Guangsheng, Minister of Foreign Trade and Economic Cooperation in
Dohar, Qatar, celebrating Chinas accession to the World Trade
given business communities and Hong Kong policy planners a run-down of
likely impacts from China's accession to the World Trade Organization
from WTO membership will reward efficient and innovative companies, regardless
of whether they are local or foreign, private or public. Inefficient companies
and those behind in technology are likely to be weeded out.
Hong Kong companies that use China as their export platform are expected
to expand, but companies that produce in China to circumvent tariff and
non-tariff barriers imposed by China on its imports will experience increased
pressure from import liberalisation. Some may not survive.
up of service industries such as banking, insurance, securities and distribution
will provide opportunities to Hong Kong companies, but the extent to which
the opportunities can be turned into profit is unclear. One reason is
that Hong Kong service providers will be competing in China with North
American, Western European and Japanese providers with more advanced technology
and superior managerial skills.
For Hong Kong
companies primarily operating in the SAR producing goods and services,
survival depends on having high value-added and technological elements.
Hong Kong companies
involved in cargo shipment and transshipment will benefit in the short
term from the expansion of Chinas exports and imports but in the
longer term they will face increasing pressure from Chinas other
of Hong Kongs Chek Lap Kok airport is unlikely to be challenged
by any Chinese Mainland airport which will preserve lasting benefits for
Hong Kong companies involved in passenger and cargo air transportation.
Kong will benefit from Mainland Chinese companies setting up subsidiaries
in the SAR to conduct business in foreign countries, there will be less
need for foreign companies to use Hong Kong as an intermediary. However
smaller multinational companies seeking post-WTO investment in China may
need help from Hong Kongs traders and investors.
The research was compiled by Dr Leonard Cheng from the Department of Economics
at The Hong Kong University of Science and Technology (HKUST).
Projections were drawn from the experiences of economies
that have acceded to the WTO and its forerunner, GATT, over the last few
decades, together with standard trade and investment theories. Results
were validated against existing research and interviews with Chinese academics
and government officials.
Dr Cheng said: This type of research can only
generate predictions about the direction of changes but not the magnitude
According to the research, the three major economic
benefits to China from accession will be: a more stable external economic
relationships, a clearer direction and greater speed for economic reform,
and a brighter prospect for long-term economic growth.
WTO impact research also comes from HKUST in a publication
authored by Dr David Li and Dr Changqi Wu. In the research they drew data
from 48 economies that joined WTO / GATT between 1970 and 1998 and reached
three groups of findings:
it takes five years after WTO accession for an economys GDP to grow
significantly. An explanation is that the accession takes a few
years to impact on the overall economic institutions and structure,
said Dr Li.
Much of the
GDP growth comes from a faster pace of capital accumulation after accession
rather than any increase in productivity. The higher inflow of foreign
direct investment illustrates the impact of so-called tariff jumping.
Whereas before accession, countries receive foreign investment from companies
wanting to set up production bases to avoid paying high tariffs on imported
finished products, post-accession can see a surge of investment because
of different reasons such as a better business environment, reduced bureaucracy,
and greater transparency.
the ratio between imports and GDP goes up significantly. This is
consistent with the general belief that, for developing economies, accession
opens up more widely an economys domestic market to foreign countries
rather than opening foreign markets to the accession economy, said
As a consequence, most economies resort to currency
devaluation within two years of accession. The common reason is
that devaluation helps restore trade balances, he says.
Co-author Dr Changqi Wu said: One of our conclusions
is that an expected big jump in foreign direct investment after China's
accession to WTO may not materialise.
He added: Although we learned many lessons, only
some of them may apply directly to China because China is different in
many ways from other developing economies.
Dr Leonard Cheng: firstname.lastname@example.org
Dr David Li: email@example.com
Dr Changqi Wu: firstname.lastname@example.org