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Doom and Gloom Forecasts on Post-WTO China Falter
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American lawyer Gordon Chang, whose book the Coming Collapse of China was released five months ahead of China's entry into the World Trade Organization (WTO) on Dec. 11, 2001, may have a credibility issue.


Instead of experiencing what he called a "rapid fall", China has emerged as the world's fourth largest economy, contributing a yearly average of 13 percent to the world's economic growth over the past five years.


Even the auto sector, which some Chinese feared would be crushed by the intrusion of foreign imports after China agreed to lower tariff thresholds as required by the WTO, remains dynamic and vigorous.


Many of the doom and gloom scenarios proffered by Chinese and foreign experts on post-WTO China have faltered. WTO Director-General Pascal Lamy said that the country's membership in the global trade body is a "big plus for everyone."


Catastrophe illusion


Chairman Li Shufu of Geely, a private auto firm based in Zhejiang, says the worries and concerns served to up the pressure under which some would wither and some thrive.


China, probably spurred by a mixture of anxiety and excitement, moved quickly after its accession to the WTO to cushion the landing of its vulnerable sectors.


An industry injury alert mechanism was immediately established, targeting auto manufactures first and now extending to ten sectors including petrochemical, steel, machinery, textile and agriculture, ship building and construction.


The then fledgling auto industry has grown strong enough to compete with Chinese-foreign joint ventures. For the first time Chinese-made models outsold foreign designed modeles for a two month period earlier this year.


"Some Chinese feared China's WTO entry and cried, 'the wolves are coming', but I saw opportunities," said Li Shufu. His vision for Geely sees the automaker evolving into a world famous brand by 2015 with an annual output of two million cars, including 1.3 million sold overseas.


China's farmers who grew land-intensive bulk commodities with paper-thin profits such as soybean, corn and oilseed have borne the brunt of cheaper imports.


Experts have suggested farmers turn to higher-value, more labor-intensive horticultural and animal products while the government encouraged farmers to migrate to cities.


The per capita disposable annual income of Chinese farmers has surged 29.2 percent since 2000 to 3,255 yuan (US$405) last year and the impact on the farming sector has been "substantially less than expected."     


Transformation benefits


"A lot of Chinese appear more confident now than ever before when it comes to dealing with WTO rules," said Mei Xinyu, a researcher with the Ministry of Commerce. "The WTO is no longer enshrined as something too profound or sophisticated to be dealt with."


He said that the new found confidence is a result of hard lessons learned and victories won over the five-year transition period.


Embracing WTO rules has allowed China to import cheaper BMWs, enjoy better bank services and access a wider variety of products from supermarket giants like Carrefour and Wal-Mart.


The country's economy on the whole has reported an annual average growth of 9.5 percent, surging from almost 11 trillion yuan in 2001 to 18.2 trillion last year.


Foreign companies have poured US$275 billion in aggregate investment and wired back US$57.9 billion in combined profits, official data reveals.


While China goes full steam ahead to open banking, securities, insurance, railway, telecommunications, film, press and tourism, the reverberations from its WTO entry have grown unexpectedly strong.


The rules requiring non-discriminatory practices, which were designed to secure even-playing-field conditions for trade, have been widely borrowed to defend the legitimate interests of rural migrant workers and private firms.


The concepts of transparency and trade liberalization were used by the general public to request the first national hearing on train fare hikes in 2002 and to demand their legitimate right to be informed by governments during the 2003 SARS epidemic.    


Lingering worries


What did catch China off guard, however, was the explosion of trade disputes which it had hoped would diminish with the WTO membership.


Antidumping moves against China affect exports worth between 40 billion to US$50 billion a year. Now about one in seven antidumping complaints are lodged against China.


"China cannot afford to underestimate the negative impact of its ballooning trade," warned professor Zhang Hanlin of the University of International Business and Economics.


While the year's foreign trade surged 24.3 percent to US$1.593 trillion through November, China's customs indicated the full-year trade surplus is likely to hit a new high of US$168 billion.


Excessively rapid growth in international trade growth could also aggravate the economy's over dependence on imports and exports and sour China's trade relations with other partners, Zhang noted.


Other ambushes might come from improper economic management by governments, warned director Zhang Xiangchen of the WTO Affairs Department of the Ministry of Commerce.


With the five-year transition period coming to an end, Zhang says the government must continue to reform its management methods and abandon once and for all the practices of the old controlled economy which contravene WTO rules.


As competition in banking, agriculture and other sectors are likely to intensify, it would be wishful thinking for China to expect smooth sailing in the years to come.


To defuse risks, China must "learn to strike a proper balance between WTO compliance and an active effort to evolve the existing WTO rules for the good of the vast number of developing countries," Mei said.    


China's moves in 2006 to open up economy


Agriculture -- The tariffs quota on vegetable oil was removed on Jan. 1, 2006 while the average tariffs for agricultural produce is expected to decline to 15.2 percent.


Automobiles -- China chopped the tariffs for whole-car imports of sedans, cross-country vehicles and mini-buses to 25 percent in line with its WTO commitments on July 1.


Petrochemicals -- Under two new regulations issued on Dec. 7, China will open the wholesale market for crude oil and refined oil products as of January 1, 2007. The move will break the longstanding monopoly of state-owed enterprises China National Petroleum Corporation and China Petroleum and Chemical Corporation.


Banking -- Regulations on Administration of Foreign-funded Banks will take effect on Dec. 11, a landmark document marking the open-up of China's banking industry.


Foreign exchange rates -- China revalued the yuan by 2.1 percent against the dollar in July 2005 and has since allowed the currency to appreciate another 3.6 percent.


Continuing pledge -- Chinese Premier Wen Jiabao reiterated that China won't hesitate in sticking to the opening up policy and fulfill its WTO commitments at the third China-ASEAN Expo in November.


(Xinhua News Agency December 11, 2006)


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