CHINA AND THE GATT: TWO THEORIES OF POLITICAL ECONOMY EXPLAINING CHINA'S DESIRE FOR MEMBERSHIP IN THE GATIh Monica Hsiaot I. INTRODUCTION In May 1993, shortly before the fourteenth session of the GATT Working Party on China, Li Zhongzhou, Deputy Director General of the International Relations Department of the Minis- try of Foreign Trade and Economic Cooperation ( MOFTEC ), stated that China would pass a new law to mesh with both GATT rules and China's special conditions. '2 He hinted that unification of the two-track foreign currency exchange rate was imminent and that this was one among a number of conces- 3 sions designed to prepare China's market for GATT accession. On January 1, 1994, Beijing officials promulgated a new tax sys- tem in China, unified the country's official exchange rate, and began a complete overhaul of the banking system, apparently sig- to accelerate its transition to a nalling China's determination managed economy. These fast-paced reforms are part of China's on-going ef- forts to become a member of the GATT. 5 It has been seven years since China expressed its desire to join GAT, and China is t J.D. Expected, UCLA School of Law, May 1995; M.A., Stanford University, 1. The General Agreement on Tariffs and Trade ( GAF' ) is an international trade organization, supported by a set of agreements signed by 105 countries and trading territories and aimed at promoting free trade by reducing tariffs and elimi- nating non-tariff barriers. Chinese Talks on GATT Stall over Basic Issue, WALL ST. J., Mar. 3, 1993, at 1. 2. Yong Wang, One Step Closer for China to Enter GATT, CHINA DAILY, May 22, 1993, at 1. 3. Id. 4. Merrill Lynch & Co. Global Securities Research & Economics Group, MER- RILL LYNCH ASIAN ECON. COMMENTARY, Feb. 1, 1994, at 1, 2 [hereinafter MERRILL LYNCH COMMENTARY]. 5. China's Devaluation Aimed at Investors, CHI. TRIB., Jan. 2, 1994, at C17; China's Overhaul of Tax System Creates Problems, Benefits for Foreign Investors, 11 Int'l Trade Rep. (BNA), Feb. 2, 1994, at 173 [hereinafter China's Overhaulj; Robert Tyerman, Beijing Takes Two Steps to the West, SUNDAY TELEGRAPH (London), Jan.