BY Thomas Clouse
A strong services sector saw China’s GDP revised upward
China and the Association of Southeast Asian Nations (ASEAN) created the world’s third-largest free-trade zone, measured by trade volume, on January 1, eliminating tariffs on 90% of goods traded as part of the ASEAN-China Free Trade Area (ACFTA). The area will cover roughly 1.9 billion people and will be
the world’s largest in terms of population. As part of the agreement, most trade barriers will be eliminated between China and ASEAN’s original six members—Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand—while other ASEAN members, including Vietnam and Cambodia, will reduce tariffs by 2015. China surpassed the United States last year to become ASEAN’s third-largest trading partner behind the EU and Japan.
China upwardly revised its 2008 GDP growth figure from 9% to 9.6% in December. The newly revised figure reflects recently gathered data about the country’s service sector, indicating that such industries are contributing more to China’s growth than earlier estimated. The stronger role of the service sector is good news for policymakers, who are trying to strengthen the country’s domestic market. The revised number also places China closer to overtaking Japan this year as the world’s second-largest economy. Policymakers received further good news when China’s purchasing managers’ index (PMI), published by the China Federation of Logistics and Purchasing, hit a 20-month high in December, with managers in 17 of the 20 industries surveyed reporting an expansion in business activity.
The World Trade Organization (WTO) in December rejected China’s appeal against an earlier ruling requiring that China open its market for foreign film, book and music distributors. China currently requires that such materials pass through state-owned distribution companies. With the appeal denied, China has no further avenues within the WTO to protest the initial ruling, and the US could begin imposing duties on Chinese products later this year if China fails to comply with the decision. While the ruling could open up channels for foreign companies to distribute directly to companies in China, the Chinese government can still prohibit material and keep in place an annual limit of 20 foreign films per year.