China's Trade Liberalization and Structural Adjustments for the World Economy

While China's open‐door policy has benefited the world economy, there are anxieties, both in China and abroad, about increased competition and the cost of dramatic adjustments. This paper attempts to analyse the implications of China's trade reform for structural change and welfare in China and the rest of the world. Three sets of experiments are implemented with the GATP model. The study finds that China is the biggest gainer from its own liberalization, its labour‐intensive sector will expand but other sectors, including agriculture will contract. The structural adjustment for other countries is likely to be concentrated on the clothing sector. But the economies which experience the biggest adjustments are also the biggest gainers. Multilateral trade liberalization, such as the APEC free trade process, increases the gain both for the rest of the world and for China.