The Impact of China's Joining the WTO on China's Economic Development in the Immediate Future

Abstract

Can joining the World Trade Organization (WTO) bring us tangible short-term benefits? If this question had been posed two years ago, the answer that we would have gotten from our folks in economic and trade circles would most likely have been a largely positive and affirmative one. At that time, China's competitive strength in terms of its exports was strong: the volume of our exports was rising with each day, and, in particular, our trade surplus with regard to trade with the United States was growing in a major way—even though a significant part of that trade was entrepôt trade. At that time, the United States even resorted to repeatedly threatening us with withdrawing its "most-favored-nation" trade relations with China as a way of demanding that China reduce its trade surplus with the United States. If we had joined the WTO (or, at that time, General Agreement on Trade and Tariffs [GATT] then, we at least would have been able to avoid this threat on the part of the United States and there would have been less interference in Sino-U.S. trade relations. Today's situation, however, is somewhat different. Because of the enormous impact of the Southeast Asian financial storm, and because the Chinese government, considering the larger picture, has decided to maintain the value of the renminbi, there is already a considerable loss on the part of China's export competitiveness in an objective way; furthermore, from the perspective of the statistical data for the first quarter in 1999, the extent of this damage is likely to continue to expand. If China continued to maintain the value of the renminbi and keep it from devaluation, then the pressure of China's trade surplus with the United States would be alleviated and this trade surplus, in terms U.S. interests, would most likely be gradually replaced by a trade surplus on the part of the countries of Southeast Asia and Latin America in their trade with the United States. At the same time, the trade-related friction between China and the United States will gradually be lessened. In that sense, the significance to the United States of China's joining the WTO—in terms of "alleviating" [China's] so-called threat to the United States as a most-favored nation—is already no longer as great as it once was. Furthermore, along with the eruption of financial crises in many regions and locations in the world one after another, the world economy has already lapsed into a rather long-term state of stagnation. Although China may still need to continue to take hold of "both markets"—that is, both the overseas market and the domestic market—it must also discern that we cannot continue to adhere to a "lopsided" strategy of relying on exports to pull along the growth of the economy, and that, instead, we must turn more of our attention to relying on the domestic demand.