China and the Challenge of Economic Globalization: The Impact of WTO Membership. Hung-Gay Fung , Changhong Pei , Kevin H. Zhang

Abstract

China and the Challenge of Economic Globalization: The Impact of WTO Membership, edited by Hung-Gay Fung, Changhong Pei and Kevin H. Zhang. Armonk: M. E. Sharpe, 2006. xviii + 317 pp. US$89.95 (hardcover). Given the size of China's market, it comes as no surprise that its accession to the World Trade Organization (WTO) is touted as an historic event that will bring profound changes to the country as well as the international community. While a large number of accounts have used econometric approaches to project the benefits and losses that WTO membership could elicit, China and the Challenge of Economic Globalization examines what has actually happened since China's accession. The book is made up of 18 chapters, broadly divided into four parts. Part 1 provides a general assessment of China's post-WTO economic performance. The first chapter, by Changhong Pei and Jinjian Shen, provides a panoramic view of China's trade performance after its WTO accession. The statistics, largely based on official figures from China's General Customs Administration, show that the economic and trade fundamentals are positive for Beijing given the huge foreign reserves accumulated after 2001. Chapters 2, 4 and 5 look at the area of foreign direct investment (FDI), one of the major engines for China's economic growth in the last two decades. The authors examine this issue from different perspectives. Kevin Zhang sees FDI as providing both opportunities and challenges to the Chinese leadership in the post-WTO era, but is alarmed by the increasing negative effects of potential clashes between foreign multinational corporations and the Chinese government. Ying-Qiu Liu sees FDI as more of an opportunity than a challenge as regards China's Western Development Strategy for the inland provinces. Employing a general equilibrium model, Xiaodong Wu examines the relationship between FDI and income inequality. Wu concludes that FDI does not necessarily bring inequality. Instead, the wage effect of FDI is largely contingent on the situations of specific industries. Part 2 looks at the changes in China's economic welfare resulting from its WTO accession. Yan-Zhong Wang argues that WTO membership will further strengthen China's comparative advantage of low-cost but high-quality labor, a point with which Ju-Wei Zhang concurs. While it is certainly true that China has benefited from the explosive growth of labor-intensive manufacturing industries, Wang's account of the prospect of China participating in the international labor division as a world factory is perhaps too optimistic. The sustainable development of an economy the size of China's has to be achieved by continuous industrial upgrade and technological advancement in an increasingly globalized knowledge economy. Similar optimism can also be found in Bing-Wen Zheng's chapter on corporatism and China's welfare regime. …