Q: Many people had feared that China's entry into the
World Trade Organization (WTO) in 2001 would bring catastrophe to
certain industries in the country. Have the past three years
justified the fear? What sort of challenges will China face in the
financial and agricultural sectors?
A: Before China's entry into the WTO three years ago, some
Chinese people did worry that certain industries would be under
severe blows. However, the adverse impact proved to be weak.
On the contrary, the increase in China's foreign trade and the
sound growing momentum of most sectors of the national economy has
captured people's more attention. There are four main
reasons:
?
First, China's opening of its market was not inaugurated by its
accession to the WTO in 2001. In fact, China has adopted the open
policy for more than two decades. The WTO entry just helped open
the country wider to the world.
Second, China opened many industries ahead of its committed
schedules. Take the retail industry as an example. In accordance
with China's WTO accession commitments, the country should open
this sector to foreign companies before December 11, 2004. In fact,
foreign retailers had set up their businesses all over China well
before the deadline.
?
Third, in accession negotiations, China succeeded in seeking
protection and grace period for some vulnerable industries, such as
the automobile industry and service industry. Since these
industries are still in the grace period, the possible impact has
yet to be felt.
?
Fourth, changes in international market have prevented foreign
goods from flooding into China. For instance, the import of
agricultural products has not increased as sharply as expected due
to price hikes in the world agricultural market. Since the
international telecommunications industry is still in a period of
adjustment, foreign businesses vying for Chinese market are at a
phase of learning related policies, studying investment strategies
and conducting market analyses. Foreign investment in this sector
is not in full swing. Yet as foreign companies gradually increase
their investment, Chinese telecom companies are bound to feel more
competition pressure.
The successful adaptation over the last three years does not
mean that we could feel at ease. In fact, certain industries are
still facing numerous challenges and potential risks, which we
should handle prudently and properly to avoid possible disorder and
crisis.
First, financial security must be guaranteed. With foreign
banking giants and insurance giants entering the Chinese market in
droves, geographical limitations on foreign financial institutions
ending and foreign companies now being allowed to deal in Renminbi
business, Chinese commercial banks and the insurance industry will
face increasingly stiff competition. How to solve the problem of a
relative high proportion of bad debts? How to catch up in products
and services, and how to maintain key clients are all thorny
problems to be solved by the Chinese financial industry. Properly
handling these problems is fundamental to the smooth transition of
the China's financial industry, especially the banking
industry.
?
Second, security of agriculture must be guaranteed. China boasts a
large agricultural population—70 percent of the total
population—while per capita arable land is only 0.1 hectare. Due to
this situation, it is hard for Chinese farmers to compete, in the
production and sales of main products, with their foreign
counterparts in developed countries who enjoy heavy production and
export subsidies provided by their governments. Increased imports
and domestic oversupply will exert double pressure on Chinese
farmers.
In order to respond to these challenges, China will further
transform government functions, enhancing macro control and
management and improving service. Moreover, trade frictions must be
prudently handled, so as to weaken any resultant negative impacts
on exports and to safeguard the lawful rights and interests of
Chinese companies.