Chinaâs Economy: Findings of a Research Trip (CRS Report for Congress)
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| Release Date |
Feb. 9, 1998 |
| Report Number |
98-131 |
| Report Type |
Report |
| Authors |
Raymond J. Ahearn, Foreign Affairs and National Defense Division |
| Source Agency |
Congressional Research Service |
Summary:
China's economic ascendency has aroused great interest in the Congress. This report combines
first-hand impressions of China's economy and U.S.-China commercial relations with an analysis
of
publicly available data and reporting.
China's economy presents divergent and contradictory images. On the one hand, it is dynamic
with considerable potential to become a world class power in many areas. On the other hand, visions
of China as an economic power constantly collide with the stark reality of the country's poverty,
uneven development, and glaring structural weaknesses. While Asia's financial crisis has elevated
a sense of urgency among Chinese officials to push forward with fundamental reforms of the
country's banking system and state-owned enterprises, a slowing economy will make the reforms
more difficult to carry out.
In the Hong Kong Special Administrative Region (HKSAR), most officials appeared confident
that Hong Kong's special role as China's main source of finance and services would continue to
grow in the future. Their confidence was based on Hong Kong's successful transition to date, and
on China's own obvious self-interest in maintaining the HKSAR as its "Golden Goose." At the
same time, the challenge that Asia's financial crisis is posing for both Hong Kong and China, as
well as Hong Kong's own growing internal problems, illustrated that the so-called "one country-two
systems" arrangement remains delicate, subtle, and vulnerable to stress.
China's economic expansion was seen to be having a huge, albeit uncertain, impact, not only
on the rest of the world, but on China itself. The effects, both positive and negative, encompass
shifts in world trade, production, and employment, the environment, foreign relations, and China's
Communist and authoritarian system of governance. The rapid expansion of China's economy has
also coincided with an intensification of U.S.-China commercial ties. China's market holds
tremendous allure for a growing number of U.S. companies, but it remains a very difficult one in
which to do business. Although China's reforms and economic dynamism are gradually improving
the business environment, its domestic market remains substantially regulated, and there are few
short-cuts to commercial success.
The U.S. trade deficit with China is large, rapidly expanding, and increasingly sensitive
politically. For many Americans, the deficit symbolizes an imbalanced trading relationship where
Chinese firms have relatively more access to the U.S. market than American firms have to China's
market. Chinese and U.S. officials proposed divergent solutions for curbing the deficit.
China's bid to join the World Trade Organization (WTO) is widely viewed as an enormously
important, complicated, and risky undertaking. Depending on the terms of the accession agreement,
China's entry could either weaken or strengthen its own economy, selected U.S. economic interests,
as well as the world trading system. It is not clear what forces or events might push either side to
reach a compromise or mutually acceptable agreement.
