By Jan Joost Teunissen
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Extra info for China's role in Asia and the world economy: fostering stability and growth
It will deﬁnitely improve efficiency. The reform package could be the largest structural reform the government has taken since the late 1970s (see Figure 4): • The combining of the State Economic and Trade Commission (SETC) and the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) into a new agency, the Ministry of Commerce. After China’s entry into WTO, some of the functions of MOFTEC have become less important or even futile. The establishment of the new ministry will reduce the power overlap between the departments that used to oversee foreign and domestic trade regulations.
The organisation of this paper is as follows. Sections 2 and 3 investigate the probability of WTO-induced macroeconomic shocks, the resilience of China’s economy to such shocks, and explores the policies that the Chinese Government can implement to counter negative developments from WTO membership. Section 4 discusses the sustainability of China’s expansionary ﬁscal policy to keep aggregate demand high, and Section 5 identiﬁes the beneﬁts of WTO membership for macroeconomic management. Section 6 outlines the continued challenge to macroeconomic management from China’s still-too-large state enterprise sector.
For example, China is a natural food-importer and a natural factoryoriented society given its low land-man ratio, but its agricultural sector still employs over 332 million people, which is over two-third of the rural labour force. The bulk of China’s state-owned sector relies on WTO-contravening policy instruments like subsidies and import barriers2 for survival, and this sector employs over 40 percent of the urban labour force. Together, the agricultural sector and the state sector employ about 60 percent of the total labour force.