Beijing projects itself as economic partner, not threat
Perceived as an economic or military threat by its jittery neighbors and looked upon suspiciously by western powers, China these days is seen as a rising economic star, boldly aspiring to become the locomotive for Southeast Asian growth.
In the months leading to its formal admission to the WTO, Beijing made headlines with two proposals for free trade areas in Asia, demonstrating its eagerness to help the region pull out of the economic doldrums. China has offered the 10-nation Association of the Southeast Asian Nations (Asean) its domestic markets a few years before it expects Asean markets to reciprocate.
The overture forms part of a bigger idea to set up a Free Trade Area (FTA) with Asean that has the potential to reshape the region's geopolitics by drawing China further into Asia economically and politically.
In another development, Beijing said earlier this month it was ''seriously considering'' a request to set up a China-Hong Kong free trade area. The idea had come from Hong Kong's chief administrative executive Tung Chee-hwa, and might also include Macau, the former Portuguese colony that is now a special administrative region of China.
According to Long Yongtu, China's chief trade negotiator, the idea of a free trade zone among China, Hong Kong and Macau was conceived some time ago but it has gathered steam only recently because of the region's economic slowdown and China's entry into the WTO.
The timing of the proposals suggests that Beijing is stepping in to counter ideas that its entry into the WTO marks its emergence as a serious economic threat. Beijing would rather create alliances with its Southeast Asian neighbours than have them band together to ward off the economic threat of a post-WTO China.
Window of opportunity
Clearly, China's offer to Asean to create a sprawling Free Trade Area is intended to calm fears throughout the region that the rise of Beijing's economic power means the decline of its neighbours. Many Southeast Asian countries fear they will be unable to compete with a Chinese economic powerhouse that can produce virtually everything for the world's markets, cheaply and well.
''It is hard to persuade Asean to believe that China is an economic partner rather than a threat to absorb foreign investment from Asean to China after it enters the World Trade Organisation,'' says Zhang Yunling, director of Asia-Pacific Studies under the Chinese Academy of Social Sciences.
By proposing to go first, Beijing is now offering a window of opportunity for Asean's exporters. Speaking at a seminar held in Beijing last month, Zhang said Chinese negotiators worked hard to convince Asean members that China and Asean receive different kinds of foreign investment.
The original FTA co-operative plan included South Korea and Japan but Seoul and Tokyo's unwillingness to put their all-important agricultural sectors on the table has led to an agreement only between Asean and China.
China has agreed to unilaterally open its agricultural market to Asean, and in addition, has granted preferential tariff treatment to three of the least developed countries in the bloc - Laos, Cambodia and Burma.
Analysts see Beijing's overtures as a bold bid to fill the growing economic gap created by a still-stagnant Japan. ''China is becoming the biggest engine of growth for Asia,'' argued Georges Ugeux, group executive vice-president of the New York Stock Exchange at the World Economic Forum in Hong Kong in October.
''China is now a center-stage power not just politically, but economically,'' he added. With the US economy officially in recession and Japan's economic engine stagnating, the case of China being an additional engine of growth rather than a threat gathers more and more supporters.
Nothing to lose
Hong Kong is one example. The bustling financial hub on China's southern frontier used to be ''a window, a launching pad, a bridge and a link between the Chinese mainland and the world'', says Lu Jinyong, a professor with the University of International Business and Economics.
Beijing used to import and export a very large portion of goods via Hong Kong. With China's entry into the WTO and the country's further opening up, Hong Kong's role would gradually vanish. Observers predict that the Hong Kong economy would be hurt by the loss of its privileged position as go-between in China's foreign trade.
Painfully aware that its privileged edge is on the line, Hong Kong has welcomed Beijing's consent to consider a free-trade agreement with the special administrative region. Faced with a severe economic downturn, Hong Kongers also increasingly look to China for help.
The free trade zone is expected to bring tariffs for Hong Kong companies down before Beijing lowers tariffs for other WTO members. One model considered by Hong Kong and mainland officials is that of the North American Trade Agreement.
''In order to be Asia's and even the world's logistics centres that Hong Kong and Macau aim to become, they have to have the huge China market as their backup,'' Li Guanghui, a senior researcher with the Chinese Academy of International Trade and Economic Co-operation told Business Weekly.
''Hong Kong and Macau, which are already free trade areas by themselves, have nothing to lose and everything to gain by joining a free trade zone with the Chinese mainland,'' he added.
