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by Gary Lim
Due to the huge population of the country, China holds a certain fascination
for most of us in business, academia, or government. It is destined to
become a major player in the world, both for manufacturing and potential
sales. A recent impetus to this is the award of the hosting of the 2008
Olympic Games to Beijing. For the longer term, the more significant event
that will shape the economic landscape of China and the rest of us is
the pending entry of China into the World Trade Organisation. What are
the implications for China and the rest of the world? This article seeks
to examine the pros and cons of WTO membership for China and how that
impacts the rest of us.
Positives
- WTO membership will eliminate the acrimonious annual
trade review that U.S. Congress holds. In addition, it will deny other
countries the ability to discriminate against China on trade matters.
- WTO membership will allow China to be heard in the
international economic arena and to enjoy the privileges, like having
access to the WTO mechanism for trade disputes.
- There will be a shot in the arm for Chinese goods
with free access to world markets. The main beneficiary will be those
industries in which China has competitive advantages, like textile,
home appliances, bicycles and motorcycles, food, and toys.
- There will be restructuring in the economy and many
jobs will be created in those industries that have the ability to capitalise
on the opportunities to export to the world markets.
- China will be forced to upgrade its economy to international
standards and eliminate unacceptable practices. These include respect
for intellectual property, free access to markets, non-discriminatory
and unfair practices, and respect for the rule of law.
- One main beneficiary is Hong Kong, which traditionally
serves as a conduit between China and the rest of the world. The China
boom will enable Hong Kong to sustain and increase its economic role.
- Chinese consumers will enjoy the fruits of a capitalist
economy, with more choice of goods and services. In addition, prices
will be lower and customer service will improve with more competition.
Negatives
- Many state-owned enterprises that were used to the
centrally planned economic system will be eliminated. They are struggling
with archaic machinery and old production methods, shoddy products,
disregard for customers, heavy debt, and a stubborn, undisciplined,
old workforce. They will be unable to survive with open competition.
- Chinese farmers, who lack modern farming techniques,
machinery, and economy of scale, will be overwhelmed by foreign agricultural
produce. They are currently protected by a high tariff wall.
- Enormous labour restructuring will happen that is
unprecedented in the modern world. Labour will migrate from rural to
urban centres to seek job opportunities. Many millions of employees
in the lower skill categories, including a high proportion of older
people, will be jobless without skill retraining. At the same time,
there will be shortage of people needed to fill New Economy positions,
like IT, telecommunication, law, finance, foreign trade, biotechnology,
etc.
- Many industries will be affected. One of the biggest
industries to suffer in China will be the car industry. It is protected
by high tariffs and lacks the economy of scale to be competitive. It
will be attacked by imports at cheaper prices and better quality.
- Under WTO rules, tariffs will eventually be eliminated,
and there will be no requirement for export quota and transfer of technology
for local production. China will be under pressure to develop its own
technology.
Gary Lim can be reached at Gary Lim Consultancy :
166 Waterloo Street #04-168
Singapore 187963;
Tel: (65) 3399593
fax: (65) 3377671
E-mail: garylim@garylim.com
For information on Management Centre Europe’s Marketing & Sales portfolio,
visit http://www.mce-ama.com/events/marketing.htm
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