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China and the WTO

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Geography

Located in E. Asia

4th largest country in the world (size wise)

Terrain: mostly mountains, high plateaus,

deserts in west; plains, deltas and hills in

the east.

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Population

1.3 Billion

Age 0-14: 21.4%

Age 15-64: 71%Age 65 and older: 7.6%

Median age in China is 32

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Economy

4th largest GDP (ppp)

9th largest GDP Real Growth Rate

GDP By Sector:-Agriculture: 14.4%

-Industry/Construction: 53.1%

-Services: 32.5%

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Labor Force

Largest Labor Force in the world (791.4billion)

Half of Labor Force is in agriculture

Industry and Service provide the other50%

Unemployment rate is 4.2%

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Trade

4th largest in exports

4th largest in imports

Main Trade Partners:

-USA

-Japan

-Hong Kong

-South Korea

-Taiwan

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What is the WTO?

World Trade Organization

International, multilateral organization whichsets rules for global trading system

Resolves disputes between member states

China is 143rd member of WTO.

All member states must be signatories to its

about 30 agreements. Main goal is to encourage smooth and free trade

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China entry to WTO

China was voted in as a member on November11, 2001 but became an official member onemonth later, December 11, 2001

In order for China to gain member status, Chinahad to agree to separate negotiations with all ofthe current WTO members

China tried to get member status for 15 yearsprior to 2001

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China and WTO obligation

2001: After membership china will opennew cities to foreign banks for localcurrency business.

2002: China will eliminate restrictions onforeign firms and allow the institution toopen the new offices.

2004: Foreign companies are permitted toprovide health and group insurance to thechinese.

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Continue.

2005: US to eliminate Chinese textilequota but adopt measures to preventimport surges.

2006: China to reduce auto tariffs to 25%from current 80-100%.

2007: Foreign companies can hold 49% intelecom services through joint venture.

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Timeline for Qualification

1986 -- China applies to join General Agreement on Tariffs and Trade (GATT),predecessor to WTO.

1989 -- China's suppression of pro-democracy demonstrators in Tiananmen Square onJune 4 derails negotiations.

November 1995 -- China unveils economic and trade reforms aimed at winning U.S.backing to enter the WTO. It plans to slash import tariffs by 30 percent and allow jointventure companies to be set up.

April 8, 1999 -- President Bill Clinton and Premier Zhu Rongji sign a joint statement inWashington welcoming substantial progress and committing them to completion of aWTO deal by the end of the year. The gap is closed on about 90 percent of WTOissues.

May 7, 1999 -- China freezes WTO talks after NATO forces accidentally bomb the Chineseembassy in Belgrade.

September 11, 1999 -- Clinton and Chinese President Jiang Zemin agree on the sidelines

of the Asia-Pacific Economic Cooperation (APEC) forum in New Zealand to resumeWTO negotiations.November 15, 1999 -- U.S. and China announce a WTO pact. China agrees to open a wide

range of markets, from agriculture to telecommunications. Clinton must persuade theU.S. Congress to grant China permanent normal trade relations (PNTR).

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Timeline for Qualification

May 19, 2000 -- The European Union signs a WTO accession pact with ChinaOctober 10 -- Clinton signs a law giving China normal trade status with U.S.January, 2001 -- Further multilateral talks end in acrimony as China and some WTO

members disagree on farm subsidies.June 9 -- China and the U.S. announce consensus on issues holding up China's entry,

including farm subsidies, after meetings on the sidelines of an APEC trade ministers'meeting.

June 20 -- The European Union says it has resolved outstanding bilateral issues withChina over its accession.

September 14 -- WTO members agree on terms for China's entry at an informal meeting,clearing the way for the nation to join by the end of the year.

November 10 -- Trade ministers from across the world officially approve China's entry.The move was approved unanimously at the WTO meeting in the Gulf state of Qatar

December 11 -- China ends its 15-year quest to join, officially becoming a fully-fledged

member of the international trading system.

http://archives.cnn.com/2001/WORLD/asiapcf/east/09/18/china.wto.timeline/

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What has been changed/reformed?

Chinas entry into the WTO set in motion the most far-reachingreforms since Beijing since 1978.

Over 1100 laws and regulations have been changed since 2001 China can not impose one level of barriers (e.g., tariffs) against one

member country and another level for others

China will participate in the WTO's dispute settlement system Manufactured goods saw the largest decrease in tariffs. Tariffs were eliminated on computers, semiconductors and other

information technology products in compliance with the InformationTechnology Agreement

In agriculture, it has pledged to bind all tariffs and reduce them

from an average level of 31.5 percent to 17.4 percent Foreign car makers will be able to distribute and retail vehicles on

their own, and provide financing to buyers.

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What has been changed/reformed?

China has promised to open its telecommunications,financial services, distribution, and many other industriesto foreign service providers.

Pledged to apply its trade policy uniformly across thecountry and to enforce only those laws, regulations, andother measures that have been published beforehand.

Agreed to eliminate all prohibited subsidies (includingthose to state-owned enterprises), liberalize tradingrights, and require state trading companies to conducttheir operations in a commercial manner.

-http://www.imf.org/external/pubs/ft/fandd/2002/09/adhikari.htm

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WTO Entry Boosts Economy

GDP grew by 7.9% in the year following entry toWTO

Increase of 18.4% in trade volume with the

United States after one year Chinas exports increased by 19.7% after one

year

Due to improved trading environment, Chinabecame the 4th largest trade body in the worldbehind only the United States, EU and Japan.

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Foreign Investment

Influx of foreign investment has increasedrapidly since entry to WTO because of increasedconfidence from multinationals

China experienced an increase of 22.55% in

foreign direct investment one year after WTOentry

Foreign Investment has exceeded the UnitedStates, making the country the largest foreign

investment destination in the world Low cost labor and vast market, which provide a

great scope for profit, make investors confidentin investing time and resources into China

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Private Sector

Private Sector has seen rapid growth after being discriminatedagainst in the past

Private Sectors have been barred from direct foreign trade Financing had been blocked by government policies which blocked

growth

WTO policies forced China to treat all enterprises, whether stateowned or not, equally All domestic enterprises can trade freely and idependently in foreign

trade In Zhejiang Province, for example, 80 % of the 1,700 enterprises

that were granted the right to conduct foreign trade this year are

private firms. In the first nine months of this year, the foreign tradevolume of those private companies was 3.5 times that for the sameperiod last year.

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Automobile Sector

Changes in Car Market

Current market structure for a carfinancing in china:

Only 16% were financed

Launching of financing services

Bank & Non-Banking can set up autofinancing institution.

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What does the future hold forChina in the WTO?

Economic growth will continue and more reforms will bemade

China will have access to advanced technology By 2010, all of Chinas tariffs will eventually be reduced

to 15% Banks will begin to launch massive market oriented

reform programs to prepare for competition fromoutside markets

Business standards will continue to rise

Chinese citizens will begin to receive 3 key things:1. More Rights2. Better Government Services3. Equal Treatment

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GMAC

GM is the largest corporate FDIcontributor to China.

GMAC has numerous manufacturingpartner to leverage.

GMAC has a numerous GM networkpartners to leverage.

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Final Question

As Chinas economy grows, so does theirdemand for energy. This is reflectedthrough examples like cnoocs attempted

acquisition of Unical and Chinasinvolvement with anti-American nationslike Iran and Sudan.

-How will Chinas acquisition of energy inanti-American countries change the China-U.S. relationship?

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The End