February 4, 2002	Monday	Ziqa’ad 20, 1422

CHINA’S entry into the WTO is perhaps the most crucial economic event of the 22nd century. With a consumers market of over 1.25 billion and an annual import requirement of above $240 billion, China is sure to become the heart of the WTO—the multi-trade organization working under the slogan of, “A World Free of Trade Barriers”.

About three decades ago, China was the poorest country of the world with 80 per cent of its population living below the poverty line or $1 a day and only one-third adult literacy rate. At that time, economic indicators of China and India (exports, the GDP growth rate, and adult literacy rate etc), were almost the same. Since that time, China has made revolutionary progress in almost every sphere of life. Today Chinese exports have gone up to a mighty level of $250 billion from $15 billion in 1979 while that of India are still around $40 billions.

China share in the world GDP of $42 trillion is $1.16 trillion and in the total world trade 3.3 per cent ranking it 7th in the world. The economic indicators like inflation (3 per cent), poverty incidence (less than 10 per cent), life expectancy (70 per cent), infant mortality rate (down to 31 per cent), child malnutrition (16 per cent), adult literacy rate (above 95 per cent) and annual national savings (of about 42 per cent) make it a fantasy for the rest of the world and for its neighbours in particular.

China doubled its per capita income in 10 years, the fastest double and an unparalleled record that couldn’t be matched by any other country of the world. It took UK some 100 years to double its per capita; the USA 50 years and Korea some 25 years. But China has surpassed all of them by winning this laurel within a short span of only 10 years. The verity of 9 per cent average growth rate over 20 years (1980-2000) was achieved through professional competence, of course together with the patriotic approach of the government.

China’s “Protocol of Accession” and the “Report of the the Working Party on China”,— these two documents describe how the WTO rules will apply to China and how China intends to implement its commitments in the areas of goods, services and intellectual property rights.

The important points in these two documents are; China will reduce average tariff on goods from 24 per cent to 7 per cent; China will phase-out all tariffs on Information Technology by 2005; China will broadly open up its services sectors, such as insurance, banking, securities, telecommunications, express mail, legal, accounting and computer-related services; and China will permit foreign companies to operate wholesale, retail, and franchised distribution networks.

Foreign investors, especially in the last 10 years, have shown keen interest for investing in China, mainly due to following reasons;

Drastic changes in the legal structure to make it more explicable for foreigners; its investment-friendly policies; changed attitude of the Chinese investors in seeking more joint ventures with foreigners; and increased awareness of the Chinese people about the rest of the world.

The fact that listed companies in China have increased from 14 in 1990 to 950 in 1999 and that the market capitalisation has gone up to $330 billion from a meagre level of $2 billion in 1990 alone sets the tone for new investments in China.

The US investors instantly recognized these facts and now they are the major investors in China. China and US has entered into many one-way agreements (not bilateral) allowing US investors to export wheat, oranges, meat and pharmaceuticals initially and then expand to service sector in China. Most of the US banks had completed their negotiations regarding launching businesses in China before the WTO regime when the Chinese market opened all its three sectors of economy, i.e. agriculture, industry and services for foreign investors.

As far as the Pakistan and Chinese economic relations are concerned, China has always been bighearted in mending our economy. Broad-based Chinese cooperation in the field of heavy industry, infrastructure, defence and technology has always been is vital. $200 million Gwadar project, initiated with the Chinese financial and technical help, is expected to play a crucial role in Pakistan’ economy. Chinese companies have begun 218 projects with a total contract value of $4.123 billion. But Pakistani investor has never shown any interest either to invest in China or to explore that big market and perhaps that is why Pakistani bilateral trade with China has never crossed $1 billion mark except for year 2000. Pakistan’s exports to China are of skimpy $304 million level. China is the biggest recipient of direct foreign investment to the tune of $45 billion in the region but Pakistanis have failed to get any reasonable share in the same. We should learn from 9/11 experience where we lost 25 per cent textile and 63 per cent leather goods orders, due share in Chinese market.

After Pakistan’s trade talks with the Chinese government headed by General Pervaiz Musharraf, the way seems almost clear. During the President’s visit, about 52 MoU’s were negotiated and further access to leather and textile sector was sought. The associate members of the ICAP are now offered accounting, tax and finance-related services and besides opening up of their offices in China.

Pakistan’s major export items to China include raw cotton, wool/cotton fabrics, cotton yarn, petroleum products, leather, vegetables, synthetic textile fabrics, and wool/cotton fabrics which have a sizable potential to thrive there after the WTO rules apply to China. Pakistan can also export polyester to China at competitive rates. Pakistan, producing 400,000 tonnes can export the same to China gradually increase it to more than 600,000 tonnes by 2002 which would a big boost its textile industry. However much would depend on Pakistan’s competitive quality. Besides, joint ventures in textiles, engineering goods, Energy, agriculture and agro-based industry and chemical and polyester sector could also be promising.

China would offer extensive business opportunities to foreigners on the eve of world Olympics to be held in 2008. We should prepare ourselves to meet that opportunity. Chinese businessmen have already shown keen interest in Pakistan-made fabrics for their readymade garments export and they also intend to develop a silk park in Pakistan citrus paribus.

A major problem faced by Pakistan’s home industry in the recent years was the flood of dumped imports of “Made in China” stuff. Pakistan should frame anti-dumping laws to safeguard its local industry, China has negotiated an accord with the USA that seeks to prevent US cheap products from flooding Chinese markets.