CHINA AND THE WTO
Table1: Comparison between Member and Non-Member of China's Entry WTO by 2005 (%)
The Goldman Sachs study estimates that China's WTO accession would add about 0.5 percentage points to its economic growth rates by 2005. This is a significant addition but still means the PRC economy would have to grow at the unlikely rate of well over seven percent per year to reach $1.66 trillion by 2005. The average growth rate of GDP in per year will be promoted 1% if China is entry to WTO in comparison with that China is not a member of WTO between 1998 and 2010. That China's WTO member will enhance its share of GDP in the whole world from 3% at present to 6% after five year later. Otherwise this share shall be only 4.5%. (Mark W. Frzier: "Coming to Terms with the 'WTO' Effect on US-China Trade and China's Economic Growth", NBR Publication, September 1999).
3. Improve the adjustment related industrial and economic structures.
With the expanding of FDI and international trade, a lots of international capital and high-tech will be involved into China, which will be benefited for overcoming the shortage of capital and advanced technology, and for shifting Chinese economy from quantity development to intensive development. The industrial and economic structures in China will be focused on the roles of intellectual knowledge and educated specialists.
4. Stimulate enterprises to enhance their ability to take part in global competition.
It is painfully for Chinese enterprises (especially for state own enterprises) to join the international competition under the agreement with standards of WTO led by western developed countries, that strike to the heart of China's economic system and even touch on the PRC's political future. It seems like invite wolf to home. In that case, you have to defeat wolf, otherwise you could be eaten by wolf.
5. Reform China's legal regulation system in accordance with the WTO standard
Their more than ten thousands of regulation, rules of law will be reformed and changed according the rule of law of the WTO. Otherwise, China could be punished by the dispute system of the WTO, if there are some conflicts between China and other members of the WTO. It will be to fast the steps of reform of China's legal regulation system.
Debate about China's member of the WTO.
The WTO emphasizes on privatization, liberalization, and deregulation, which are very deferent from the current system emphasized on centralization and communism. China's membership of WTO has not only been a source of concern within the political bureaucracy, but also animated conflicts over national economic policy, the ongoing debate over which economic development strategy will be most successful for China and the role of the member of WTO plays in these strategies. These debates were based on about the ten unresolved questions: (1) Are the concepts of -national economy" (minzu jingji) and -national industry" (minzu gongye) still meaningful today? A national economy is understood as one owned and run by Chinese enterprises rather than foreign investment enterprises (FIEs) or foreign governments. (2) Who takes advantage of whom? The use of Foreign Direct Investment (FDI) could be to obtain intellectual property (IP), know-how and management skills, but allowing foreign investors to dominate China's economy. (3) Does the strategy of "trading market access for technology" work? It is adult the whether foreign firms sell the most-advanced IP to China; instead, technology transfer wipes out China's capacity to develop indigenous and possibly competitive technologies. (4) Are multinational corporations (MNCs) benign investors? It is impossible, to build a strong and independent economy by relying only on FDI especially investment from MNCs, which final goal is to dominate the Chinese market. (5) Is China a capital and tech-scarce country? China's domestic deposits have exceeded the volume of loans ($43.5 billion, by 1998). Chinese scientific and tech level has taken leading position in the world developing countries. FDI is, in some areas, for contributing to inefficient utilisation of domestic capital. (6) Is there too much FDI for the Chinese economy to absorb? (7) Does FDI encourage state ownership enterprises (SOE) reform? The excessive FDI and the methods used to attract it are detrimental to SOE reform and have helped FIEs gain dominant market share. (8) Should China open markets to domestic investors first, before opening them up to foreign ones? (9) Should China allow foreigners to hold majority shares of FIEs? (10) And does China need a concept of "industrial security"? The government should retain the current standards of industrial security that prevent FDI from dominating strategic industries. (Yong Wang, 2000)
Chinese national economy will meet very strong pressures from outside word due to tariff cut. The agriculture production will be seriously reduced year by year, in which the biggest reduction will have been taken by wool (-37.0%) and the least reduction will belong to rice (-1.04%). The agriculture land will be decreased 18.38% by 2005. The income from rural resident will be cut dawn 2.05% by 2005 (please see table 1). With the being of insolvency of enterprises, more than 11 million workers will be unemployment, in which 9. 6 million workers will be shifted from agriculture sector to another sectors. As tariffs fall, competition will speed the dismantling of China's state enterprises, meaning that tens of millions of Chinese citizens will no longer depend on the government for everything from their paycheck to their housing to their health care. There will also be tensions-more short- term unemployment, labor and political activism-and China's leaders will face hard political choices. There will be great pressure to accommodate popular demands, by expanding local elections, letting workers take grievances to court, and broadening outlets for dissent.
Open markets will also accelerate the information revolution in China. In the past year, the number of Internet addresses in China has more than quadrupled to nine million. This year, the number is expected to grow to more than 20 million. China's restrict access to some Web sites only proves how these changes threaten the status quo. (William Jefferson Clinton: " China's Opportunities, and Ours", " New York Time", 09/24/2000)
Stronger pressure comes from the industrial structure adjustment. China has to meet the problems of the contradiction between the capital and technique-intensive market and labor-intensive market. One hand, some capital and technique-intensive sectors, like bank and insurance, automobile, telecommunication and pharmacy, will lose their share and advantage in the domestic market. For instance, the manufactures of automobile, petroleum and metal will be cutting dawn their number of enterprises at 27%, 3%, and 16% partly, which will lead to a lot of unemployment in these sectors. In other hand, in the labor-intensive sectors there have already had much huge unemployment, they can not be involved the workers lay off from the capital and technique-intensive sectors. At same time, they can not export their unemployment into the previous sectors either. Thus, the issues of unemployment will become the serious problem related social stability.
Stronger pressure comes from the management. With increasing of the share taken by multinational companies (MNCs), in which their share will take 50%, or over 50%, foreign companies will have toughly influenced on the decision process in the Chinese enterprises management. How to deal with the issue regarding the cooperation between Chinese managers and foreign managers? How to deal with the issue in respect to relationship between foreign managers and the government in different levels? How to estimate the role of Chinese Communist Party in the management in the joint ventures?
Stronger pressure comes from ideology and social justice. It is very similarity to the message addressed by us to WTO in Bangkok Conference, Thailand last year that the trade liberalization policies pursued by the WTO contributed significantly to the following results: (1) Growing impoverishment and discontent among the majorities of people. (2) Increasing inequality in income distribution within countries, which is masked by the economic statistics that indicate economic recovery, but do not show how the urban poor and rural communities were pushed even further into misery and despair, carrying the burden instead of the affluent sectors of society and business. (3) Accelerated destruction of environment and ecological systems particularly affecting livelihood and health of the rural and suburb poor especially in the western part of China. (4) Trade liberalization exacerbates the culture of consumerism and threatens the very survival of the extremely precious, diverse and traditional Chinese ancient cultures and religions.
V. The Impact of China's WTO Entry to Asia
As the biggest developing country in the world, China's WTO entry will play a important role in the global multinational trade system, in which China could represent the interests of the majority developing countries in Asia to set up the new regulation benefited for this region. Apart from the WTO, there are some regional free trade blocks, like North American Free Trade Agreement (NAFTA) and European Union (EU). The countries located in the North America and in Europe (the majority of countries) are very benefited from the indicated trade organization above. However, it is very difficult for the other counties in the other part of the world to move into the trade block or to be benefited from these regional economic and trade organization. We note that there is a no free trade union, like NAFTA and EU, united whole Asia. If China becomes a member of WTO, possibly it could be an opportunity to set up an Asian regional trade organization, (it could be to take long time to go -- my personal view), which could be block the Asia's interests shared by Asian countries and Asian people.
China's WTO entry will be benefited for Asian peace and security. China will try to be keeping the commercial environment stable. For example, China has so far largely escaped the Asian regional turmoil surrounding it, due to her the renminbi is stable. China's economic managers have had a front row seat from which to witness the Asian Region's crisis. As china moves to modernize its own economic system, it can thus benefit from the region's experience. China will continue to play a important role in the peace dialogue between North Korea and South Korea. She will continue to keep good cooperation related to the issue of non-proliferation with other Asian nuclear countries. Although there is a big conflict on "the one China policy" between mainland of China and Taiwan, Taiwan president Chen Shuibian has supported China's WTO entry, because it is useful for keeping peace and commercial development for the both sides of Taiwan Strait.
At same time, with the China's WTO entry, Asia will have faced the stronger economic and commercial competition than before any time in the Asia history. In accordance with the statistic figure reported by the Institute of International Economics of the USA, the tariff barriers in China is higher than that in Japan and in South Korea (21.7%: 5.0%: 7.9%), but the non-tariff barriers in China is lower than that in Japan and South Korea (22.7%: 173.0%: 30.7%). China's WTO entry with the condition of cutting dawn the tariff barriers and non-tariff barriers will be make bigger pressure on some Asian countries like Japan, South Korea, India, etc., to open their doors more widely to the whole world.
China's industrial structure associated to labor intensive sectors is very similar to the industrial structure in South Easter Asia countries, like Malaysia, Thailand, etc. When China access into the WTO, her production of textile will have raised 22.5% with increasing of export 63.8%; her output of garments will have enhanced 63.8% with adding of export 200.0%. So, the South Eastern Asia countries will meet stronger competition with Chinese producers in terms of labor intensive sectors such as textile and garments.
Both China and Asia have to meet the biggest pressures from western developed countries in terms of the high-tech intensive industry such as telecommunication, bioengineering, new types of material, and space engineering, etc. They have not any competitive advantage over the western developed countries in those industries. In order to take its advantage over the developing countries, the US brought the rule of law related to high tech trade, like electronic commerce, almost suddenly at the preparation stage for the Geneva Ministerial Meeting. Countries, particularly the developing countries, had hardly had any time to examine the proposal by the US. If the proposal wrote by the US is approved, it would bring benefit to some other developed countries. The developing counties including the Asian developing countries have practically no benefit. ( Bhagirath Lal Das, "The Implication of the New Issues in the WTO", " World Economy & China, Number 11-12, 1999) That how to protect the interests of the developing countries including Asia developing countries in the system of the WTO is a important issue, when China becomes a member of the WTO.