Last December the Bank of Finland Institute for Economies in Transition (BOFIT) held an international seminar on the integration of Russia and China into the world economy. The seminar was held on 11–12 December 2007 and addressed economic integration from many different angles.
Olga Garanina (University of Grenoble) and Minoru Yasuda (University of Birmingham) addressed the structure of Russian foreign trade and its impact on different sectors of the economy. According to Garanina, Russia conducts very different types of trade with eg the EU and CIS countries. Only a very small quantity of industrial products are exported to the EU and China, while in the CIS countries there is still a demand for Russian goods. However, it would seem that here, too, Russia is losing markets to eg China. Russia's raw material exports are worth many times the value of its exports of industrial products. Yasuda’s findings complement this picture by pointing out that there does not seem to be much demand for Russian industrial products even within Russia itself. On the contrary, in most sectors the growing domestic demand is boosting imports. The results of these studies illustrate that Russian economic integration with the outside world has so far been somewhat one-dimensional: raw material exports have grown rapidly, as have imports of investment and consumer goods. So far, Russian manufacturing has been unable to develop products with high demand in global markets.
Jarko Fidrmuc (University of Munich), Iikka Korhonen (Bank of Finland) and Ivana Bátorová (Comenius University) addressed the degree of convergence between economic cycles in China and other countries. According to their findings, China’s economic cycles remain very different from those of the OECD countries, although Korea would seem to form an exception to this rule. It appears that even increased trade with China has not yet increased the convergence of economic cycles. The same study shows, however, that increased trade between OECD countries has increased the degree of convergence between their economic cycles. So far, Chinese integration with the world economy seems to have proceeded differently, due perhaps to China’s unique position in the international production chains. According to Yannick Bineau (Université de Lille I), the structure of foreign trade in Asian economies is still so different that external shocks have very different impacts on them. On the other hand, Aaron Mehrotra (Bank of Finland) and Tomasz Kozluk (OECD) show that changes in Chinese monetary policy do have a notable impact at least on the smaller economies of South-East Asia such as Singapore and Hong Kong, suggesting that in some areas integration may be increasing.
Tuuli Koivu (Bank of Finland) and Alicia García-Herrero (Bank for International Settlements) estimate export and import equations for China and come to the conclusion that even a material revaluation of the renminbi would not decrease China’s trade balance surplus by much. A significant proportion of Chinese imports consist of components and raw materials needed in the manufacture of export products, and these imports would decrease if exports were to diminish. An appreciation of the currency would, however, have a different impact on different countries, since they trade with China with quite different products. This study gives grounds to assume that even if the Chinese central bank were to allow the currency to appreciate faster than at present, this would have a relatively minor impact on most countries’ trade deficit with China.
The full programme of the seminar can be found at the website. Presentations held at the seminar will be published in the coming months in the BOFIT Discussion Paper series. |