ABSTRACT
China's integration with the global economy has contributed to a new pattern of international trade and capital flows. This pattern is characterized by a growing share of developing countries in world trade, which increased to around 28 per cent in 1999. Although global foreign direct investment (FDI) was largely concentrated among developed countries, private net capital flows to emerging markets was as high as 150 billion dollars in 1999.1 China was among those countries benefiting most from the liberalization of the world trading system, which now has the lowest tariffs ever for manufactures. Since the middle of the 1990s, it has also become the second largest recipient of FDI, lying only behind the United States.2 With accession to the WTO it is expected that China will be able to further expand its exports and absorb more foreign capital. The World Bank projects that by 2020, China's share in world exports will increase to nearly 10 per cent, ahead of Japan, but still behind the United States and the European Union.3 The issue of whether this rapid integration with the world economy will have a largely favourable effect on the rest of the world - as foreseen by the World Bank - and what exactly the impact on international trade and capital flow will be, are the issues dealt with in this paper.
