Top Lawmaker Urges Study of Impact of China's WTO Entry

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Last updated at: (Beijing Time) Monday, December 31, 2001

Top Lawmaker Urges Study of Impact of China's WTO Entry

China's top legislator Li Peng on Saturday called for study of the new situation and problems arising after the country enters the WTO. Practical and effective measures should be taken to find out reasonable resolutions to major contradictions and problems of various kinds, he said.

Li made these remarks at a lecture held by the NPC Standing Committee to discuss the impact of China's WTO entry on its efforts to develop the legal system.

Joining the WTO is the result of China's long-time efforts and it is a great strategic decision-making for speeding up the development of the country's reform, opening and socialist modernization drive, Li said.

China's WTO entry is in line with the country's fundamental and long-term interests and also marks a new stage of its opening to the outside world, he said.

Impacts on China's WTO Entry

Telecoms

State-owned telecoms giants may be hit as competition among domestic operators heats up, with foreign investment beefing up their infrastructure and services.

An increase in the number of network operators could bring more business opportunities to domestic equipment manufacturers. Lower tariffs on telecom equipment could have a limited impact as domestic makers do not count on protection from high tariffs.

Automobiles

China plans to cut import tariffs to 60-80 percent in the next two years and to 25 percent by mid-2006. The domestic auto industry is seen as one of the hardest hit, with a shake-out looming upon WTO entry.

Cheaper imports could also hurt foreign auto joint ventures with better product quality and services, such as Shanghai General Motors and Shanghai Volkswagen. Some Chinese are holding off buying cars, expecting a wave of cheaper imports.

Banking

Foreign banks could end up with more than half the domestic market for fee-based banking services, which include trade financing, credit card transactions and cash management, Chinese bank officials say.

Five to 10 years after WTO entry, foreign banks could capture 15 percent of the market for foreign exchange deposits, 10 percent of yuan deposits, 20-30 percent of foreign exchange loans and 15 percent of yuan loans. Foreign banks would raid their Chinese counterparts for talent and could lure away 20 percent of staff at domestic banks with college degrees.

China has pushed its creaky banking sector into a scramble to expand services, forge cooperative pacts, list stocks, shed bad debts and merge to cope with the threat of foreign competition.

Securities

Chinese securities companies are seen as weak in investment banking business. Broking fees and proprietary trading make up the bulk of revenues of domestic brokerages, which have little edge in financial consultancy or fund management.

Fledgling domestic brokerages are seeking partnerships with foreign securities houses to tap their expertise and capital strength. China International Capital Corp, a joint venture investment bank of China Construction Bank and Morgan Stanley Dean Witter, has a head start but may see more rivals.

Already, a slew of foreign fund managers are tying up with domestic firms, providing foreign know-how for running open-ended mutual funds as a first step towards setting up joint venture fund management companies in China. Hong-Kong based JP Morgan Fleming Asset Management says it will take a stake in its Chinese partner, Huaan Fund Management, as soon as authorities permit.

Insurance

Foreign insurers are expected to have an easier time getting critical licences to sell policies in China. Domestic insurers, now enjoying a 99 percent market share, will face stiff competition from foreign firms.

Agricluture

The 8.5 percent cap will give it room to pay more to help the farmers after WTO entry.

In April 2000, China accepted the first shipments of US pork and beef to start implementing the US deal. China's producers will be major losers because tariff cuts and freer imports will mean domestic grains like corn and soybeans must compete with higher quality imports. Cheaper meat imports will threaten the domestic livestock industry.

Textile

China's textile and apparel sector is one of the few that should see a clear benefit from WTO entry with the lifting of import quotas abroad. Chinese textile firms focused on exports will be best positioned to capitalise on the agreement.

Energy/Oil

China will give up monopoly in the oil sector, allowing private traders to import oil products and foreign firms to set up petrol kiosks. But analysts said Chinese oil giants like Sinopec need not worry about their retail market share because by 2003 they would have all the best sites.

In June, a senior government researcher said China will allow oil product imports of 16.58 million tonnes upon entry, expanding 15 percent annually until 2005, when the quota will be scrapped.

Distribution/Retail

It would allow foreign firms a controlling stake of up to 65 percent in retail stores. Foreign firms must now distribute products made in China through domestic companies.

WTO entry will mean foreign firms can cut out distribution intermediaries and have the choice to set up their own networks, reducing the time taken to get their products to market. China has approved the first wholesale joint venture, with Japan's Marubeni Corp, marking the opening of the wholesale industry.

WTO Entry to Have Great Impact on China: Premier

Chinese Premier Zhu Rongji has warned that the WTO entry will have an enormous impact on the economic, social, and science and technology sectors in the country.

China has to readjust its strategies for the development of the science, technology and education sectors, Zhu said Friday at the 10th meeting of the national leading group on science, technology and education.

Full Story

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WTO Entry to Have Great Impact on China: Premier

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