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China's WTO accession will lift the quality of country's economic growth, with total trade expected to surge to US$one trillion by 2006, analysts predicted Tuesday in Hong Kong.
"We see its membership of the body improving the quality of economic growth and bringing profound change: continuous economic reform and trade liberalization, an enhanced role for the private sector, and the removal of local barriers to trade," said Pu Yonghao, a senior analyst with Nomura International (Hong Kong) Limited.
At the same time, accelerating bankruptcy, rising unemployment and surging imports are likely in the short to medium term, the analyst predicted.
In Doha Sunday, trade ministers completed the paperwork for China's accession to the World Trade Organization (WTO). China should formally become a WTO member on December 11, when it is due to present articles of ratification.
The commitment of China's leadership to open domestic markets to overseas involvement heralds greater market competition -- something the leadership expects will accelerate economic restructuring.
The country's goal is not so much to increase the headline rate of growth as to improve the quality of growth and thus ensure its sustainability, Pu said.
"We believe the main focus of economic restructuring post-WTO will be the reform of state-owned enterprises and the lifting of local market-protection measures," he added.
On the micro side, sector consolidation, merger and acquisition, cost cutting, and changes in relative pricing are likely to be the key forces in corporate earnings growth, Pu explained.
"As a result of trade liberalization, namely, lowering tariffs, abolishing quotas, and an attendant increase in export-oriented foreign direct investment, we expect China's foreign trade (combination of exports and imports) will double to more than one trillion U.S. dollars by 2006," the analyst said.
Observers on foreign trade estimated that after WTO entry, China's imports are likely to surge, and exports are expected to grow by 15 percent annually over the period from 2002 to 2006, versus 9 percent in a no-WTO scenario over same period.
Assuming world exports grow by 6.9 percent yearly over the period from 2002 to 2006, China's share of global exports could increase to 5.9 percent by 2006, against 4.4 percent under a no-WTO scenario, the observers forecast.
Pu predicted China's foreign direct investment will be doubled by 2006. He noted three factors underpin our expectation of a post-WTO rise in foreign direct investment. They are the opening up of domestic sectors and greater utilization of export potential, the shift of manufacturing to China amid falling global demand and weakening regional economies, and the increasing intra-company trade flows prompted by specialization of production chains.
"On our projections, China's annual utilized foreign direct investment growth rate should be maintained at 16 percent over the period from 2002 to 2006, with foreign direct investment seen totaling 100 billion U.S. dollars by 2006," Pu said.
Researchers on Asian economic development here also estimated that WTO accession will boost China's annual GDP growth by 0.5 percentage points on average (7.7 percent in 2002-06 assuming the U.S. economic growth recovers from 2003).
This growth trajectory should take total GDP to 15.5 trillion yuan (1.87 trillion U.S. dollars) in 2006, from 8.9 trillion yuan (1.07 trillion U.S. dollars) in 2000. The researchers believed that this sets the backdrop for China to remain the fastest-growing economy in the region.
(People's Daily November 14, 2001)
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