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Highlights of PRC efforts to implement its World Trade Organization commitments and related examples of China's foreign trade and investment liberalization during the period March-May 2002
General overviewA raft of new and amended laws have brought many areas of China's trade and investment regimes into compliance with World Trade Organization (WTO) commitments and demonstrate the seriousness with which the Chinese government has approached WTO implementation efforts. China's Ministry of Foreign Trade and Economic Cooperation (MOFTEC) announced in May 2002 that more than 2,300 laws and regulations had been amended to comply with WTO rules and 830 abolished since the country joined the world trade body on December 11, 2001.Despite progress in passing new laws, China continues to have difficulty implementing WTO terms in a number of areas. Among the problems companies hope Chinese officials will address in coming months are new regulations that are inconsistent with WTO obligations; uneven or inadequate transparency; missed quota allocation deadlines; high prudential requirements in services; and entrenched bureaucratic opposition to the implementation of WTO-consistent rules. Chinese trade officials and other WTO members are now hammering out final procedures and schedules for China's 2002 transitional review mechanism (TRM) at the WTO in Geneva. China agreed in its accession protocol to undergo a special TRM, under which the WTO's 16 subsidiary bodies and committees will review the country's progress on implementation each year for eight years, with a final review 10 years after accession. The upcoming TRM will in all likelihood examine the progress and the problems that have marked the first months of China's adjustment to the WTO-defined trading regime. The procedures adopted in this first annual TRM will have an important effect on the business communities' evaluation of China's WTO compliance over the next decade. The following sections highlight China's implementation in the trade and investment arenas and on rule-of-law-related issues; and detail local government developments and US and PRC efforts at WTO-related education and training.
I. Import and export policies Tariff reductions
As of June 2002, China had yet to eliminate tariffs on certain semiconductor and telecommunications equipment inputs bound for the domestic market--such tariffs must be eliminated under the terms of the Information Technology Agreement (ITA).
US companies that are involved in antidumping cases introduced prior to China's WTO entry report continual improvement in the handling of cases by MOFTEC and State Economic and Trade Commission (SETC) officials. Companies are reserving final judgment, however, until after the PRC issues preliminary margin decisions. China is also exhibiting an increasing willingness to use its antidumping laws to protect vulnerable industries.
China has delayed allocation of 2002 quotas in several industries, claiming that its December 2001 WTO entry did not allow enough time to process 2002 quotas. In a number of sectors where quotas have recently been allocated, inconsistent and opaque administrative practices by Chinese authorities continue to hamper imports. China's own rules on quotas require application procedures for the allocation of 2003 quotas to begin this summer.
China took steps in the first quarter of 2002 to alleviate international concern over its regulation of agricultural genetically modified organism (GMO) products. The rules in the original form would have all but shut out importers of GMO goods, which would have included most US soybean products. PRC authorities established a temporary certification process in March that has facilitated the resumption of PRC soybean purchases from US exporters through at least December 20, when the temporary permits expire.
II. Investment-related measures
China's revised Catalogue Guiding Foreign Investment in Industry and Regulation on Guiding Foreign Investment Direction, both of which took effect on April 1, generally conform to China's WTO commitments but do not detail business scope or either geographic or quantitative commitments. Though the catalogue encourages development of new and high-technology agricultural products, it now explicitly prohibits foreign investment in the genetically modified crop development and seed business (See p. 22).
Several announcements by the State Postal Bureau (China Post) and its supervisory agency, the Ministry of Information Industry (MII), threaten to restrict the business of international express delivery companies in China severely. China Post has proposed a domestic monopoly for delivery of mail under 500 grams. At the same time, the PRC has required foreign express services firms to register with China Post for "entrustment" so that they can carry packages over 500 grams. A prompt and satisfactory resolution of this situation is imperative, given China's commitment not to "roll back" any aspects of its commercial environment as they obtained at the time of PRC accession to the WTO.
A number of foreign banks have received licenses for operations liberalized under China's WTO commitments. Foreign investment in foreign currency services was allowed upon PRC accession nationwide, and foreign or joint venture banks including Bank of East Asia, Citibank, Hang Seng, HSBC, Standard Chartered, and Xiamen International Bank have received licenses. The right to offer renminbi lending to foreign companies and individuals has been extended beyond the pilot programs in Guangdong and Shanghai to Dalian in Liaoning, and Tianjin.
China's Administrative Regulations on Foreign Insurance Companies call for extremely high capital requirements, which foreign companies view as onerous. It also remains unclear how the requirements apply to branches, especially of firms already established in the market. In a positive development, licenses for life insurance operations were granted in Beijing (to American International Group, Inc.) and Tianjin (to Sun Life Everbright Life Insurance Co. Ltd.), more than a year ahead of WTO commitments to open these two cities.
III. Local government developments Government reshuffling
Although many local governments, particularly those of the major coastal cities, have embraced WTO liberalization, local officials in a number of regions have pointed to difficulties in implementing WTO requirements, in part because of severe shortages of trained staff. The government is also facing significant personnel changes in coming months that could slow implementation efforts. Nevertheless, central-level officials are reportedly pressuring local counterparts heavily to push through new rules in order to comply with WTO requirements.
Shenzhen Mayor Yu Youjun announced in early March that Shenzhen had central-government approval to accelerate the implementation of China's WTO commitments in 16 services sectors, including accounting, legal, consulting, and financial services; securities; logistics; and tourism. Other economic zones may imitate Shenzhen in order to heighten their competitive edge over less well-positioned competitors.
IV. Rule of law Intellectual property rights: Pharmaceuticals, software
Chinese authorities have circulated a draft law to foreign pharmaceutical manufacturers regarding protection of clinical trial data used in the drug approval process. Software registration rules to protect copyright have been amended to even out the treatment of domestic and imported software. Despite these moves, there has been little improvement in enforcement of China's intellectual property rights protection regime.
V. Capacity building Council meetings, programs expand
US-China Business Council staff has continued to travel throughout China representing members' concerns and assisting with WTO training efforts. The Council has completed the latest phase of its cooperative program with the Shanghai WTO Affairs Consulting Center, the leading WTO research center in China, to produce a series of digital videoconferences (DVCs) with simultaneous translations on WTO-related topics. The DVCs feature US experts and a Chinese audience drawn from government, academia, and the media.
Guangdong, Jiangsu, and Zhejiang provinces, Shanghai, and Beijing have all opened WTO consulting centers in recent months and the Wuhan municipal government is expected to open a similar center soon. The full scope and impact of these centers' activities has not yet become clear.
Boston and Harvard universities are among a number of US academic institutions that have launched programs to train PRC officials and state-owned enterprise managers about the WTO. China's own management training firms and educational institutions are conducting programs nationwide as well.
--US-China Business Council staff
China Business Review, Volume 29, Number 4, July-August 2002
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