Full Report - Subregional Office for East and North-East Asia - escap

THE STATE OF INCLUSIVE AND SUSTAINABLE DEVELOPMENT IN UNCERTAIN TIMES CHAPTER 1
the poor and reduce inequality with the objective of
lifting 80 million people from poverty by 2015. The
plans include measures to increase the progressivity
of the tax system by increasing the contributions of
successful state-owned enterprises, and increase the
various elements of tax contribution of the richer
members of society. Furthermore, minimum wages
in rural areas are to be increased significantly and
the household registration system is to be reformed
to allow urban residents from rural areas to be
entitled to the social security and other entitlements
of urban-registered citizens.
ESCAP analysis shows that the improvement of
the inclusiveness of growth in China promised by
the ongoing reform process, even if it were to
result in lower headline GDP growth rates, could
have a significant positive impact on economies
in the region. Despite a slowdown in headline
GDP growth in China, largely as a result of a fall
in investment, an increasingly consumption-driven
Chinese economy would benefit regional exporters
of consumer goods through increased penetration
in the Chinese market. The total benefit in exports
for the region would be almost $13 billion during
the period 2013-2015, with export growth for the
region at up to 0.5 of a percentage point above
the level without rebalancing (see box 1.3).
Foreign investment declined, especially
in least developed countries
Due to macroeconomic fragility and policy uncertainty
for investors amid the global slowdown, foreign
Box 1.3. The impact of a rebalancing China on Asia-Pacific economies
The twelfth five-year plan of the Government of China explicitly outlines a series of measures aimed at rebalancing the economy
away from external dependence and towards a sustainable, domestically driven long-term growth path. Some initiatives that
focus on boosting consumption, reducing reliance on exports, reforming financial markets and tackling various other structural
impediments are already underway, with more planned to be implemented over the coming years. Due to the importance of
Chinese imports to intraregional trade, this is likely to have an impact throughout the wider region. The five-year plan’s aim
to reduce the imbalance between consumption and investment may have particularly significant implications for exporters of
capital goods as these exports have been largely fuelled by Chinese investment in recent years.
ESCAP conducted multi-year impact assessments for selected Asia-Pacific economies based on a scenario involving the rebalancing
of the Chinese economy. Table A shows the likely impact of the rebalancing over the period 2013-2015. In the scenario, the
rebalancing of the Chinese economy was compared to its projected long-term growth - the average pace of growth observed in
the economy during the past ten years. The scenario assumes that the economy will expand by 8.6% annually during the period
2013-2015, a figure that is 1.7 percentage points less than the long-term trend but is consistent with the estimates reported by the
Development Research Center of the State Council, a state agency of China (World Bank, 2012a). As a result of the rebalancing,
fixed investment would grow 7.3 percentage points less and consumption would grow 2 percentage points more than what is
projected based on the long-term trend. The impacts are reported both in terms of percentage point changes of real export
growth and in terms of export benefits or losses. The ESCAP calculations assume that under the rebalancing scenario, the share
of China in global consumption will continue to grow at the 1999-2011 average rate, while the share of global consumer goods
imports will speed up to grow proportionately with consumption share throughout 2013-15.
ESCAP analysis shows that a rebalancing of the Chinese economy would have overall positive impacts on trade performance
of the region’s economies. Despite a growth slowdown, largely the result of a fall in investment, an increasingly consumptiondriven
economy would benefit exporters of consumer goods through increased penetration in the Chinese market. The total
benefit in exports for the region would be nearly $13 billion over the period 2013-2015, with export growth at up to 0.5 of a
percentage point above the level without the rebalancing.
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