[OUTLOOK]Chinese economic integration

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[OUTLOOK]Chinese economic integration

The economic integration of the entire Chinese economic region is being realized. A general opinion to date has been that this region, including China, Taiwan, Hong Kong and Macao residents and the Chinese emigrants across the world, could not make progress toward a phase of official and practical integration yet. But as Chinese people around the world accelerate “growth through integration,” the Chinese economic region is moving toward a new phase of integration.
If the Chinese economic region is integrated as one entity, its size will transcend our imagination. As of 2004, Chinese people, including those spread across the world, total 1.4 billion, accounting for about 22 percent of the world’s population. Economically, the gross domestic product of China, Taiwan and Hong Kong based on purchasing power ranks third in the world with $7.6 trillion after the United States with $11.6 trillion and European Union with $8.6 trillion.
If the gross domestic product of the five Asean (Association of South East Asian Nations) countries where Chinese emigrants control the economy is added to this figure, the Chinese economic region ranks second in the world with $9.7 trillion, accounting for 17 percent of the world’s gross domestic product.
China’s opening up its door was a starting point for integration. In other words, the primary contributors to China’s successful opening up were Chinese emigrants and, on the other hand, Chinese emigrants could find a way out to achieve rapid growth thanks to this opening up. The amount of investment Hong Kong, Taiwan, Singapore and Southeast Asian countries, the base of Chinese emigrants, have made in China from 1983 until early this year exceeded 80 percent of the total investment in China. In addition, the return of Hong Kong and Macao to China was a political turning point for integration.
Recently, there were two remarkable events that showed the unity of the Chinese economic region. One was the signing of the Closer Economic Partnership Arrangement between China and Hong Kong that took effect in January 2004. This arrangement stipulates that China can import products whose place of origin is Hong Kong free of tariffs. In particular, the scope of products will expand to all cargo trade, transportation, construction and tourism from January 2006. Hong Kong, the base of Chinese entrepreneurs, has now achieved integration with the mainland economy in name and reality.
The other event is that the China-Asean free trade agreement became effective in July this year. According to this agreement, China will establish free trade zones with six countries by 2010 and then with four countries ― Cambodia, Laos, Myanmar and Vietnam ― by 2015.
Given the fact that Southeast Asia belongs to the Chinese commercial community, this free trade agreement means that a free trade zone is actually established between Chinese emigrants there and China. In this situation, cooperation between our country and the Chinese economic region has become an unavoidable task.
If this is the case, how can we turn the huge wave called the integration of the Chinese economic region into opportunities? We should find the solution in viewing the Chinese economic region as an integrated entity, instead of the past approach that saw mainland China, Taiwan, Hong Kong and Southeast Asian countries as separate entities.
Based on this perception, we should seek various ways to cooperate with the Chinese economic region. First, our companies should seek a way to enter the Chinese market along with Chinese emigrants in Korea. It is expected that this method will enable us to use their culture and linguistic ability to communicate with China, so that we can advance into the Chinese domestic market effectively.
Second, we should diversify the conventional investment method in the Chinese region, from investment concentrated on mainland China, to diverse investments in Hong Kong and Southeast Asian countries. Through this diversification, we can reduce the risk arising from excessive dependence on China and enjoy the advantage of making an inroad into the Chinese market by detour.
As the China-Hong Kong CEPA and China-Asean free trade agreement came into effect, the products our businesses produce in Hong Kong and Southeast Asia will be treated as domestic products in the Chinese market.
Last, we should actively attract Chinese emigrant entrepreneurs to the domestic market. More than at any other time, our country now needs the cooperation of Chinese emigrant entrepreneurs, who have essential capabilities in Southeast Asia.
The Korean culture wave that has recently started to spread in the Chinese economic region with the surging popularity of Korean films and performing arts, and the 8th World Chinese Entrepreneurs Convention recently held in Seoul will provide precious opportunities to strengthen our exchange within the Chinese region.

* The writer is the president of the Trade Research Institute at the Korea International Trade Association. Translation by the JoongAng Daily staff.

by Hyun Oh-seok
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