World Trade Organization Membership And Its Effect On The Chinese Economy

Abstract

The transition from a command economy to a market-based economy has been remarkably successful in China. After 15 years of negotiations, China finally joined the World Trade Organization (WTO) in December 2001. Because of trade and investment liberalization under the WTO, there will be greater competition between Chinese and foreign firms, both inside China and outside China. While there is a great deal of economic literature on China's entry to the WTO, there has been no research on the global marketing impact and implications of China's membership of the WTO. This paper is an attempt to fill this gap. The objective of this study is to examine the general impact of China's entry to the WTO and to assess the global marketing implications of specific trade-related policy issues within the WTO framework for China. Eleven specific WTO policy issues are examined and several global marketing propositions offered in terms of the WTO's impact on and implications for China.

Table of Contents

Abstract2

General impact of the WTO on China's trade and investment5

Import and export licenses7

Rules of origin9

Customs valuations10

Standards11

Subsidies and countervailing measures11

Antidumping measures13

Safeguards14

Trade-related investment measures14

Trade in services15

E-commerce16

Global marketing implications of the WTO on China18

Marketing-mix implications18

Conclusion20

End Notes22

World Trade Organization Membership And Its Effect On The Chinese Economy

Introduction

Since the introduction of economic reforms and an open-door policy in 1978, China has emerged as a key player in the global economy. The pace of the internationalization of the Chinese economy is very impressive. The Chinese economy has undergone extensive transformations during the last two decades. The economic reforms introduced in 1978 have resulted in high economic growth and rapid industrialization in China. With gross domestic product (GDP) growing at nearly 10 percent a year, China is the fastest growing economy in the world. High economic growth has transformed China into the world's seventh largest economy.

By all measures, the transition from a command economy to a market-based economy has been remarkably successful in China. During the ten-year period between 1990 and 2000, China's merchandise exports grew very rapidly, with an average growth rate of 15 percent per year. By 2000, China had emerged as the world's seventh largest exporting country, with an export value of more than US$249.3 billion (World Trade Organization, 2001a). Similarly, China's merchandise imports also increased at an impressive rate of 15 percent a year between 1990 and 2000. With an import value of US$225.1 billion, China became the world's eighth largest importing country in 2000. By 2000, China's trade sector had surged to 43.9 percent of its GDP (from 10 percent in 1978), making China one of the most trade-dependent countries in the world.

During the last two decades, China's rapid growth in foreign trade has been accompanied by a large influx of foreign capital. With low production costs and a huge market potential, China has also attracted massive inflows of foreign direct investment (FDI) into the country. This is in sharp contrast to the situation in China prior to 1978, when the ...