Ascension Years:

1
Ascension Years
Article 21
Chinas Ascension into the World Trade
Organization By Tsugami Toshiya

• Presentation By Yu Sato,
  Philippe Duclos, Alauna Wolfe, Jessica Krantz
  

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WTO

• Maximize the economy by eliminating trade
  barriers and discriminatory
  measures

• GATT
• (General Agreement on Tariffs and Trade)
• ?
• WTO (World Trade Organization)
• 1995 - WTO organized

3
Transition Economy in China

• Price of goods and services, demand and supply
  were controlled by government
• Almost all companies were state or public-owned
  enterprises under the influence of and guidance
  of the government
• Government controlled how much to import

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Continued

• China emphasized to abolish price controls and
  import restriction and to end direct government
  involvement
• China Cup is already half
  full
• Other WTO country Cup is still half empty
• China declared Unilateral market
• China became WTO member in 2001

5
Chinas Reform Opening

• State-owned enterprise reform
• Privatization
• Switch in government functions
• From managing to overseeing
• Market opening

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Chinas Reform Opening

• Objective
• Obtaining essential elements of production
• Escape from poverty underdevelopment
• Be part of the great nations in the 21st century
• Become wealthy advance

7
Membership Negotiations

• November 99 US-China bilateral accord
• Chinese's market opening measure where really
  bold
• Strong motivation to achieve a settlement with
  the US
• WTO provided institutional frameworks to reform
  liberalize

8
Rapid Progress of Privatization

• Until early 1990s, China viewed the introduction
  of foreign capital and advanced technology as a
  major means of promoting economic growth
• Chinas domestic capital accumulation suffered a
  vast lag in technology
• Economic growth in China depended on foreign
  countries
• This aim is basically the same today

9
Privatization

• Recent development in economic growth
• Due to permeation of the market economy, the
  improvement of Chinas economic level, and
  domestic capital accumulation
• Rapid progress of privatization of Chinas
  economy is a part of this new development

10

• Privately owned companies appeared in the 1980s
  but were long neglected and discriminated
  against
• Those that survived have recently been given
  more attention
• The share of Chinas GDP accounted for the by
  the state-owned economy has declined to about
  25

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The Concept of Capital

• An adequate supply of capital is necessary for
  the sound growth of a market economy, and the
  national government must invest capital in
  companies as long as it means to protect the
  ideology of a state-owned system of companies.
• China is not able to supply capital adequate to
  its economy because of its size and growth

12
Communists Adapts

• In the mid-1990s, China was forced to choose
  between protecting its ideology and maintaining
  its growth
• Chinese Communist Party was forced to give up
  ideology strive for greater wealth

13

• China government needed to allow those who have
  money to supply capital
• 1999 revision of Chinas Constitution
• Private and non-government companies were
  promoted to important organizational
  constituents of the socialist market economy
  rather than supplement constituents
• The private economy had been given full
  recognition

14
Inward Liberalization

• The phrase inward liberalization was coined to
  differentiate from opening to foreign interests
• To gain WTO entry, China allowed entry by
  foreign companies into sectors that had
  traditionally been monopolized by state-run
  enterprises (i.e., finance telecommunications)
• This phrase addressed the need for a level
  playing field domestic private companies
  should also be allowed entry

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• Another trend has emerged recently the change
  in the forms of corporate ownership, which is
  made utilizing the capital market
• Large state-owned companies are being listed on
  the overseas stock exchange
• Managers and employees are buying out the
  smaller but sound state-owned companies and the
  public-owned companies in agricultural regions

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China trades on NYSE

• The stock market is going to replace the
  government as the supervisor of companies and
  represent an exit for capital that the
  government had previously invested
• Recently, Chinas leading state- owned companies
  (like oil and steel mfg.) were listed on the NYSE

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• The Chinese stock market still faces many
  problems
• The concept of capital is changing the nature
  of the Chinese economy
• The changes may be viewed as a step toward the
  market economy although no WTO agreement
  requires China to proceed with such privatization

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Negatives of the WTO

• 1 Problem
• The future of Farming and the farm villages is
  uncertain.

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Results

• Massive numbers of farmers now unemployed
• Due to restructuring of state owned enterprises
• Impact more evident in interior regions of
  China

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Why the concern?

• In the coming 10 years
• Negative spread of grain prices in China and the
  international market
• Now the prices will fall with market openings
• Farm families will no longer be able to earn a
  living
• Now there isnt enough work for the 800 million
  farm family population
• The excess population will begin to migrate
• Possibly 100 million people moving toward the
  coast

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Uncertain Future

• Massive Hidden liabilities
• Future Pension Liabilities
• Disposal of non-Performing Loans
• Prospect for the future of the Chinese Economy
  is certainly unclear
• Solution
• Government Finance
• High growth must continue for as long as
  possible

22
Implications on Japan

• Net effect will be positive
• Japanese exports are likely to see a large
  increase
• Japan is likely to be the biggest beneficiary
  of Chinas WTO membership

23
The Reality

• Trade Friction exists between China and Japan in
  the area of agriculture
• Japan must work on its own reform to not be
  outdone by Chinas growth
• After Japan establishes a win-win relationship
  with China, the maximum benefits will be
  realized by both parties.