Transcript China`s Accession to the WTO: Experience and Lessons

China’s Accession to the WTO:
Experience and Lessons
Long， Guoqiang
Deputy Director General and Senior Fellow,
Dept. of Foreign Economic Relations,
Development Research Center,
March, 15, 2006, Beijing, WBI
Contents





China’s Commitments to WTO
Impacts of China’s WTO Accession
China’s Experience
Lessons and challenges
Prospects of Policies
G.Long, DRC
2
Commitments




On trade of goods
Market access of trade in service
Implementing TRIMs
Institutional commitments
G.Long, DRC
3
Commitments on trade of
goods




tariff reduction：Average tariff rate of
industrial goods lower to 9.4% in year
2005; Average tariff rate of agriculture
goods lower to 14.5% at early 2004
eliminating non-tariff barriers: quotas
Liberalize Trading right
eliminating export subsidies
G.Long, DRC
4
Trade in service




Liberalizing location restrictions
Liberalizing restrictions on foreign
ownership share
Liberalizing restriction on business
scopes
Broadest coverage of sectors in
developing members
G.Long, DRC
5
Implementing TRIMs


Eliminating performance requirements on
foreign invested companies: local contents,
export requirements, balance of foreign
exchange
China will not condition their approval of an
investment on whether a company:
----Provides offsets,
----transfers technology
----uses locally produced goods, or
----conducts research and development in
China
G.Long, DRC
6
Institutional commitments




Trade and investment facilitation
Transparence
consistent of trade and investmentrelated laws, rules and policies
Protection of IPRs
G.Long, DRC
7
II, Impacts of WTO accession





Theoretic benefits and costs
Impacts on institutional reform
Impacts on foreign investment
Impacts on trade
Impacts on economic growth
G.Long, DRC
8
benefits





External incentives to institutional
reform
Lower the cost for import
Intensify domestic market competition
More attractive investment climate
Promote industries restructure to those
with comparative advantages
G.Long, DRC
9
costs




Surge of import: external shock
Adjustment cost of uncompetitive
industries: bankruptcy, unemployment,
social instability, etc
Lose of tariff revenue
Foreign control on strategic industries
G.Long, DRC
10
Impacts on institutional reform



Reform the regulations regarding trade and
foreign investment according to WTO
commitments;
The central government has reviewed 2300
laws, regulations and rules, in which, 325
were revised and 830 were abolished;
Re-design the function of government to
meet the requirement of market economy
system.
G.Long, DRC
11
Development of FDI in China




China has been the largest host for FDI
in developing countries since 1993.
FDI wander since late 90’s
FDI’s role increasing in capital inflow
Greenfield Investment dominates FDI
G.Long, DRC
12
China is the largest host for
FDI in developing countries.
FDI in China(billion USD)
70
60
50
40
30
20
10
05
20
04
20
03
20
02
20
01
20
00
20
99
19
98
19
97
19
96
19
95
19
94
19
93
19
92
19
19
91
0
Source: China Statistics Yearbook
G.Long, DRC
13
FDI wandered in late 90’s
近年来中国利用外资增速的国际比较（1995－99）
80.0
增长率％
60.0
40.0
20.0
0.0
-20.0
1995年
全球％
1996年
发达国家％
1997年
1998年
发展中国家％
来源：World Investment Report 2000, 中国统计年鉴2000
G.Long, DRC
1999年
中国％
14
FDI inflow into China
G.Long, DRC
15
Structure change of FDI





70% in manufacture,
More than 750 R&D centers by TNCs
More domestic market-16seeking
investment
More M&A taken place
Intensified competition not only
between FIEs and domestic companies,
but also among FIEs
G.Long, DRC
16
Reasons for more FDI
Traditional attraction still there: cheap labor
force, land, industrial base, etc;
 Investment climate improved after WTO
accession:
--soft climate: transparency; WTO consistent
laws, regulations; expectable policies, etc;
--better market access
--less restriction on FDI and more efficient
approval process;
--industrial cluster;
G.Long, DRC
17
--rapid expanding domestic
economy;

Impacts on trade



DRC: exports and imports are forecast
to be 24% and 18% percent higher,
respectively, than if China remained
outside the WTO
U.S.ITC: exports will rise by 12% and
imports by about 14%
labor intensive products increase
G.Long, DRC
18
China’s trade development
after WTO accession
G.Long, DRC
19
Reasons for rapid trade
development





Increase of FDI, which takes 58% of China’s
export
Liberalization of trade right to domestic
companies, especially private companies;
Intensified competition increase China’s
international competitiveness;
Over capacity;
Rapid economic growth
G.Long, DRC
20
Impacts on Growth



DRC research group: WTO will boost
China’s average annual growth rate by
a full percentage point.
US International Trade Commission: 4
percent increase of GDP
benefit will distributed unequally on
different regions and sectors
G.Long, DRC
21
China’s GDP growth
G.Long, DRC
22
Impacts on sensitive industries
are acceptable





Agriculture
Automobile industry
Machinery
Petrochemical industry
Steel industry
G.Long, DRC
23
China became net importer of
agriculture goods
2001
2002
2003
2004
2005
import
export
balance
billion USD growth % billion USD growth % billion USD growth %
11.83
5.2
16.07
2.4
4.24
-3.9
12.44
5.2
18.14
12.9
5.7
35
18.93
52.1
21.43
18.1
2.5
56.1
28.03
48.1
23.39
9.2
-4.64
-285.6
28.65
2.4
27.18
17.7
-1.47
-68.3
Source: China Custom Statistics,
G.Long, DRC
24
Automobile industry

Production of automobile increased
from 2.34 million in 2001 to 5.7 million
in 2005, became the 2nd biggest auto
market in the world.
G.Long, DRC
25
Rapid expansion of auto
production
China's Auto production (10,000)
600
444.37
500
400
300
507.4
325.1
207
234.17
2000
2001
200
100
0
2002
2003
2004
Source: China Statistics yearbook,
G.Long, DRC
26
China’s became a net exporter
of Auto products
China's auto export and import (billion USD)
25
19.7
20
15.3
15
10
5
4.32
1.84
0
2001
2005
出口
进口
G.Long, DRC
27
III. China’s Experience



Make full use of opportunities of market
opening and handle the challenges:grace
period is very important
Implement all commitments seriously
Promote domestic institutional reform to
make full use of comparative advantages and
enforce international competitiveness under
the framework of market economy,
overcoming the obstacle of interest groups
G.Long, DRC
28
China’s Experience




Improving investment climate, avoiding the
substitute effect of investment by trade
Keep macro economy developing stably and
rapidly
Establish alert system on the surge of import
in sensitive sectors
Strategies to offset the external shock:
Western China Development Plan, Reviving
Rusty Industrial Bases in Northeast Area,
Reform of SOEs, State Banks,
G.Long, DRC
29
IV. Lessons and Challenges





Missed the best time for the reform of the
system of RMB exchange
Facing increasing trade frictions: anti-dumping,
specific safeguard, quota on China’s export of
textile and garments, TBTs, IPRs
Imbalance of bilateral trade relations: USChina trade, etc.
Too heavy relying on external market
Potential risk of relying on foreign invested
companies of technology innovation, and
foreign control of strategic industries
G.Long, DRC
30
G.Long, DRC
20
03
20
01
19
99
19
91
'
19
93
'
19
95
'
19
97
'
19
81
'
19
83
'
19
85
'
19
87
'
19
89
'
1000
900
800
700
600
500
400
300
200
100
0
19
80
'
RMB/100USD
Exchange Rate of Chinese Currency vs USD
31
Anti-dumping cases against China's export
60
50
40
30
20
10
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
anti-dumping case aganst China
G.Long, DRC
ratio in the world (%)
32
TBT: a new trade barrier
facing by China’s export
year
Companies
affected by
TBT (%)
Products
affected by
TBT (%)
Export lost
by TBT
(bi. USD)
2000
66%
25%
11
2002
71%
39%
17
Source: MOFCOM’ enterprises survey
G.Long, DRC
33
International relocation of
export-oriented assembling
Japan
2
1
China
2
US
1
2
Other
East Asia
econs.
G.Long, DRC
34
Relying on foreign invested
companies

For example, in ITC sector, foreign
invested companies take 81.9% of sales,
81.1% of output, 83.8% of profit,
68.4% of employment and 90% of
export of the whole sector
G.Long, DRC
35
V. Prospects of China’s trade
policies







Peaceful development and win-win strategy
Pro-free trade in global trade system
Struggle for full market economy treatment
Pro-active regionalism strategy
Further trade liberalization
Manageable floating exchange system
International cooperation to smoothen price
fluctuation of primary commodities
G.Long, DRC
36

Thanks!
G.Long, DRC
37

Announcement: This file is prepared for
the use of WBI training program on
March 15, 2006 only. Any part of the file
should not be revised or used for other
purpose without the written permit of
the author. Long Guoqiang
G.Long, DRC
38