Economic development in China and the Greater China region as a whole will be influenced by several internal and external factors, said Joan Zheng head of Greater China Economics of JP Morgan Chase's Asia-Pacific Economic & Policy Research.

Speaking on "The Economic Outlook for Greater China" at the 11th joint meeting of the HKTBCC and the CTHKBCC on Dec. 13, Ms Zheng said not least of these factors was the U.S. economy.

U.S. Economic Outlook
While there are signs that the U.S. economy is cooling after years of strong growth, Ms Zheng forecasts that if an economic slowdown does begin, it will not result in a second Asia crisis.

She predicts that every 2 per cent decline in the U.S. economy would result in a 0.3 per cent reduction in Asia's exports, and a mere 0.1 per cent decline in Asian countries' GDP over the short term.

China will be least affected by any slowdown in the U.S. economy, Ms Zheng said, adding that a 2 per cent decline in the U.S. economy would probably shave only 0.1 per cent off the total value of China's exports, and would not even affect China's GDP.

China's WTO entry
Ms Zheng expects that a series of reforms will immediately follow China's WTO entry, including further reforms to state-owned enterprises (SOEs) and the banking sector.

With regards to state corporate sector reforms, China will open the door to non-state companies and the process of privatising state-owned enterprises will gain momentum.

To increase their attractiveness to private investors, SOEs must improve their transparency and accountability, as well as develop their markets to avoid hindering the systematic sell-off of SOEs, she said.

Reform of the banking sector is also crucial if China is to thrive in the post-WTO era. Banks are now required to work off the existing non-performing loans (NPLs) and to prevent future NPLs.

But burdened by debts from SOEs, slow improvements to the legal system and an overall lack of expertise, Ms Zheng expects that the state-owned banks will not be able to go commercial any time soon.

In addition, she predicts that the renminbi will not be fully convertible for another five years. By that time, with the gradual easing of capital controls, banks will have gained the ability to handle risks associated with capital flows.

WTO's Impact on Taiwan and Hong Kong
Ms Zheng believes that Taiwan will enter the WTO after China, and this will result in big changes in trade relations and capital flows between Taiwan and China. Taiwan's old economies will be especially hard hit, and according to Ms Zhang Taiwan's long-term plans should be looking at specialisation in high-tech manufacturing.