Chi Hung KWAN
Consulting Fellow, RIETI

China is undergoing a dual transition from a planned to a market economy, and from a traditional agricultural to a modern industrial society. In this column, we examine how this process has come about, and its implications for China's 1.3 billion people as well as the rest of the world.

(January 10, 2012)

Japan is facing growing concerns about the hollowing out of its industry, with sharp increases in outward foreign direct investment (FDI) in recent years against a backdrop of growing competition from other Asian countries, notably China. Six major challenges confronting domestic companies, namely the high corporate tax rate, high labor costs, stringent greenhouse gas targets, delays in free trade agreements (FTA), an extremely strong yen, and post-earthquake power shortages, are exacerbating the trend ("Hollowing Out and the Japanese Economy (1): Six Deterrents to Domestic Capital Investment (Seminar)", the Nihon Keizai Shimbun on December 19, 2011). Japan must seek to upgrade its industry and avert its hollowing out if it is to regain its economic vitality. As it tackles these challenges, Japan's experience with the flying geese pattern of economic development, which brought shared prosperity to the Asian region in the postwar period, will serve as a useful reference.

(December 27, 2011)

Thanks to weak overseas economies and the restrictive monetary policy pursued since early 2010 in a bid to cool down its overheated economy, economic growth in China has been slowing. The inflation rate, which had been rising, also began falling from its peak in July 2011. In response, the government's monetary policy stance is shifting from tightening to easing, as observed in the recent cut in the reserve requirement. Although the economy is likely to continue to slow for now, it is expected to bottom out in the first half of 2012 and recover ahead of the National Congress of the Communist Party of China (Party Congress) to be held in the fall, given the adoption of further credit easing including rate cuts and an expansionary fiscal policy.

• China Seeking to Transform its Economic Development Pattern (December 13, 2011)
• World Trade Transformed with the Rise of China (November 30, 2011, 2011)
• The Saga of Three Kingdoms—Japan, the United States, and China—and the TPP (November 17, 2011)
• Short-term Outlook for the Chinese Economy (October 26, 2011)
• Determinants of the Policy Interest Rate in China: Implications of the Taylor Rule (September 30, 2011)
• China Heading from Labor Surplus to Shortage (September 29, 2011)
• China Aiming for Industrial Upgrading Without Hollowing Out (September 7, 2011)
• Chongqing Becoming a New Growth Spot in China (August 24, 2011)
• Shift of the Automobile Industry to China and Japan's Hollowing-Out Problem (August 10, 2011)
• Growth in Money Supply Slowing Down Sharply on the Back of Credit Tightening (July 28, 2011)
• Whither Inflation in China? (July 19, 2011)
• "Japan Plus One" Implies a Boom of Japanese Investment in China (June 22, 2011)
• The Bright and Dark Sides of China's Huge Population (June 1, 2011)
• China Watching out for the "Middle-Income Trap" (May 9, 2011)
• Rethinking Energy Security (April 8, 2011)
• What Is Missing in Discussions on TPP (March 15, 2011)
• "Emerging-Nation Effect" or "China Effect" (March 15, 2011)
• Will Food Prices Keep Surging? (February 25, 2011)
• A Shares Cheaper than H Shares in a Bear Market: The next bull market may be driven by A shares (January 31, 2011)
• Policy Priority Shifting from Sustaining Growth to Curbing Inflation: The Chinese economy will hit bottom in 2011 and begin recovering ahead of the Party Conference in 2012 (January 31, 2011)
• Share Price Cycle in China Linked to Business Cycle (December 28, 2010)
• Chinese Companies Investing in Japan to Strengthen their Supply Chains: Technologies and markets are the main targets (November 26, 2010)
• The Chinese Economy Viewed from a Business Cycle Perspective: To hit bottom in 2011 and recover strongly in 2012 (October 29, 2010)
• China Beginning to Show Signs of Cooling Inflation: Receding fears of rate hike (September 29, 2010)
• How China's Foreign Exchange Rate System Works after the Resumption of Currency Reforms in June 2010 (September 29, 2010)
• China as the Central Player of the BRICs: Driving the world and the Japanese economy (August 27, 2010)
• The Chinese Economy Heads for Soft Landing: Macroeconomic policies and structural changes will contribute to stable growth (July 30, 2010)
• Made-in-China Inflation to Accelerate with the Resumption of Yuan Revaluation: Stimulative effect on the Japanese economy questionable (June 29, 2010)
• Chinese Real Estate Market Entering a Correction Phase (June 29, 2010)
• China Replacing the U.S. as the Largest Overseas Market for Japan (May 19, 2010)
• Revaluation of Yuan Expected to Resume Soon (May 19, 2010)
• China's Economy Likely to Achieve Double-Digit Growth Driven by Recovering Exports - Worries of downside risk misplaced - (April 28, 2010)
• Shortage of Migrant Workers Suggests Arrival of Lewisian Turning Point - Industrial upgrading likely to accelerate as a result - (April 28, 2010)
• Chinese Monetary Policy Under Pressure as Asset Bubble Balloons - Japan's experience and lessons offer useful reference - (April 12, 2010)