China and the World Trade Organization
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China became a member of the World Trade Organization (WTO) on 11 December 2001. The admission of China to the WTO was preceded by a lengthy process of negotiations and required significant changes to the Chinese economy. It signified China's deeper integration into the world economy.
Until the 1970s, China’s economy was managed by the communist government and was kept closed from other economies. Together with political reforms, China in the early 1980s began to open its economy and signed a number of regional trade agreements. China gained observer status with GATT and from 1986, began working towards joining that organization. China aimed to be included as a WTO founding member (which would validate it as a world economic power) but this attempt was thwarted because United States, European countries, and Japan requested that China first reform various tariff policies, including tariff reductions, open markets and industrial policies.
United States role
The United States acted as a dominant power in the international economy and strongly supported an open system. They had a great interest in China because it was one of the fastest growing markets for U.S. goods and services. U.S. imports from China almost doubled within five years from $51.5 billion in 1996 to $102 billion in 2001. The United States imposed additional conditions on China and so there were, from a Chinese perspective, both positive and negative aspects linked with admission.
These changes were difficult steps for China and conflicted with its prior economic strategy. Accession meant that China would engage in global competition according to rules that it did not make. China's admission was "an enormous multilateral achievement" that marked a clear commitment towards multilateralism.
When China joined the WTO, it agreed to considerably harsher conditions than other developing countries. After China joined the World Trade Organization (WTO), the service sector was considerably liberalized and foreign investment was allowed; restrictions on retail, wholesale and distribution ended. Banking, financial services, insurance and telecommunications were also opened up to foreign investment. Furthermore, China had to deal with certain concerns linked to transparency and intellectual property that the accession to WTO underlined.
- Hong Kong, China had been admitted as a WTO member on 1 January 1995, before Hong Kong was handed over to China in 1997.
- Taiwan also joined the WTO under the name of the Separate Custom Territories of Taiwan, Penghu, Kinmen, and Matsu, just after the admittance of China.
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