THE GREAT DIVIDENDS OF OPPORTUNITY

By+Mei+Xinyu

China will mark the 15th anniversary of its accession to the World Trade Organization （WTO） on December 11. In retrospect， one of the most important aspects of Chinas WTO inclusion is that the country was able to take hold of an opportunity for development—something which may not be emulated in the foreseeable future.

The significance of Chinas accession to the WTO can be demonstrated by comparing the economic and trade data recorded before and after the event. In 2001， for example， Chinas exports were valued at$266.2 billion， accounting for 4.3 percent of total world exports that year. With those figures， China ranked sixth in the world after the United States （$730.8 billion， 11.9 percent）， Germany （$570.8 billion， 9.3 percent）， Japan （$403.5 billion， 6.6 percent）， France （$321.8 billion， 5.2 percent） and the United Kingdom （$273.1 billion， 4.4 percent）， according to the International Trade Statistics 2002 released by the WTO.

In 2015， however， Chinas exports were valued at $2.27 trillion， soaring by 754 percent compared to 2001 and accounting for 13.8 percent of the worlds total. Based on figures released by the WTOs World Trade Statistical Review 2016， the United States， which was the second largest exporter， exported $1.51 trillion worth of goods and accounted for 9.1 percent of the global aggregate.

If China had not entered the WTO， its unlikely that the country would have been able to experience such a robust growth in that time frame.

Historical legacy

Ultimately， time will tell the impact of the success that China has derived from the WTO， as the proportion of Chinas merchandise exports in the worlds total in 2015 was near the level reached by the United States in the early 1960s.

In 1948， the United States gained a 21.6-percent share of world merchandise exports， mainly because Western Europe and Japans industries had not yet recovered from World War II. By 1953， Europe and Japans economies had almost recovered， meaning that the percentage of U.S. merchandise exports contribution to the worlds total declined to 14.6 percent， thereafter remaining at a similar level for many years. For instance in 1963， 1973， 1983 and 1993， the percentage stood at 14.3 percent， 12.2 percent， 11.2 percent and 12.6 percent， respectively. In 2003 and 2015， the figure dropped slightly to 9.8 percent and 9.4 percent （excluding the huge amount of re-exports）.

But in 1948， China accounted for only 0.9 percent of world merchandise exports， and the percentage rose to 14.2 percent in 2015， said World Trade Statistical Review 2016. This means that China has come close to the level of the United States in 1963.

Chinas growth was achieved because it had opened up to a large external market， leading to a rapid expansion in the countrys manufacturing industry and its overall economic scale. Take into consideration Chinese enterprises whose annual sales revenues are above 20 million yuan （$2.9 million）. In 2001， those companies raked in a total of 8.4 trillion yuan （$1.22 trillion）. But by 2015， that figure had grown to 110.33 trillion yuan （$15.99 trillion）. During that period， Chinas GDP rose from 11.03 trillion yuan （$1.6 trillion） to 68.55 trillion yuan （$9.93 trillion）.

How could Chinas manufacturing industry， foreign trade and overall economy achieve such rapid growth？

To answer this question， one must look at the 1990s and 2000s， a period in which international trade exhibited robust growth.

As a catch-up economy， China had been well prepared when it entered the WTO in terms of its industrial foundations， human resources， infrastructure， economic structure and government administration. These factors allowed it to tap into its latent potential. Now some of Chinas traditional advantages are disappearing： the population is aging， land and labor costs are rising. Meanwhile， India， Viet Nam and other emerging-market economies now expect to catch up with or overtake China.

However， the window of time available for rapid growth is closing， especially with the election of Donald Trump， who advocated protectionism during his U.S. presidential campaign， accelerating the process. Once the time is up， it will be difficult for other economies to mirror Chinas economic growth， and the next opportunity to do so might take 10 years or more to reappear.

Reasons

The economic and trade prosperity in the 2000s was underpinned by multiple factors.

To begin with， there was an upsurge in innovation in information technology and other fields that had spread to the whole world during that era. Also， the market economy system had been established in the worlds major economies， and transition economies in Europe and the former Soviet Union had survived the impact of the change from a centrally planned economic system to a market-oriented one and resumed all-round growth. Furthermore， the WTOs multilateral trade schemes and rules performed as expected.

Another factor to consider is that quantitative easing measures adopted by major Western central banks， especially the U.S. Federal Reserve， were providing ample liquidity through multiple channels to other economies， directly or indirectly， which was significant to support their economic and trade growth.

This monetary policy was particularly important for the foreign-related sectors of export-oriented economies， because combined with the openness of some major importing markets， quantitative easing in Western economies had boosted the rapid growth of global foreign exchange reserves. Funds outstanding for foreign exchange became a major source of money supply in export-oriented economies， making up for their deficiency in foreign exchange that restricted economic growth and stability in developing countries and further boosting their trade growth by bringing more advantages in liquidity provision to foreign-related sectors of these countries compared with other economic sectors.

The open-market policy followed by Western economies， especially the United States in its role as the worlds largest im- porting market， had created conditions for other economies to carry out an exportdriven growth pattern.

Headwinds

Nonetheless， the world economy is struggling to overcome the recession caused by the U.S. sub-prime lending crisis in 2008， and it will take quite a long time to return to prosperity. Now， all the favorable factors that prevailed in the first decade of this century are either disappearing or being reversed.

At the moment there is no sign of the arrival of a new technology revolution that could be powerful enough to foster allround economic growth.

Moreover， quantitative easing by the U.S. Federal Reserve and other major Western central banks has been unable to function as expected. The corollary effect is that， sooner or later， Western economies will tighten up their money supplies.

In addition， trade protectionism and anti-globalization sentiment are surging throughout the world. In particular， after Trump takes office as U.S. president， the global trade system is likely to experience turmoil.

The Triffin dilemma embodies the conflict the United States has in hoisting the dollar as an international currency—the United States is putting dollars into foreign markets through massive trade deficits to satisfy the demand on liquidity by international trade and foreign markets. These actions ultimately impair market participants confidence in the greenback， resulting in a weakened trade-driven growth pattern.

Trump has vowed to cast aside the U.S.-led Trans-Pacific Partnership （TPP） trade agreement initiated by President Barack Obama. But even the TPP would have been unable to free the United States from the Triffin dilemma. The TPP was partly initiated to exclude China from the process of economic rule-making in the Asia-Pacific region. It also sought to squeeze Chinas share in the international market so as to ensure the influence of the United States in the formulation of international trade rules.

The TPP aimed to boost Viet Nam and other manufacturing competitors of China， allowing them unfettered entry into the U.S. market in order to help them grab a larger share of the “made-in-China” market. Such a tactic would have inevitably enlarged U.S. trade deficits， thus threatening the long-term stability of the U.S. economy and the dollar. Notably， the United States had attempted to contain Japans trade growth by forming the North American Free Trade Agreement with Canada and Mexico in 1994， but it finally failed to achieve its goal.