China's membership of the World Trade Organisation (WTO) may cause disruption in the short term but ultimately the benefits will outweigh the costs, Lehman Brothers said in a bullish assessment.

The report, entitled "China: Gigantic Possibilities, Present Realities", covers the prospects for China's economic, political, social and foreign policy from a market perspective.

It predicts that whatever the potential setbacks, China will not be deflected from its present policy of opening its economy to the wider world.

"As China will face many issues of adjustment as it moves forward, we remain basically optimistic that China will overcome these obstacles and grow fast in coming years," said the firm's global chief economist, John Llewellyn.

"We have been systematically impressed by the way the Chinese government and the Chinese people have learned from the experience of other countries which have attempted similar transitions," he told a press briefing.

Lehman Brothers said continued structural reform of the economy was vital for the more optimistic growth targets to be achieved.

"Without (structural) reform, China will grow on average per year over the next 20 years by under four percent," said senior economist Robert Subbaraman, who co-authored the report.

"However with reform China, we believe, has the potential to grow at around six percent per year, over years."

Among the predictions in the report are that China's WTO membership, sealed in December, might fade as an issue as it has been gradually factored into decisions by Chinese leaders during the 15-year battle to join the trade body.

And eventually all firms with claims to a global presence would have to establish themselves in China, the report said.

Overall, China's economy will offer "exciting" opportunities for foreigners over the next decade or so, although the risks -- particularly "growing pains" associated with WTO membership -- will be high.

( February 3, 2002)