Affairs and International Trade, Hart now holds the Simon Reisman chair in trade policy at the Norman Paterson School of International Affairs at Carleton University in Ottawa.
 
The CCCE is the senior voice of Canada’s business community, representing 150 chief executives and leading entrepreneurs in all sectors and regions of the country. Its members lead companies that collectively administer $4.5 trillion in assets, employ more than 1.4 million men and women and are responsible for most of Canada’s private-sector exports, investment and training.