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How Globalization Will Change Japan-China Trading Patterns

China has achieved rapid economic development since it adopted the reform and open-door policy in 1979. It has steadily expanded its economic presence in the world, and in the second quarter of 2002 exports from China accounted for 5.6 percent of total world exports. The United States now imports more from China than from Japan, while Japan imports more from China than from the United States. China’s Asian neighbors have also started to benefit from this growth. Exports from Asian economies to China increased dramatically in 2002, reflecting China’s high growth rate and the reduction of tariffs. South Korea and Taiwan both registered substantial growth in the areas of general machinery, electrical and electronic equipment, and consumer durables, including mobile telephones and notebook computer exports. There were also dramatic increases in exports of general machinery, electrical and electronic equipment, mineral fuels and chemical products from the Association of Southeast Asian Nations (ASEAN) economies to China. The expansion of trading relationships within the East Asian region will lay the foundations for regional economic integration in the future. China’s admission to the World Trade Organization (WTO) will lead to accelerated restructuring of its domestic economy and is also expected to strengthen China’s influence on the world economy. A number of factors point to a growing role for China as a demand absorber in the future. First, expanding foreign investment will lead to the formation of divisions of labor between China and its East Asian neighbors. Second, rising income levels will lead to increased demand for imported goods. Third, development imports are expected to expand, especially in the area of resources. There have been dramatic changes in the import and export mix between Japan