The WTO, increased trade and investment, should contribute to the development of civil society in China in the long run; in the short run, because of labor unrest and fear of losing political control, human rights violations in China may increase. I do not believe that there will be any substantial changes in how China handles human-rights issues. Most importantly, the central government does not feel nor has ever admitted that it has done anything wrong. There will, however, be changes at the margin.
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China is no longer walled off. The fact that video and still photos of North Korean refugees seeking shelter in the Japanese consulate in the northeastern city of Shenyang were flashed around the world almost immediately after the incident highlights the ability of those intent on spotlighting abuses.
China will be on good behavior in the run-up to the Olympics. Though official statistics give China a mere 3. At the same time, an additional 12 to 13 million new workers are expected to enter the labor market each year. As clashes with unemployed workers continue to rage, will China be able to create enough jobs to prevent widespread social unrest? The government needs to take the shackles off the private sector by reducing government involvement in the economy. It also needs to ensure that private companies have access to the capital markets by ensuring that state-owned enterprises do not enjoy preferential access to bank financing or the stock market.
Progress has been made—as many as 35 million workers have been laid off from state-owned enterprises in the past five years without major social upheavals to date. As indicated in my answer, I do not believe that the private sector can grow fast enough to avoid social unrest, and fast growth will create other problems such as high inflation. China would need sustained double-digit growth to keep unemployment at bay.
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It has little chance of achieving that, nor would it want to do so, remembering the inflationary side effects of its double-digit growth spurt in the early s. Even at the official rate of 7. In the coming decade, China needs to create million new jobs a year. China faces extremely difficult choices as it gets to the truly hard part of the reform process. The sustained worker protests this spring were a potent reminder of simmering anger. WTO will push the process of reform and opening along and ensure that reforms are not bogged down halfway through the process.
Much more attention will be paid to laid-off workers to ensure that discontent does not spill out into the streets in an uncontrollable fashion. The slowness with which China has built a social safety net, especially in the area of pensions, is a worrying sign. In order for China to join the WTO, China promised to lower tariffs and abolish many quotas allowing foreign companies to compete more effectively with state owned enterprises.
But will China really commit itself to free trade or will it impose non-trade barriers to protect weak domestic industries? China has already reduced its tariffs dramatically during the s.
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In fact, tariffs have been cut by three-quarters from their peak 20 years ago. Industrial tariffs now average 15 percent; they will fall to nine percent by — hardly an earth-shattering reduction. Promised tariff reductions—and the temptation to use non-tariff measures to limit imports—will be higher in the agricultural sector. Already, we are seeing worrying signs of that China is having difficulties fully complying with the letter and spirit of the WTO agreement. In some sectors, the lowering of trade barriers will cause unemployment to rise, and in others it will create new job opportunities.
Will they be able to compete effectively with China?
China is already emerging as an economic locomotive for the region. Exports from the rest of Asia to China are growing rapidly. But Southeast Asia cannot afford to be complacent. Already, foreign direct investment increasingly is going to China rather than Southeast Asia. As indicated in my answer, Southeast Asia will not be able to compete directly with China on costs, but will need to continue to move up the ladder to higher-value added products. Chinese labor is too competent and has substantial cost advantages in too many product-markets not to affect is neighbors.
However, poor protection of patents and copyrights, as well as a climate that prohibits free speech and interaction, will probably continue to inhibit high-level innovation and cutting-edge research. China is emerging as a locomotive, both for the region and for the world. There will be losers, both within China and in other countries even Mexico is feeling the sting of the China challenge , but an economically strong China is better than a weak China.
Under WTO agreements, foreign banks will soon be able to offer services in China. What will the consequences be for failure? China is taking steps to clean up bad debts which according to private estimates are closer to 50 percent of GDP by setting up asset management corporations. But bad loans continue to mount. Few governments take serious steps before there is a severe banking crisis.
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Foreign banks will be niche players, but will accelerate reform in the domestic banking system. I have nothing to add to my answer. I do not believe that foreign banks will necessarily accelerate reform in the banking sector in China. China has a strong incentive to move quickly on bank reform. Unfinished Reforms in the Chinese Economy. Collusion, Local Governments and Development in China. Globalization, Competition and Growth in China.
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China's Three Decades of Economic Reforms. China's Role in Global Economic Recovery. Exchange Rate Regimes in East Asia. Financial Development and Cooperation in Asia and the Pacific. Economic Development in Pacific Asia. Economic Transition in China. China's Third Economic Transformation.
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China in the Wake of Asia's Financial Crisis. Globalization and the Asia Pacific Economy. Financial Systems at the Crossroads. Inflation and Growth in China. China's Economy in Transition: From External to Internal Rebalancing. Research on Compulsory Education Financing in China. China, Asia, and the New World Economy.
The Chinese Economy after WTO Accession
Reform of the International Monetary System. Trade and Employment in Asia. Financing China's Rural Enterprises. Fiscal Underpinnings for Sustainable Development in China. Rebalancing Growth in Asia: Economic Dimensions for China. Lessons from the Asian Financial Crisis. The International Monetary Fund. The Future of Asian Finance.
Foreign Direct Investment in China. Governing Rapid Growth in China. Lost Decades in Growth Performance. Already read this title? Please accept our apologies for any inconvenience this may cause. Exclusive web offer for individuals. Add to Wish List. Toggle navigation Additional Book Information. Description Author s Bio Reviews. Summary This book provides an analysis of the Chinese economy in the context of globalization after China's admission to the WTO.
In four parts it addresses globalization, privatization, fiscal policy and financial development. In depth analysis is also given to international trade, industrial development as well as economic performance and the labour market.