On December 11, 2001, China became a formal WTO member after fifteen years of negotiations. According to Chen, Shi, Ni & Chen, the remarkable development during the past 28 years “has made China the second largest beneficiary of direct foreign investment, behind only the US” (“China’s WTO accession impacts on domestic automobile industry”).
The country with the largest developing economy in the world gets many opportunities of WTO membership; however, at the same time, the country faces several challenges that should be overcome in order to get better integration into the world market. WTO membership brings the new opportunities for the Chinese business such as taking the advantage of the new market access and getting protection provided by the rules-based system of WTO.
One of the major opportunities that WTO membership provides for China is the possibility of transformation of the heavily regulated economy to the rules-based one adapted to market requirements. Moreover, WTO membership provides also the new possibilities for the Chinese private sector that can extend its participation in economic activities. On the other hand, China faces several challenges; the Chinese government comprehends that this serious step requires development of the large scale programs and reforms that would change the traditional macro-control and the image of “non-market economy”, adapt Chinese business to the new requirements and, at the same time, protect the national sectors.
Mr. He Yafei, Minister and Deputy Chief of Mission of Embassy of the People’s Republic of China in the United States, indicates such opportunities for China as broad commitments in subsidies, price control, improvement of the juridical procedures that can guarantee the transparent decision-making process. Besides, the private sector gets an opportunity to participate in various economic activities. The Chinese companies are able to create more stable commercial relations with their partners among WTO members.
According to Mr. Yafei, the analysts expect “certain sector-specific benefits, e.g., possible increase of textiles and apparel exports due to the application of quota elimination and increased quota growth for China by restraining countries; a possible rush of foreign investments into China, thus boosting employment and economic growth” (Yafei, 2001).
Analyzing development of the Chinese automobile industry, Chen, Shi, Ni & Chen indicate that WTO membership has significant impact on development of this sector. After joining WTO, the automobile industry demonstrated the average development rate 24,9% in a period from 2002 to 2005 and, “in 2002, the first year after joining in WTO, China’s automobile manufacturers produced 3263 thousand, increasing 37% compared to 2001; and then in 2003, the output was 4440, increasing 34% compared to 2002” (Chen, Shi, Ni & Chen). Such rapid growth is caused by the transformation of the Chinese economy according to WTO rules which provide the possibility for domestic automobile manufacture groups to compete within national and international market.
As the most populous country, China can offer a big number of business opportunities for foreign partners. WTO accession requires trade liberalization and, as the result, several sectors such as agriculture, forestry, fisheries and environmental services are environmentally sensitive (Runnalls, Ye, von Moltke & Yang, 2002, p. 4). In this situation, the government should change the traditional macro-control and the image of “non-market economy” and allow the companies operate by themselves (Baihua, 2005).
Although this process seems complicated, it is an absolute necessity. The government should protect the national agricultural sector due to the expansion of agricultural export that floods China’s market. Thus, an analysis report by the US Department of Agriculture predicted decrease of China’s production of “wheat, soybean, corn, rice and cotton by 1,4% to 37%, and loss of 13.2 million jobs” (Yafei, 2001). Moreover, such sectors as distribution, banking, insurance and telecommunication today are underdeveloped and inexperienced and require more attention as they face the problems within the competition with foreigner companies.
Additionally, many manufacturing industries such as pharmaceutical and chemical, paper and pulp, machinery also face the problems of competitiveness. One of the major characteristics of the world market is a high level of competitiveness within all spheres and industries. Therefore, the Chinese companies which were acquainted only with the principles of domestic market should learn and develop the new approaches in order to increase the productivity and efficiency facing the aggressive foreign challenges.
WTO membership allows China being more integrated into the world economy. The opportunities that WTO membership provides for the country, such as the new market access, possibility for the private sector to extend its participation in economic activities, broad commitments in subsidies, price control, improvement of the juridical procedures, etc., help to increase the country’s development making China one of the most valuable players.
However, facing such challenges as the change the traditional macro-control, providing more freedom of decision-making for companies and protection of the national agricultural sector, the Chinese government continues improving current situation, providing the reforms of agriculture, forestry, fisheries and environmental services and other sectors of the economics in order to better integrate the country into the world trade community.
Reference List
Baihua, G. (2005). Shanghai’s WTO Affairs Consultation Center: Working Together to Take Advantage of WTO Membership. In P. Gallaher, P. Law & A. L. Stoler (Eds.), Managing the Challenges of WTO Participation – 45 Case Studies. Web.
Chen, Z., Shi, P., Ni, C. & Chen, Y. (n.d.). China’s WTO accession impacts on domestic automobile industry – a rudimental approach from the view of scale economy. Web.
Runnalls, D., Ye, R., von Moltke, K. & Yang, W. (2002). Trade and Sustainability: Challenges and Opportunities for China as a WTO Member. Web.
Yafei, H. (2001). China’s Entry into the WTO: Opportunities and Challenges. Web.