Contemporary China Research Base Steering Committee

The Contemporary China Research Base was established in the University of Tokyo's Institute of Social Science (ISS) in April 2007 to conduct research on Economic Growth and Stability in China. The Base is a collaboration between the University of Tokyo and the National Institutes for the Humanities (NIHU), an Inter-University Research Institute Corporation in Japan.

Paralleling the course of the Hu Jintao regime which came to power in the fall of 2002, the Chinese economy is now entering a transitional phase. The era of 'unlimited labor supply' from rural China, once the backbone of the country's growth, is now coming to an end. The market for younger labor is growing tighter in urban areas, while expanding economic activity is bringing environmental and resource constraints to the forefront. The issues of the adjustment of the urban-rural labor force distribution and the coordination between agricultural and non-agricultural sectors can no longer be avoided. To build a more stable society, and to adjust and manage resource allocation smoothly, improvements must be made to the social safety net, income distribution, the legal system and the regulation of areas such as ownership, governance and the environment. A more democratic political system will be required to safeguard these new institutions.

China's economic expansion is making a strong impact on the international community in both the political and economic spheres. Meanwhile, under multilateral frameworks such as the IMF and WTO, as well as intra-regional arrangements such as the China-ASEAN FTA, China itself is feeling pressure to improve foreign economic relations and achieve domestic change, such as better coordination among different industrial sectors and the development of more robust legal institutions.

The pursuit of area studies grounded in the social sciences has been a core mission of the ISS ever since its foundation in 1946, with scholars in economics, law and political science engaging in Chinese Studies within their respective disciplines. The University of Tokyo signed an exchange agreement with the Chinese Academy of Social Sciences (CASS) in 1986. As the University's principal interface for this agreement, the ISS has used joint research projects, researcher exchange and visiting professor programs with CASS-affiliated institutes to develop an extensive track record of exchange activity and a diverse research network.

The pursuit of area studies grounded in the social sciences has been a core mission of the ISS ever since its foundation in 1946, with scholars in economics, law and political science engaging in Chinese Studies within their respective disciplines. The University of Tokyo signed an exchange agreement with the Chinese Academy of Social Sciences (CASS) in 1986. As the University's principal interface for this agreement, the ISS has used joint research projects, researcher exchange and visiting professor programs with CASS-affiliated institutes to develop an extensive track record of exchange activity and a diverse research network.

Building on these foundations, the ISS Contemporary China Research Base was launched with the aim of contributing to the development of Contemporary Chinese Studies, not only within the University of Tokyo, but throughout Japan and across the world. The Base envisages two major components of activity over its five-year period of operation.

*A brief report on Contemporary China Research Base appeared in Social Science Japan, No.45, September 2011.

Research Group 1: Institutions, Policies and Economic Development (leader: Tajima Toshio)

Attentive to the challenges of structural adjustment and institutional reform in China's economic sector and the realignment of economic and legal institutions occasioned by China's membership of the WTO, this group will chiefly address issues concerning the domestic economy, institutions and policies, including: (a) macroeconomic policy and fiscal / monetary reform, and the relationship between government and private enterprise; (b) the development of systems of civil and commercial law / intellectual property law / environmental law, and issues of ownership and governance; (c) structural adjustment in the agricultural sector and land use / community selfgovernment; (d) labor markets / labor force mobility / social security; and (e) economic ideology and perceptions of society and history, etc. Research activity is organized around three subgroups: (1) structural adjustment and economic policy (the 'Economy Subgroup'), (2) intensified reform / opening and reorganization of economic law systems (the 'Law Subgroup'), and (3) agricultural and rural problems in a period of transition (the 'Rural Issues Subgroup').

Research Group 2: Foreign Economic Relationsand Industrial Structure (leader: MarukawaTomoo)

From the standpoint of China's economic internationalizationand increasingly apparent resource limitations, as well as economic partnerships and industrial adjustment in Asia, this group willchiefly address issues in China's industrial development and foreign economic relations, including: (a) trends of foreign trade and intra-regional economic partnerships in China and the Asian region; (b) foreign economic relations pertaining to investment, foreign exchange and intellectual property rights; (c) industrial agglomerations and international division of labor in Asia; (d) offshore development and the growth of outsourcing to China; and (e) resource constraints and development-and-import schemes / official development assistance (ODA) / resource diplomacy. Research activity is organized around three subgroups, focusing on: (1) the structure of trade in connection with China both within and outside Asia and possibilities for East Asian economic partnerships (the 'Trade Subgroup'), (2) industrial agglomeration in China and the Asian region (the 'Industrial Agglomeration Subgroup'), and (3) resource constraints in China and developmentand- import schemes / ODA / resource diplomacy (the 'ODA Subgroup').

The two Research Groups and six Subgroups operate in a manner enabling cross-participation, with research activities and workshops conducted on a routine basis, as well as field survey and research exchange activities in China and elsewhere, and the publication of research findings. Research seminars are held roughly twice a month at the ISS or on the Komaba Campus, and are generally open to the public. Further information on research activities and seminars is posted regularly on our website: http://web.iss.u-tokyo.ac.jp/kyoten/index.html.

These research activities are supported by a secretariat, consisting of an Associate Professor stationed full-time in an administrative and research office in the ISS, as well as two Research Assistants responsible for the Hongo and Komaba area. In addition, a residential facility for field research in Beijing (and the rest of China) is provided by the ISS Beijing Research Base established in October 2007 within the Institute of Economics of the Chinese Academy of Social Sciences (CASS).

Research in the Base's first year of operation has already yielded two publications (both in Japanese):
（1）宮島良明・大泉啓一郎（2008）『中国の台頭と東アジア域内貿易　World Trade Atlas（1996- 2006）の分析から』 ISS Contemporary Chinese Studies No. 1.
（2）田島俊雄・古谷眞介（2008）『中国のソフトウェア産業とオフショア開発・人材派遣・職業教育』ISS Contemporary Chinese Studies No. 2.

The Base has also launched projects in the educational sphere. In the winter term of the 2007 academic year, a course on 'Multiple Dimensions of Japan-China Relations' was offered across all graduate schools under the Japan-Asian Studies Program of the Asian Studies Network at the University of Tokyo (ASNET). This course is being taught once again in the summer of 2008. In a similar vein, a half-year seminar on 'Revised Chinese Modern History'（書き直される中国近現代史） is set to be taught on the Komaba Campus (Graduate School of Arts and Sciences) in the 2008 winter term.

The Lewis Turning Point and China's Aim for a Harmonious Society

Tajima Toshio

Tajima Toshio is a Professor of Chinese Economy and the Director of the Contemporary China Research Base at the Institute of Social Science at the University of Tokyo.

In 2007 discussions were held on China's 'unlimited' supply of labor and its advance toward the 'Lewis turning point', and the Contemporary China Research Base was established to conduct research on 'Economic Growth and Stability in China'. In recent years, shortages of young laborers and wage increases in urban and coastal China have been remarkable. Our research activities have focused primarily on understanding the extent of the economic implications of China's contemporary policy issues, and determining how to frame them in terms of long-term economic development.

However, there is actually a surplus of middle-aged labor in China's rural regions. Looking at the demographic features, China's labor force will enter a phase of definite growth over the next several years, and the dominant debate is that this is the mediumterm process leading up to the surpassing of the Lewis turning point. It is commonly accepted that Japan surpassed its Lewis turning point around 1960, but the post-war Baby Boom Generation (1947 ? 49) did not reach working age until 1963 and later, so the nation continued to enjoy demographic dividends even after the turning point. Real development of the regional labor market probably began in the early 1970s in Japan. However, in light of the sea change in the Japanese society and economy from the mid-1950s to the early 1970s, it is reasonable to say that China, since entering the 21st century, is in the midst of unprecedented social change.

As a member of the same generation that experienced Japan during this era, I shall briefly recount the situation.

Around the time of the Lewis turning point, the relation of supply and demand for labor grew tight. It was a seller's market. The ratio of labor distribution rose, and industrial development and export-oriented industrialization that relied on an abundant supply of low-cost labor faced revision. Short-term employment relations receded as laborers and unions continued to gain clout, and the spotlight fell on skills development via internal labor markets. Worker protection advanced, universal healthcare was implemented and a public pension system was launched. With the expansion of the labor market, farmers began taking on second jobs as the agricultural structure adjusted and agricultural protection was brought in line with these new policies. Higher education became common as labor force participation and birthrates fell. A middle class was created, and consumer durables like appliances and automobiles came into widespread use. Social interest in public and environmental issues rose, and social restrictions on industrial activity grew tight. After weathering the Nixon Shocks in 1971 (i.e. the transition from managed to floating currency and the thaw in relations with China) and the first Oil Shock in 1973, Japan's rapid economic growth came to an end.

The 5-year project of the ISS Contemporary China Research Base is an attempt to comparatively observe the social and economic changes in China as it approaches the Lewis turning point in light of Japan's experiences. In this article, I will discuss the research conducted in the 2007 academic year by the Economy Subgroup and the Rural Issues Subgroup.

The Hu Jintao-Wen Jiabao regime came into being at the 16th National Congress of the Chinese Communist Party in the Fall of 2002. It championed a 'Carefor-the-People Policy' and 'Building a Harmonious Society', and offered solutions to the 'three rural issues concerning agriculture, countryside and farmers'. This approach differs from the previous neoliberal trend toward deregulation, market economization and ownership reform, and it appears that China is aiming for social democratic or Keynesian policy management. But the predominant discipline in China today is imported Neoclassical economics, with a trace of left-wing Marxist economics remaining.

In light of this situation, we invited Prof. Sun Ge of the Institute of Literature, Chinese Academy of Social Sciences (CASS) to serve as an ISS Visiting Professor, and held a workshop on recent changes in Chinese economic and social thought. Discussions covered the affinity between neoclassical trends and nationalism as observed in both Japan and China. The voice of caution is strong regarding the resurgence of Big Government in the wake of China's traumatic planned economy, and the existence of any theoretical or ideological underpinnings in this policy transition appears to be rather flimsy. Given the shift to closer, mutually complementary economic ties between Japan and China, we conducted field surveys of cases in the software industry.

Giving consideration to offshore software development due to the shortage of talent in Japan and the inevitability of staffing from overseas, we conducted interviews at over 100 software companies, human resources companies, and vocational education institutions in Dalian, Beijing, Xi-an, Chengdu, Wuhan, Shanghai, Shenyang and Suzhou regarding the development of the software industry in China's coastal regions and the potential for industrial development inland. In the case of the software industry, direct communication in Japanese with customers and clients, among systems engineers and programmers, is necessary for creating a borderless division of labor. The issues faced are slightly different in nature than those in manufacturing.

So-called Bridge Systems Engineers (Bridge SEs) serve as liaisons to overcome these problems and encourage effective offshore software development. Fluent in both Japanese and Chinese, Bridge SEs comprise a class of experienced leaders and managers. Dalian, Beijing and Shanghai are rich in human resources and, for the time being, they will maintain their competitive advantage, but skyrocketing wages and office building rents in these cities means there are also opportunities in the inland regions. This means that since there is already an oversupply of ordinary programmers throughout the country, regions will fight for veteran project managers, especially Bridge SEs fluent in foreign languages. The outcomes of this research were published in March 2008 in 田島俊雄・古谷眞介（2008）『中国のソフトウェア産業とオフシ ョア開発・人材派遣・職業教育』 ISS Contemporary Chinese Studies No.2.

In the Rural Issues Subgroup, the core mission is to observe social and economic changes in China as it approaches the Lewis turning point from the perspective of agricultural development and labor supply in light of the rural economy over the past few years. Speaking of agriculture, the shortage of labor and rising wage standards in non-agricultural sectors over the past several years has been caused by an increase in agricultural productivity and higher prices, both at home and abroad. This is also thought to be the result of agricultural protection policies put into effect since the Hu Jintao-Wen Jiabao administration came to power. The Rural Issues Subgroup held a joint research seminar with the Trade Subgroup on the impact of the China- ASEAN FTA on farm product trade, and invited a Chinese agricultural policy official to give a report. In March 2008, the Rural Issues Subgroup began fixed-point surveys in suburban and rural regions on the topic of employment composition of the rural workforce and the structural adjustment of land use. However, since this coincided with anti-government demonstrations by minority ethnic groups in Lhasa in the Tibet Autonomous Region, research initially scheduled for the mountain villages of Gansu Province had to be suspended. This was an unexpected incident, but it was yet another opportunity to experience China's serious ethnic and social issues?and the risks that come with them.

Law Subgroup Report: The Property Law of the People's Republic of China

Tanaka Nobuyuki

Tanaka Nobuyuki is a Professor of Contemporary Chinese Law at the Institute of Social Science atthe University of TokyoActivities in the first year of operation

New enactments and amendments to laws in the civil and commercial fields in China are apt to generate intense controversy ? a tendency which has become even more marked in recent years. It goes without saying that such controversy stems from the acute tension between new legal policies aimed at developing a market economy and the socialist legal tenets which China has maintained up until now, and from the fact that compromise between these two conflicting positions is becoming increasingly difficult to maintain. A leading example is provided by the fiery debate which arose in the summer of 2005 over the enactment of the new Property Law of the People's Republic of China.

The Law Subgroup was established with the aim of using an analysis of these and other problems surrounding civil and commercial law in China to develop a clearer understanding of the actual nature of the socialist market economy advocated by China's leaders. The Institute of Social Science (ISS) had pursued exchange and joint research activities with the Institute of Law of the Chinese Academy of Social Sciences (CASS) for many years ahead of this Subgroup's establishment. In order to contribute to advancements in civil and commercial law research in China, the ISS also played a part in the formation of the Sino-Japan Civil and Commercial Law Society and cooperates with the Society's activities on an ongoing basis. It was thus highly significant, albeit somewhat fortuitous, that an international symposium to mark the enactment of the new Property Law was held jointly by the ISS and the Sino-Japan Civil and Commercial Law Society in 2007, the same year in which the Contemporary China Research Base was launched.

International Symposium ? 'Contemplating China's Property Law'

Celebrating the 130th anniversary of the founding of the University of Tokyo Hosts: University of Tokyo Institute of Social Science (ISS), University of Tokyo Graduate Schools for Law and Politics, Sino-Japan Civil and Commercial Law Society Planning: University of Tokyo ISS Contemporary China Research Base Date/Time: Friday August 31, 2007 1:00 to 6:00 p.m. Venue: Main Conference Room, Sanjo Conference Hall, University of Tokyo Hongo Campus

Statement of Purpose

The adoption of the Property Law of the People's Republic of China in March 2007 attracted a great deal of attention, both from within China and internationally, for its provision of legal foundations for the country's socialist market economy system. The law was initially drafted by a group of scholars from the Research Department of Civil Law at the Institute of Law of the Chinese Academy of Social Sciences (CASS), commissioned by the Standing Committee of the National People's Congress and headed by Professor Liang Huixing. The draft they produced was seen as lending impetus to China's shift towards a market economy model, and generated a great deal of controversy.

The Symposium on China's new Property Law was organized as part of the Contemporary China Research Base at the ISS, in collaboration with the Sino-Japan Civil and Commercial Law Society convened by the Research Department of Civil Law at the CASS Institute of Law, and the University of Tokyo Graduate Schools for Law and Political Science. Featuring presentations from the actual scholars responsible for producing the Law's initial draft, the Symposium aimed to review the issues raised in the processes leading to the adoption of the Law and thereby shed light on its significance and the challenges it presents.

The Symposium featured presentations by seven scholars from the CASS Institute of Law who had participated in the drafting of the Property Law, part of a contingent of 25 attendees from universities and institutes all over China. They were joined in passionate discussion by seven presenters from Japan and numerous other scholars, making total attendance at the Symposium exceed one hundred people. A volume containing the Symposium proceedings is scheduled to be published shortly.

Plans for the future

With the enactment of the Property Law in 2007, compilers of China's civil code have shifted their attention to the drafting of a Law of Obligations. However, because no significant activity on this front is expected for the next two to three years, the Law Subgroup will devote itself to research in fields such as intellectual property rights and finance/securities. These are the most advanced fields of law in terms of application of global standards; examining how China addresses them and what kind of laws it formulates is likely to yield important insights relevant to research in other areas.

In terms of methodology, we plan not only to explore the theoretical dimensions of these issues, but to address the interface between law and society, extending our scope of analysis to practical considerations of how transformation of the legal system is affecting Chinese society, what processes are involved and what kind of problems are being engendered thereby. We will continue to enjoy the cooperation of CASS, but we also plan to adopt a diversified, multipronged approach to our survey and research activities, involving not only scholars but lawyers and other practitioners as well.

The Rise of China and Development of Intra-Regional Trade: Findings from the World Trade Atlas (1996-2006)

Suehiro Akira, Miyajima Yoshiaki and Oizumi Keiichiro

Suehiro Akira is a Professor of Asian Economy at the Institute of Social Science at the University of Tokyo
Miyajima Yoshiaki is a Research Associate at the Institute of Social Science at the University of Tokyo
Oizumi Keiichiro is a Senior Economist at the Japan Research Institute, Limited.

Observations and Issues

The growth of the Asian economy since 1990 has been remarkable. Certainly, the Asian currency crisis of 1997 created a temporary banking and currency crisis for the countries of the region; however, the Asian economy recovered rapidly and by the early part of the 2000s was once again showing signs of strong growth fueled by domestic consumption and exports. The regional driving force behind this growth has been China.

If we examine trends in trade for East Asia (Japan, Northeast Asia, Southeast Asia) since the 1980s, we observe the following four characteristics.

First, while global trade (exports) between 1980 and 2005 grew from 1.932 trillion dollars to 10.24 trillion dollars (530%), it was outdone by the speed of expansion in East Asian trade during the same period, which grew from 272 billion dollars to 2.696 trillion dollars (990%). As a result, East Asia's share of global exports grew from 14% to almost 26%. In contrast, the North American share dropped from 15% to 12%, and the European share dropped from 42% to 37%.

Second, the expansion in East Asian trade up through 1985 was buoyed by a growth in exports to the United States. However, the Plaza Accords in 1985 signaled a turning point after which trade with neighbors in the region began to rise (from 34% in 1985 to 49% in 2005). In other words, East Asia was no longer simply a base for production and export but also a destination for goods manufactured in the region, creating an "Asianized Asian economy".

Third, the driving force behind East Asian trade expansion has been the remarkable growth of Chinese exports. If we compare the years 1998 and 2006, we see that China's position as an import trading partner increased for each of the major nations/regions, going from #4 to #2 for the United States, from #4 to #1 for the 15 nations of the EU, and from #2 to #1 for Japan.

Fourth, the most significant increase in trade with China over the past 10 years has come from the members of ASEAN. While the value of this trade is less than that of trade between China and the United States or China and the EU, the percentage increase in imports from China for each ASEAN member has been 700 to 800%, compared with 200 to 300% for overall imports. This is one of the factors responsible for the increase in the proportion of East Asian intra-regional trade.

With these four characteristics in mind, our research team, the Trade Subgroup, set out to examine the following two major research issues.

（1）What factors are responsible for the increase in trade between China and ASEAN members?
（2）What is happening to the competitive relationship between China and the other countries of East
Asia within the three major markets of Japan, the United States and the EU? That is to say, is China's rise driving the other countries of East Asia out of the global market?

Data Source: World Trade Atlas

The trade statistics which each country announces for itself are not sufficient to address these two issues. This is because different countries use different product categories, creating significant discrepancies in the statistical figures given by exporting and importing countries. Thus, we instead used the electronic version of the World Trade Atlas (WTA) put out by Global Trade Information Services, Inc. By using the WTA, we were able to obtain more detailed and relevant trade relations information which is based on a Harmonized Commodity Description and Coding System (HS Code).

Thus, we used the latest version of the WTA to produce detailed trade statistics for 1,270 commodities (represented by four-digit HS Codes) for 12 countries and regions: Japan, China, Hong Kong, Taiwan, Korea, Singapore, Thailand, Malaysia, Indonesia, the Philippines, the United States, and the 15 countries of the EU. The resulting database contains 335,280 items created from 1,270 commodities × 12 countries and regions × 2 groupings (exports and imports) × 11 years (1996 ? 2006). And for each major commodity, the intensity of trade, trade specialization index and market share shift within the three major markets was calculated for China and the other countries of East Asia. This data is arranged and organized in "The Rise of China and Intra-Regional Trade in East Asia: Analysis of the World Trade Atlas, 1996-2006" (Miyajima & Oizumi [2008]).

However, a problem exists with the WTA. While it is useful in that it includes Hong Kong and Taiwan in its statistics, it does not include such countries as Vietnam, Laos, or Cambodia due to their failure to maintain trade statistics corresponding to the HS Codes. Thus, the ASEAN members are limited to the four countries of Thailand, Malaysia, Indonesia and the Philippines (Singapore is included in the NIES4).

Trade Expansion for China and ASEAN Members: Intra-firm Trade and Traditional Vertical Trade

The primary commodities supporting the expansion of trade for China and the ASEAN4 are IT goods such as computer-related products (8471, 8473), semiconductor devices (8541), and integrated circuits (8542). Table 1 gives statistics for IT goods according to major country or region.

As Table 1 shows, the United States is the largest importer of IT goods from China (97 billion dollars) followed by the NIES4 (92 billion dollars). Hong Kong, Taiwan, Korea, and Singapore have become major markets for Chinese IT goods. At the same time, the NIES4 are the largest exporters of IT goods to China (120 billion dollars). On the other hand, although inferior in terms of dollar value, the ASEAN4 have shown astounding growth of more than 1,100% between 1998 and 2006. But what does all this movement indicate?

Put simply, the growth in bilateral trade of IT goods for China and the other nations of East Asia is a reflection of the regional expansion and development of intra-firm trading for Japanese, Korean and Taiwanese companies. For example, if we look at laptop computers, we see American companies contracting Taiwanese companies to design the computers which are then assembled in China, with semiconductors coming from Japan and peripheral devices coming from ASEAN members. As a result, the increase in personal computer exports from China to United States means an accompanying increase in IT goods-related trade within East Asia. Furthermore, the final destination of these personal computers in not just the Unites States or the EU; East Asia, including China, is itself a huge market.

However, trade within and between companies from Japan, etc., cannot fully account for the sudden increase in trade experienced by China and ASEAN members. Table 2 uses the WTA to give the top ten commodities (four-digit HS Code) exported to China from the ASEAN4 in 2006. It shows that the #1, #3, #4, and #5 commodities are all IT goods. However, with the exception of polycarboxlic acid at #9, the remaining commodities are all primary commodities. In other words, China's industrialization has meant increased exports of natural rubber (for making tires) and crude oil, while higher incomes in China have meant increased exports of palm oil (cooking oil), rice and other agricultural products. Meanwhile, while not shown here, the top ten commodities imported by the ASEAN4 from China, excluding IT goods, include mobile phones and digital cameras (#4), steel products (#5), and audio-visual equipment (#6). In other words, the ASEAN4 export primary commodities to China and, in turn, import industrial products, confirming that a traditional, vertically specialized trade relationship exists between the two.

From the perspective of catch-up industrialization, the above facts do not make sense (Suehiro [2008]). The common assumption would be that China would export primary commodities and food while the ASEAN members export industrial products. What needs to be noted, however, is that, while China may be a latecomer to the global marketplace, only Japan has a longer history of industrialization, and the fact is that China is one of the first industrial nations within Asia. At the same time, China's rapid economic growth provides an immense market for ASEAN members' raw materials and food. Thus, China and Southeast Asia's trade has grown as a result of the mutually reciprocal nature of horizontally specialized trade based on intra-firm trade and vertically specialized trade based on factor endorsement. We can say, therefore, that the expansion in intra-regional trade is operating according to more autonomous and sustainable mechanisms than when the United States has been the absorber of East Asian exports.

Competitive Relationship between China and East Asia in Major Markets

An overlap in products, such as electronics and textiles, is apparent amongst exports from China and those East Asian countries which have been late to industrialize. And a frequent point of contention has been the so-called "Chinese menace" theory which asserts that China's economic rise has been driving the industrial products of NIES and ASEAN member countries out of world markets. Is this assertion true?

In order to examine this issue, we undertook the following. First, for each four-digit HS Code grouping, we computed the change in market share within the three major markets of Japan, the United States and the EU for ten countries/regions in East Asia (including China). If, for example, Export Country A increased its market share by 3% or more within the Japanese market for product X1 between 2000 and 2006, we counted this as a "Win". If it declined 3% or more during that time, we counted this as a "Lose". A variation within the range of 3% to -3% was treated as a gray area because of its difficulty in assessing. In the same way, product X1 was also evaluated as "Win" or "Lose" for China If both Export Country A and China increased their market share 3% or more within the Japanese market, this was treated as a "Win-Win" relationship for Country A; if it decreased more than 3% this was treated as a "Lose-Win" relationship. And, finally, the export value of Country A's "Win-Win" products X1, X2, X3... (or "Lose-Win" products Y1, Y2, Y3...) targeted at Japan was calculated as a ratio of the total value of country A's exports to Japan. This is shown in Table 3.

For example, if we look at Malaysia, we see that 18% of its exports to Japan are "Win-Win" while 19% are "Lose-Win"; 48% of exports to the United States are "Win-Win" while 3% are "Lose-Win"; and 22% of exports to the EU are "Win-Win" while 6% are "Lose-Win". As Table 3 shows, China does not have one-sided dominance over the other East Asian countries and regions in any of the three major markets. The export value of "Win-Win" products is quite large. And, there is great variation in "Win-Win" and "Win-Lose" ratios according to country/region and market. Thus, by needlessly insisting that a "Chinese menace" exists, people are only inviting a misunderstanding of the actual competitive relationship that exists between China and other East Asian nations.

References
Suehiro, Akira. [2008]. Catch-up Industrialization: The Trajectory and Prospects of East Asian Economies, Singapore: NUS Press.
宮島良明・大泉啓一郎（2008）『中国の台頭と東アジア域内貿易　World Trade Atlas（1996- 2006）の分析から』 ISS Contemporary China Research Series No.1, March.

The Discovery of Industrial Agglomerations in China

Marukawa Tomoo

Marukawa Tomoo is a Professor of Chinese　Economy at the Institute of Social Science at the　University of Tokyo

Industrial agglomeration refers to the phenomenon in which small and medium-sized enterprises in the same or related industries concentrate in a specific region. In his Principles of Economics published at the end of the 19th century, the economist Alfred Marshall reported on industrial agglomeration in the United Kingdom. This was the first academic treatment of industrial agglomeration, after which the phenomenon was 'discovered' throughout Europe, Japan, Asia and Africa. Since the 1990s, industrial clusters, a type of industrial agglomeration formed from university and research institution spin-offs, have been gaining attention?e.g. the Silicon Valley in the United States?and countries are implementing policies to cultivate industrial clusters.

However, socialist planned economies that focus on planned industrial zoning and economies of scale are incompatible with industrial agglomeration. During China's planned economy that started in the 1950s, industrial agglomerations that existed up to that point completely vanished; however, they made a quiet comeback under the economic reforms of the 1980s. Until recently, industrial agglomeration was generally frowned upon as 'disorganized, with low technical standards'. Not until the Eleventh Five-Year Plan (2006 ? 2010) was the industrial cluster concept (chanye jiqun in Chinese) incorporated into Chinese economic policy, and the previously negative view of industrial agglomeration transformed into a positive one.

Given this, and the fact that research on Chinese industrial agglomeration has yet to advance significantly, instances of industrial agglomeration throughout China have been 'discovered' in rapid succession over the past few years. The aim of our research is to discover Chinese industrial agglomeration that has not been given sufficient focus until now and unlock the mechanisms behind its origins, development and decline. The first step in this process was to spend 4 months (November 2007 to March 2008) conducting field surveys of industrial agglomerations in Wenzhou city in Zhejiang Province, and Wuxi and Tianjin cities in Jiangsu Province.

Wenzhou city was the first region where industrial agglomeration was noticed after China's economic reforms. Wenzhou is home to a collection of somewhat unrelated industries such as leather shoes, rubber and plastic shoes, synthetic leather, electric parts, lighters, valves and pumps, but each individual case of industrial agglomeration has a history.

The leather and leather shoe industrial agglomeration is one of the small-scale agglomerations that existed before the establishment of the People's Republic which made a comeback after economic reforms. During the planned economy, this industrial agglomeration vanished, and tradesmen became laborers in state-owned companies. Under the new open-door policy, individuals were allowed to start household enterprises, so the former tradesmen turned laborers set up their own businesses and, in turn, rejuvenated the industrial agglomeration. The plastic shoe industrial agglomeration began when the tradesmen that left the leather shoe factories started making shoes by melting scrap plastic with soldering irons. Their neighbors began imitating this practice, and over the course of several years, thousands of small plastic shoemaking operations sprang up, creating the industrial agglomeration. The industrial agglomeration for valve-making was born around 1970, right in the middle of the planned economy era. During this time, even the slightest hint of private enterprise, including farmers raising chickens in their yards, was subject to crackdown in an effort to keep capitalism at bay. Some farmers in Wenzhou started their own business under the guise of 'People's Commune- Operated Enterprise', and began manufacturing valves?which were in high demand at the time?for petrochemical factories. By the end of the Cultural Revolution, the number of valvemakers in Wenzhou skyrocketed to over 1,000 companies. Every time the government would clamp down, the valve-makers would spring back to life, and now Wenzhou has grown into the largest valve manufacturing region in China. In the 1980s, some of these companies saw the increasing demand for water pumps in high-rise apartment buildings and switched industries. Many enterprises followed suit, giving rise to an industrial agglomeration in pumps.

Several industrial agglomerations have sprung up in southern Jiangsu Province. In the 1980s, factories operated by village government agencies flourished, and this region was often contrasted to the agglomeration of small business owners in Wenzhou. Some of these village-run enterprises have since grown into massive corporations with thousands of employees. As opposed to Wenzhou, where only a handful of companies have more than 1,000 employees, the existence of industrial policies in the village government agencies is part of the reason why there are so many large companies in southern Jiangsu Province. On the other hand, southern Jiangsu Province and Wenzhou are becoming similar in nature. This is due to the increasingly large number of employees that are leaving the village-run companies to set up their own businesses nearby in the same or similar industries. For example, 400 small and medium-sized apparel manufacturing factories started by former employees of a large knitwear company nearby form an industrial agglomeration in the Zhutang district of Wuxi city. Likewise, a large apparel factory in the Changan district of Wuxi is surrounded by an agglomeration of 300 small and medium-sized apparel manufacturing factories started by former employees. This region of industrial agglomerations now includes factories in the related industries of dying and clothing accessories.

While industrial agglomerations in China are distributed largely along the southeastern coast in the provinces of Jiangsu, Zhejiang and Guangdong, they also exist in the north. Tianjin city is home to a bicycle manufacturing agglomeration that produces approximately 40% of the world's bicycles. Tianjin was originally the home of one of the most powerful state-owned bicycle manufacturers in China, and this industrial agglomeration was born out of a slump in state-owned manufacturing. Unable to respond to rising production costs and changing needs in the early 1990s, the state-owned enterprise went into a slump. Many workers left the enterprise to start their own businesses or to take jobs with private companies in rural areas, taking the state-run bicycle factory technical know-how with them. With the decline of the vertically integrated state-run factory that manufactured everything from parts to finished bicycles, private companies created an industrial agglomeration, with each company specializing in certain parts or finished bicycle assembly. The road to agglomeration, however, has not been easy. Since 2003, cost competition among Tianjin's bicycle manufacturers has grown fierce, as the industry is wracked by skyrocketing raw materials and personnel costs. However, in the face of trouble, Tianjin's privately-owned bicycle makers are switching over to electric bicycle production in addition to making use of new materials in an effort to ride out the storm.

In this article I described the industrial agglomerations in the 3 cities of Wenzhou, Wuxi, and Tianjin. It used to be thought that industrial agglomeration of numerous private companies was a phenomenon only limited to certain regions such as Wenzhou city; however, with private enterprises replacing state-run companies as the major players in the economy, cities such as Wuxi and Tianjin, with historically dominant industrial organizations much different than Wenzhou, are growing more and more similar to Wenzhou. The vertically integrated large bicycle company of Tianjin has since been replaced by an industrial agglomeration of specialized small and medium-sized enterprises, and the region's growth into both a domestic and an international manufacturing stronghold has been impressive. The fact that industrial agglomerations of small and mediumsized enterprises in specialized industries have more of a competitive advantage in the market over China's large vertically-integrated companies can, for the most part, be taken for granted.

Of course, small and medium-sized enterprises do not have a strong competitive advantage across all industries. In some cases vertically-integrated companies in the same industry may have the upper hand due to changes in technology. Under what conditions can industrial agglomerations demonstrate their strengths? To what extent can industrial agglomerations adjust to changes in technology and outside forces? These are the kinds of questions that we intend to consider as we continue to investigate more cases in our research.

Chinese Foreign Aid ODA Subgroup Report

Kawashima Shin

Kawashima Shin is an Associate Professor of History of Politics and Diplomacy in Asia at the Graduate School of Arts and Sciences at the University of Tokyo

Our Subgroup consists of Takahara Akio, Professor of Chinese politics in the Graduate Schools for Law and Politics, Endo Mitsugi, Professor of international relations in Africa in the Graduate School of Arts and Sciences, myself, and Matsuda Yasuhiro, Associate Professor of Asian political history in the Institute of Oriental Culture, who joined the Subgroup in 2008.

China's astounding economic growth, rooted in foreign investment, continues in the midst of globalization. While it provides the world with cheap products, it is also expected to grow as a market itself. Now, China is turning the tables and using its financial muscle to provide aid to foreign countries as an actor in the global economy. Amidst this backdrop, even the local Japanese media now covers China's activities across the globe as it seeks to secure resources and food in a public- private joint effort. The fact that China, which is still an aid recipient with a per-capita GDP of approximately U.S. $2,000, now actively engages in foreign aid with a focus on its national interests has shocked the world's donor nations. Most donor nations adhere to OECDDAC rules for development assistance, but since China is not a member, its non-compliance with these rules is considered a new problem. China does not require freedom, human rights or democracy for its ODA, and its procedures are simple, so in some respects, aid from China has been embraced more than aid from advanced nations. In addition, anti-American sentiment driven by the Iraq War helped draw some recipient nations closer to China. From China's standpoint, ODA was crucial for securing resources to maintain growth and for keeping inflation in check. Investment was not led by the private sector, but rather the government provided aid, or in some cases, the government involved the private sector in its initiatives. In other words, the delineation between aid and investment and between public and private is unclear. ODA as a government vehicle remains unregulated, and aside from what is released by the Ministry of Commerce's Department of Foreign Aid, even information on government aid is not sufficiently disclosed.

In light of this, the ODA Subgroup must delve into a very gray area. Our research covers China as well rival Taiwan, and has taken to recipient nations, including those in Africa. Our aim is to create a precedent by clearly determining how China is actually implementing aid and investment. The outcomes of this research will provide an important key for understanding the global expansion of China's economy and shall contribute to the overall Research Base. We also expect to develop synergies with research on Africa, the crossstrait relationship, Chinese diplomacy and global governance to create an interdisciplinary field. For this reason, we planned collaborations with domestic and international Africa researchers and have already begun implementing some of these projects.

Activities are divided into research seminars and research. In the 2007 academic year, we held the following research seminars at the Komaba Campus. All sessions were open to the public. The first seminar (2007.12.05) featured a report by Wu Jinan of the Shanghai Institute for International Studies on the topic of 'China's Diplomatic Relations with Africa'. The second seminar (2008.01.23) featured a report by Hirano Katsumi of the Institute of Developing Economies on the same topic, 'China's Diplomatic Relations with Africa'. In the third seminar (2008.02.28) Dr. Christopher Alden, a Senior Lecturer in the Department of International Relations, London School of Economics, introduced and led discussions on his book?China in Africa (African Arguments), Zed Books, 2007. These presentations provided us with insight on China's presence in Africa, perspectives on both sides of China- Africa relations, and information on trends in research on these topics. These sessions all served as briefings for the field research we conducted in February and March.

Field research was conducted in Ethiopia and Tanzania by Professor Takahara and in South Africa and Malawi by Professor Endo and myself. Reports on this research were presented at the 4th research seminar, the China in Africa Mini-Workshop, held on June 6th. Professor Takahara's 'China's Advancement into Tanzania and Ethiopia', my 'Malawi's Anti-Taiwan Pro-China Diplomacy and Chinese Aid', and Professor Endo's 'The African Standpoint on Chinese Aid' all noted the features of Chinese foreign aid and the wide-ranging involvement of China in Africa. Professor Takahara's report pointed out that 'assistance' is not clearly defined and the concept of 'ODA' has not yet been established in China. Official aid to Africa falls under U.S. $1 billion according to the supervising Ministry of Commerce's Department of Foreign Aid (operated incountry by the embassy commerce sections). Chinese banks handle aid loans and charge a high 2% interest rate across the board. Professor Takahara also profiled the diverse types of Chinese citizens in Tanzania and Ethiopia. He especially noted the large number of Chinese nationals in these countries, both laborers and engineers alike. He divided actual assistance projects into 2 types: projects for the establishment (i.e. parliament building construction) and projects for the people (i.e. soccer stadium construction). Looking at the overall picture, China is entering a transition period as an aid donor, and at this time they are trying to learn the rules for development assistance.

Reports by Professor Endo and myself examined the course of events leading up to Malawi's cessation of diplomatic relations with Taiwan at the end of 2007 in favor of ties with China. We attempted to illustrate the machinations of Chinese foreign aid from the 3-way relationship between China, Taiwan and Malawi. The issue of government approval is a key factor in Chinese diplomacy in Africa. Landlocked Malawi was alarmed by the surrounding countries of Mozambique, Tanzania and Zambia that were progressing with nationbuilding due to their friendly ties with China. It thought it would be isolated in the region. China then offered to establish diplomatic ties with Malawi and proffered a generous aid and investment package. With an eye on the upcoming elections, the President seized the initiative and sealed an agreement in a short timeframe. Taiwan and its low-key economic cooperation to date were no match for China's financial might. Malawi explains its relationship with China in terms of national interest in a domestic context, not in terms of threat. As was the case with Zambia, relations with China are sometimes merely an election issue. However, developed nations' ambassadors stationed in Malawi are trying to involve China in the group of donor nations, and China is showing signs that it will agree to certain conditions.

In this article I have reported our research outcomes to date. Commentator Hirano Katsumi and many others have given us several issues to ponder. In the 2008 academic year, we shall build on these achievements, and with our new member Matsuda Yasuhiro, we aim to select regions for field research, including regions outside of Africa. We are also planning to hold research seminars every other month.

The Beijing Research Base

Kajima Jun

Kajima Jun is a Project Research Associate of the Contemporary China Research Base at the Institute of Social Science at the University of Tokyo

The University of Tokyo Institute of Social Science's (ISS) Beijing Research Base was established in the Institute of Economics of the Chinese Academy of Social Sciences (CASS) to encourage effective in-country research and research exchange for the ISS Contemporary China Research Base. This Base was established in April 2007, and the Research Base is the fruit of a memorandum on academic exchange concluded by ISS and the CASS Institute of Economics on October 28th of the same year.

The Beijing Research Base host institution, the CASS Institute of Economics, is located southwest of the Fucheng Gate, one of the old Beijing city gates. It is one of China's premier economic research institutes. Its history dates back to 1929, when its preceding organization?the Institute of Social Survey of the Chinese Education and Culture Foundation?was founded. It later merged with the Institute of Social Sciences of the Academia Sinica. The Institute as it is organized today was formed after the establishment of the People's Republic of China in 1949 (it changed its name to CASS in 1977?see http://ie.cass.cn/index.asp). The Institute has grown to house 8 research departments with 145 researchers. In addition to its active research, the Institute's library, renowned as a treasure trove of materials on Chinese society and economy since the days of the R.O.C., attracts many scholars of Chinese economics.

The Beijing Research Base was launched sharing space and staff with the Underdeveloped Economic Center of CASS. Center Director Yuan Gangming is one of the overseas joint researchers with the ISS Contemporary China Research Base, and he has been cooperating closely with the Base on joint research. With the support of this Research Center, the Beijing Research Base serves to assist ISS Contemporary China Research Base researchers with their in-country research, library materials collection and research exchange. With this we expect to further develop the research activities of the Contemporary China Research Base.

The Contemporary China Research Base Photo Gallery

Photos by Tajima Toshio

A row of plastic greenhouses, used for growing watermelons (Tongxing village, Hu county, Shaanxi province)

A starch factory (Hu county, Shaanxi province)

A milking plant at a ranch (Wangfang village, Hu county, Shaanxi province)

A bazaar in a rural village (Hu county, Shaanxi province)

A herd of cows at a ranch (Wangfang village, Hu county, Shaanxi province)

Contemporary China Research Base Office, Institute of Social Science, The University of Tokyo 7-3-1 Hongo, Bunkyo-ku, Tokyo 113-0033
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