Search the Internet          Tips  Sites: Finance, Investment

Worries grow as China's WTO entry looms

China's entry into the World Trade Organisation is days away and trading partners are already worried that Beijing may not be able to meet the commitments it made to win a place at the table.

Few doubt that Chinese membership -- to be approved by the WTO at a meeting in Qatar this week -- will bring fundamental change to an economy opened to the outside world little more than 20 years ago.

But with the ink on the agreement barely dry, foreign firms are tempering their optimism and governments are seeking strategies to deal with the emerging economic superpower as it becomes the world's workshop.

"What WTO does is basically give the last kick for China in the transition to a market economy," said economist Yiping Huang of Salomon Smith Barney in Hong Kong.

The market openings required for membership will, in theory, help China make its state sector more efficient, shore up a shaky banking industry and give private firms a bigger role in the economy.

But China could find ways to slow reforms as economic growth falters, if only to prevent jobless state workers from taking to the streets in protest.

And local officials bent on protecting local firms, or simply ignorant of WTO rules, could throw up roadblocks.

"I think when economic growth slows significantly, certainly they (reforms) will slow down. Implementation of all these agreements could be much more difficult," Huang said.

WTO ministers are due to approve China's entry on November 10 at a meeting in Doha and sign the documents the following day, Chinese officials say. Lawmakers in WTO member nations must then approve the move but formal entry is expected about a month later.

VOW TO COMPLY

Chinese leaders vow to live up to WTO commitments.

"Following entry to the WTO, China will improve its legal system, increase government efficiency, protect intellectual property rights and provide a level playing field," said Foreign Trade Minister Shi Guangsheng.

But no one is saying that will be easy.

"Which part of China will be the least adaptable to WTO? It's government, not enterprises," said Yu Youjun, mayor of the southern boomtown of Shenzhen.

"We've been busy with cleaning up more than 700 rules issued by the government in the past 20 years. We've scrapped more than 300 of the rules and are revising the rest. We are also drafting new rules."

China's foreign trade ministry has just set up three new departments devoted solely to World Trade Organisation issues.

The WTO Affairs Department will handle trade negotiations, the China-WTO Notification Enquiry Centre is responsible for compliance and the Fair Trade Bureau will deal with anti-dumping, both overseas and domestically.

However, many of China's laws have not yet been revised for WTO and preparations for legal recourse to handle violations are even further behind.

"This is a very complex issue," said Wang Lianzhou, chairman of the financial and economic committee of the National People's Congress, China's parliament.

The delays have left many foreign firms, eager for the vast market opening expected after China joins the WTO, waiting for change.

UNCERTAINTY OVER RULES

Mutual fund giant Franklin Templeton Investments hopes to set up a joint venture with a domestic securities firm to sell to millions of Chinese investors.

Once in the WTO, China is to allow minority foreign-owned ventures into fund management. But Beijing has yet to announce the rules and Franklin Templeton has no choice except to stand by.

"Nobody knows. We don't act until there is a policy in black and white," said Frank Liu, Franklin Templeton's chief representative for China.

The United States and other countries, meanwhile, are beefing up their teams in China to handle WTO-related issues. Diplomats say they will be dependent on companies to bring them word of rule violations.

Taiwan, which is to join the WTO immediately after China, hopes trade with its political rival will grow but Beijing has dashed hopes that entry will allow direct trade, transport and postal links.

Japan, already embroiled in a trade row with China over farm products, expects more friction.

"China will indeed become one of the biggest manufacturing nations on earth. As a nation develops, as a nation opens its market, as a nation expands its trade, friction is bound to take place," said Hitoshi Tanaka, a senior Foreign Ministry official.

Worried by surging imports, Japan in April imposed temporary curbs on giant Chinese leeks, shiitake mushrooms and the tatami rushes used to make traditional Japanese mats.

China hit back in June with punitive tariffs on $700 million worth of Japanese cars, mobile phones and air conditioners.

"I am quite confident that China will behave as a WTO member," said Tadakatsu Sano, an official with the Japanese economic ministry.

"But at the same time, they do not have a lot of experience. There are many domestic regulations related to trade that have not met all the WTO rules," he said.

ALSO READ:
India and the WTO: News and issues