China in the Asia-Pacific: Regional Adjustment to China’s
Growing Importance in the Region and Globally
[SLIDE 1] – Introductory Page
• Good morning. As you have seen from the remarks of the first two speakers, the focus
of this session is on imbalances and their impact in the region.
• Unlike the other speakers, I am not an expert in financial flows or currency valuations.
I am going to talk about some of the very imbalanced trading patterns in the Asia-
Pacific region centred on certain APEC member countries’ relations with China.
• The trade imbalances seem to be leading China and its APEC trading partners to
adopt strategies designed to facilitate policy adjustments that would in turn mitigate the
negative or enhance the positive aspects of the trade patterns in development between
China and its partners.
• But if there is one thing that is clear, it is that this is a very dynamic region of the global
economy and in some cases the apparent trade patterns seem to have led China and
its partners to policy choices that may not in the end be the best given the underlying
[SLIDE 2] – China’s Trade Imbalances
• Between 2000 and 2005, China’s trade surplus with the United States grew by 283
percent. In part because it started from a lower base, China’s trade surplus with the
EC-25 grew by some 631 percent over the same period.
• At the end of 2005, China’s combined trade surplus with the EC-25 and the United
States stood at more than $184 billion.
• But at the same time, China’s trade deficit with Asia, not counting Hong Kong,
amounted to more than $134 billion.
• This chart shows the roughly symmetrical relationship between the surpluses with the
US and EC and the deficits with other Asia.
I will come back to the reasons for this parallelism a bit later.
[SLIDE 3] – FDI Imbalances
• Not surprisingly, patterns of foreign direct investment have also not been reflective of
any kind of balance among count