Welcome To Industrysourcing
Home >News>News Details

China's WTO ride turns fears into fruit

Source:December 10, 2011 | China Daily     Date:2011-12-12
Share to Wechat

BEIJING (Xinhua) -- When China wrapped up 16 years of hard bargaining to secure long-awaited membership to the World Trade Organization (WTO) on December 11, 2001, Chinese firms were probably more alarmed than relieved.

With tariffs to be slashed and restrictions on foreign rivals to be eased, a shaky future seemed to loom for some of China's least competitive industries, notably banking, agriculture and auto making.

Ten years later, those industries are holding up well, if not thriving.

Chinese lenders are among the most profitable banks in the world and were barely hurt in the financial crisis. China's self-sufficiency rate in grains has remained above 95 percent, and the country surpassed the United States in 2009 to become the world's biggest auto producer.

Analysts attributed China's success to the catfish effect, government-sponsored reforms, limited market openness and its position in the global value chain.

The catfish effect, in which the existence of strong rivals drove the weak to improve themselves, was obvious in China's banking industry.

Back in 2001, having just survived the Asian financial crisis and freed of some of their massive bad loans with government aid, China's four major state-owned banks remained insolvent as a whole.

Today, those banks are much healthier than 10 years ago and passed the test of the global financial crisis with good asset quality and profitability, said Ba Shusong, an economist with the Development Research Center under the State Council, or China's Cabinet.

"Competition spurred China's banking industry to advance market-oriented reforms and improve its competitiveness through restructuring and better management ... so the key is whether the external pressure can change into an internal drive," Ba said.

In the past decade, the government helped rid the country's four major state-owned commercial banks of more non-performing loans. It also injected nearly $80 billion to help them restructure into shareholding companies.

And because China only agreed to limited openness for the financial services industry when joining the WTO, that provided a certain level of protection for the industry, analysts said.

"The government was being cautious with the financial sector," said Zhang Junsheng, a researcher with the Institute of International Economy, University of International Business and Economics. "It took into consideration how much the industry could bear."

Economist Louis Kuijs with the Hong Kong-based research group Fung Global Institute said China's WTO agreement made it hard for foreign companies to compete in several areas where they are restricted from entering the market or subject to differentiated prudential regulation.

Foreign banksFootwear


Back To The Top