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Membership has rewards?
2004-12-15
China Business Weekly
As people discuss the benefits and challenges stemming from China's entry to the World Trade Organization (WTO), even three years after China joined the global trade bloc, a puzzling question arises: Has China's WTO membership affected average Chinese and resulted in many changes within the Chinese society?
Economists often cite China's rising exports and the growing foreign direct investment (FDI) as the biggest benefits of China's WTO entry.
Since December 11, 2001, when China became the 142nd member of WTO, China's foreign trade has maintained strong growth momentum. In 2002, China's foreign trade volume reached US$620.77 billion, up 21.8 per cent year-on-year.
This year, China's foreign trade volume is expected to surpass US$1.1 trillion, up more than 30 per cent over the previous year. China this year is very likely to topple Japan to become the world's third-largest trader, after the United States and Germany.
In 2002, the FDI figure rose 12.51 per cent, to US$52.74 billion; in the first 10 months of this year, FDI in China reached US$53.78 billion, up 23.47 per cent over the same period of last year.
But remember, figures are figures. They have little direct impact on average people's daily lives.
Even more important, however, is the rapid growth of China's foreign trade and FDI resembles a continuation of the country's fast development throughout the 1990s, not a sudden change since the nation entered the WTO.
With the exception of 1997 and 1998, when the Asian financial crisis severely affected China's exports, the country's foreign trade has grown nearly 20 per cent each year since 1990.
During the 1990s, China's annual FDI growth rate surpassed 20 per cent on several occasions.
What, then, are the most important changes in China since the nation entered the WTO?
The general consensus is greater government transparency, implementation of a set of market operation rules and establishment of a mechanism to adjust resources based on the market rather than administrative order are the major changes in China that have resulted from WTO membership.
Around the time China entered the WTO, average Chinese knew little or nothing about the nation's commitments to the global trade bloc. Three years later, due mainly to greater transparency, Chinese residents can easily follow the drafting and implementation of legislation.
Long Yongtu, secretary-general of the non-profit Boao Forum for Asia and former chief negotiator of China's WTO negotiations, recently said the WTO requires transparency and liberalization of trade and investment management.
Those requirements, especially the need to be transparent, have forced China's government departments to end their closed-door mentality.
Since joining the WTO, the Chinese Government has revised or abolished more than 2,000 laws, regulations or official documents to meet the country's WTO commitments.
Meanwhile, newly enacted or revised laws have helped move China towards a market-oriented economy.
But, again, the post-WTO legal and administrative adjustments in China seem to have had little impact on average residents. Why?
The answer is simple: The legal and administrative improvements implemented by the Chinese Government since the nation joined the WTO has created few direct benefits for ordinary residents.
Although thousands of laws and regulations have been revised, average citizens seeking information about the newly implemented regulations -- for example, how to transfer a certificate of property ownership -- are still likely to encounter less-than-helpful government officials.
Although a public-hearing system has been established, the results of the public hearings often differ substantially from the policies that are implemented.
Rules that ban local governments from investing directly in competitive sectors have been implemented, but the departments of many local governments are still investing in auto and steel factories.
Therefore, the effects of China's WTO membership -- especially regarding transparency, public involvement in policy-making and a reduction in government involvement in competitive sectors -- have not been fully realized.
Yet, improvements are necessary in those three areas to ensure China evolves into a market-oriented economy.
With transparency, investors can expect certain actions and developments; with public participation in policy-making, people will be better able to look after their interests; and with reduced government involvement in competitive sectors, market competition will be more fair and the government will be better able to perform as a public administrator.
But such things are very difficult to achieve because they dramatically differ from the government's previous roles and practices. The continuation of the previous bureaucratic practices is another reason Chinese residents have not been able to feel the full benefits of the nation's WTO membership.
As a result, the major benefits -- transparency, public participation in policy-making and a greater role for the market -- should also be the major challenges stemming from China's WTO membership.
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