[asia-apec 1587] South China Morning Post - China and WTO

[APEC Monitoring Group]

South China Morning Post, 20/09/00

Mainland firms ill-prepared for WTO
WANG XIANGWEI



Mainland officials and analysts on Wednesday hailed the trade deal approved
by the US Senate overnight, which would give China the permanent normal
trade status and remove the last major stumbling block for China's accession
to the World Trade Organisation (WTO).
However, they cautioned against over-optimism about WTO entry, saying that
membership of the global trade body would bring problems as well as
benefits.

They said that while WTO entry would bring long-term benefits for the
mainland's economy and its full integration into the international market,
expectations of an immediate boom in trade and investment were
inappropriate.

''The WTO benefits for the mainland should come gradually, particularly in
the area of foreign investment,'' Xu Xiaonian, executive director of
research at the China International Capital Corp (CICC), an investment bank,
said on Wednesday.

He said foreign investors would need time to see how the mainland would
restructure its economy and implement the WTO rules.

Mr Xu and other mainland economists said the expected WTO entry was just the
first step in a long march for mainland firms that have a lot to learn about
how best to exploit the advantages of economic globalisation.

They said mainland businesses were ill-prepared for the challenges ahead.

''Solid and down to earth preparatory work is scarce, although officials and
entrepreneurs have long been crying wolf,'' leading government advisor Lu
Zhiqiang told the China Daily on Monday.

''As far as I know, few serious studies have ever been conducted into
relevant laws on foreign trade, overseas investment, and rules and
regulations of the WTO so that Chinese firms can meet challenges while
undertaking their obligations,'' Mr Lu, the deputy director of the State
Council's Development Research Centre, said.

Mr Xu of CICC said many mainland firms have not taken the WTO entry and its
probable impact seriously.

He said that the mainland government has come under increasing pressure from
industry groups to erect WTO-allowed trade and regulatory barriers to
protect against an onslaught from foreign investors.

''Many of the businessmen still have this 'so-what?' attitude that goes:
even after China opens up its economy following the WTO entry, foreign
investors will still need licences to do business on the mainland,

''They thus urge the government to exercise tough approval standards to
stunt foreign competition and protect domestic industries.

''While it is tempting to do so, the government should resolutely resist the
pressure [from those lobbying groups],'' he said, adding that failure to do
so would only slow the pace and increase the costs of mainland economic
restructuring.

Economists said the mainland authorities are also faced with the urgent and
difficult task of restructuring and improving the mainland's legal and
regulatory frameworks in accordance with WTO rules.

The government said it had already begun revising old laws and drafting the
necessary new regulations.

Economists said that the government should focus its efforts on laws
governing the industries that are largely regulated by government
directives.

One such area is the capital market. For instance, the mainland has so far
approved just one joint venture investment bank, China International Capital
Corp. CICC is controlled by the China Construction Bank and Morgan Stanley
Dean Witter.

''It has been approved as an exceptional case and there are no laws
governing this area at all,'' Mr Xu of CICC said.

''But things will have to change once China is a WTO member.''

Other economists said the government should step up the training of
government officials and businesspeople as a matter of urgency.

Shi Wei, a senior economist at the State Council Office for the
Restructuring of Economic Systems, said some provinces had started to invite
him and his colleagues to give lectures to the officials over the impact of
the WTO entry.

However, other economists said as mainland factories and institutions have
been accustomed to relying upon government help, many of them were still
waiting for the government to sort everything out for them.

''Those companies will never be ready until the day comes,'' Mr Xu said,
adding that that could mean some mainland firms were likely to be forced
into bankruptcy.