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The WTO: China's Future and Hong Kong's Opportunity
By Joseph C. K. Yam
Introduction
What will China's accession to the World Trade Organization mean for China and the rest of the world? For China, which is already the world's ninth largest trading entity, it will mean more external trade, and external trade of a better quality. There will be substantial tariff reductions among China's existing trading partners and there will be access to more trading partners for China. At the same time, China will be cutting its tariffs on a broad range of products, from agricultural to industrial. Tariff reductions allow comparative advantage greater play. They will help eliminate trade distortions and facilitate a more efficient allocation of resources among the trading partners, thus further promoting economic growth globally. The World Bank's estimates give an indication of the potential impact China's accession to the WTO will have on the growth of China's external trade. The Bank expects China's share in world exports to double by 2005, from 3.7 percent to around 7.3 percent, and expects China's share in world imports to rise even faster, from 3.4 percent to 7.2 percent (Martin et al. 2000).
This doubling of China's share of world trade will be complemented by opening large sectors of the Chinese economy to global competition. Foreign investors will be able to enter the telecommunications, financial services, and distribution industries, and be allowed to offer a variety of technical and professional services. These are all areas with enormous potential in China. They have already, over the past decade, seen dramatic change and expansion through the—still raging—revolution in information technology. WTO entry will give them a further boost by breaking down restrictive barriers and opening the channels for direct investment and technology transfer from outside. Increased foreign competition in these areas will force Chinese enterprises to speed up their reforms to meet the challenges. From a larger and longer perspective, further economic liberalization and integration into the global economy will undoubtedly be a stimulus to regulatory, institutional, and cultural change within China.
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