[asia-apec 1591] South China Morning Post on China Trade (PNTR)

[APEC Monitoring Group]

South China Morning Post
Thursday, September 21, 2000

Trade breakthrough prompts mixed views
SUZANNE HARRISON and STAFF REPORTERS


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Hong Kong led the cheering when the United States Congress approved
Permanent Normal Trading Relations (PNTR) with the mainland - despite
worries some companies were set to face tougher competition.
"The scene is set for China to complete accession to the World Trade
Organisation," Chief Executive Tung Chee-hwa said yesterday.

"Hong Kong will obviously stand to benefit from a good and stable
relationship between our two largest trading partners," he said.

On Tuesday night, the US Senate passed the hard-fought PNTR Bill, removing
restraints on trade with the mainland. The bill had already passed the House
of Representatives.

President Bill Clinton said the mainland would now open its markets to US
products - from wheat to cars to consulting services. "When we open markets
abroad to US goods, we open opportunities at home," he said.

PNTR had been delayed for about nine months in the wake of a strong campaign
calling for sanctions against the mainland for its alleged role in weapons
proliferation.

For the mainland, the granting of PNTR is the final move towards enjoying
the terms of trade now offered to more than 130 other countries. It is also
a vital step in negotiations towards accession to the WTO, likely to occur
next year.

Despite yesterday's enthusiasm in Hong Kong for the clearing of the last
hurdle to WTO membership, some local analysts expressed concern the SAR
would lose its competitive edge to Shanghai as the mainland opens up to
foreign investment.

They warned Hong Kong could lose its status as the window to the mainland,
with foreign companies dealing directly with mainland businesses.

However, most took a more positive view of Hong Kong's prospects after the
mainland's accession to the WTO.

American Chamber of Commerce chairman Richard Kahler said: "My view is that
the pie will keep getting bigger."

Secretary for Trade and Industry Chau Tak-hay also forecast the mainland's
entry into the world trade body would benefit Hong Kong. "I am confident
Hong Kong businesses will seize the tremendous opportunities which will be
opened up in such areas as professional and financial services,
telecommunications, transportation, distribution, marketing, retail and
tourism," Mr Chau said.

Chinese General Chamber of Commerce chairman Robin Chan Yau-hing believes
the mainland's impending entry into the WTO will have a positive long-term
impact on Hong Kong's economy. "Hong Kong manufacturers - as the main
investors in the mainland - can expect a reduction in production costs, as
they can benefit from more preferential [import] tariffs and the exemption
from export quotas," Mr Chan said.

Still, some Hong Kong companies are likely to face a tougher future as
business operations in the mainland are forced to become more transparent.

Morgan Stanley economist Andy Xie said that, as the mainland prepared to be
bound by WTO rules, some small Hong Kong companies which have operated in a
"murky" business environment would need to make changes because of increased
competition.

"The benefits of being the window to China is going to diminish faster than
you expect," Mr Xie said.

"There are a lot of good Hong Kong companies I am not worried about - such
as the top-tier . . . but the end result is that good companies will
benefit, and bad companies will not benefit in a more transparent system."

Visiting US Chamber of Commerce president Thomas Donohue said Hong Kong
companies would need to do some soul-searching. "We suggest they think about
how they would fit into a system where China is going to become a highly
developed partner, how Hong Kong keeps its position in trade and finance,"
he said.