This year sees the ten-year anniversary of China’s 2001 re-entry to the World Trade Organisation.
Economically, as an article from this week’s Economist notes, China has done very well out of its WTO membership. Its economy has quadrupled, and its exports nearly quintupled.
Foreigners have prospered too. “American foreign direct investment reaps returns of 13.5% in China, compared with 9.7% worldwide, according to K.C. Fung of the University of California, Santa Cruz. China imposes lower tariffs on average than Brazil or India” notes the article.
The China Daily also praises the benefits of the country’s WTO membership for non-Chinese firms. “The huge capacity of the Chinese market and impeccable infrastructure, and stable and fair market environment have attracted more and more MNCs to invest in China. So far, over 480 companies of the Fortune Global 500 have their investment in China. Foreign investment grew 9.5 percent annually during the past 10 years.”
Yet it is not all good news. For the Chinese, there is lingering discontent at some of the economic changes that admission to the club has brought. State Owned Enterprises (SOEs) have been shaken up and millions of workers laid off. As most of these were in unproductive roles – a legacy of the communist “jobs for everyone” policy – their redistribution to the wealth-creating private sector is no bad thing – so long as they do not linger too long on the unemployed list.
Foreigners have suffered too. China has become adept at sucking companies in, then squeezing them for their intellectual property and taxes, then spitting them out. The Economist gives the example of Mastercard, which issued China’s first ever payment card in 1986. Nowadays the Government has made sure that China UnionPay, a domestic competitor, has a de facto monopoly on local currency payments between merchants and banks – a $1.6 trillion market which Mastercard and other foreigners are realistically not allowed to compete in.
China is also becoming more adept at playing the WTO rules, and is more aggressive than it used to be in defending itself. Yet at the same time, it deems it fine to flout the rules when it wants. Long Yongtu, who helped China win admission to the WTO, recently said that China is now moving further away from the organisation’s principles. To modernise its economy, it has remained wedded to industrial policies, state-owned enterprises, and a “techno-nationalism” that protects and promotes home-grown technologies.
Yet overall, it would be foolish to deny that WTO admission has not been of benefit to the world. By integrating itself into the global economy, China has stimulated trade which in turn has brought broad economic and developmental advantages for itself and its trading partners.
It must be hoped though that Beijing will not take this for granted and bite the hand that feeds it. Many Western companies are becoming more and more disillusioned with the difficulty of doing business there, and if the WTO rules are bent or flouted even further, then investment – both in and out of the country – could be harmed. There are, after all, plenty of other WTO members in Asia to work with, and many of them are substantially cheaper than China.