China and The WTO What Price Membership

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9-707-032
REV: APRIL 9, 2008
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China and the WTO: What Price Membership?
For China and China watchers, December 11, 2006, was a particularly significant day. It marked
the five-year anniversary of the day China gained a spot in the World Trade Organization (WTO) and
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thereby rejoined the global community of market economies that it had rejected some five decades
earlier in favor of central planning. The significance of that anniversary was more than just
symbolic—it also represented the deadline for the implementation of nearly all of China’s remaining
commitments from its accession package. As such, the approaching date was bringing to the fore an
ongoing debate among scholars, governments, and businesses: How successfully was China meeting
its WTO commitments, and how had its membership changed China and the rest of the world?
China’s accession in 2001 had been hailed as a watershed event. The Chinese government had
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agreed to a sweeping series of policy changes that were, in many ways, unprecedented in the history
of the WTO. Foreigners were promised far more direct access to China’s markets, aided by new laws
and ever-lower tariffs. On the eve of accession, optimism ran high.
Nearly five years later, that optimism had not vanished, but it was now moderated by an array of
challenges that had cropped up during those years. The mood in the West had soured towards
China’s new place in the global economy as the U.S. trade deficit with China skyrocketed, reaching
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$202 billion in 2005. European laborers joined their American counterparts in blaming China for job
losses in manufacturing and accused Beijing of currency manipulation and ongoing protectionism.
For China’s part, WTO membership was proving problematic as well. The country’s largest
retailers were increasingly concerned about international competitors such as Wal-Mart and
Carrefour. At their February 2004 national conference, they challenged Long Yongtu, China’s chief
trade negotiator. “Tell us, Mr. Long, did you not give away too much in the WTO negotiations?”
asked one participant.1 Increased foreign competition was threatening stability as well, as it
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worsened China’s already high unemployment rate and widened the growing rural-urban income
gap.
Looking ahead, China’s top leadership also had to wonder. Assuming power in 2003, General
Party Secretary Hu Jintao and State Premier Wen Jiabao promised to address China’s troubled
banking system, regional and social inequality, as well as problems of persistent corruption. Was
WTO membership going to help or hinder their ability to do so? Would it enhance central state
power or ultimately undermine it? Could the Communist Party, in particular, meet an increasingly
complex set of international and domestic demands while maintaining political power?
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________________________________________________________________________________________________________________
Professor Regina Abrami prepared the original version of this case, “China and the WTO: Doing the Right Thing?” HBS No. 704-041. This
version was prepared by Professor Richard Vietor and Research Associate Julia Galef. This case was developed from published sources. HBS
cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or
illustrations of effective or ineffective management.
Copyright © 2006-2008 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-
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707-032 China and the WTO: What Price Membership?
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Background: Reforms since 1978
The China that was granted membership to the WTO in 2001 was a fundamentally different
country from the one that had existed three decades earlier under Mao Zedong. Economic reforms
had begun in 1978 when, shortly after Mao’s death, a political struggle left pragmatic moderate Deng
Xiaoping in power. Deng’s reforms achieved nearly unprecedented growth rates (averaging 9.3%
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from 1978 to 2002) and improvements in living standards (see Exhibit 20), while still maintaining the
Chinese Communist Party’s political hold on the country.
The first reforms occurred in the countryside, with the introduction of the “household
responsibility system,” a program that allocated land-use rights to households and allowed them to
keep above-quota production for sale in private markets. This was followed with the creation of
township-village enterprises (TVEs), local collectively owned firms that recruited farmers into factory
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work. The change allowed for more efficient use of rural labor and greater capacity to meet rising
consumer demand. In addition, state-owned enterprises (SOEs) were given greater managerial
autonomy and profit-retention rights. Still, “dual-track” pricing remained in place, meaning that
goods produced above the quota mandated for delivery to the state could be sold elsewhere at
market prices.
Government bureaucratic reforms were also significant. They included, at the subnational level,
increased discretionary power over budgetary allocation and influence over the appointment of
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government employees, even People’s Bank of China branch officials. Together, these factors
generated increased investment and loans for TVEs. Those public firms, in turn, became an important
engine of industrial growth and rural employment in the early years of economic reform. Still,
ongoing prejudice against capitalism discouraged private firms from expanding, and instead
entrepreneurs looked to form partnerships with local governments, in effect, “wearing a red hat” as
pseudo-TVEs. Finally, foreign investment was welcomed into China, but only in limited, mostly
coastal areas (called special economic zones, or SEZs) and economic sectors. In this way, the
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government aimed to encourage transfer of technology from foreign firms to domestic ones, while
protecting the largely inefficient state-owned sector from competition. Imports were also restricted
through a complicated combination of tariff and nontariff barriers that varied, at times illegally, by
locale. As a result, the business environment suffered from a lack of transparency that gave rise to
increasing reliance on social networks (guanxi) as a means to lower the costs of doing business.
Its flaws notwithstanding, China had undergone a remarkable transformation. And when hard-
nosed reformer Zhu Rongji took over for the more cautious Li Peng as premier in 1998, he redoubled
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the country’s modernizing efforts in hopes of securing the WTO membership that China had been
pursuing for the past 12 years. He reversed the historical trend of rising public-sector employment,
selling off tens of thousands of smaller state-owned enterprises, and further lowered barriers to trade
and investment. Upon Zhu’s exit, China scholar Nicholas Lardy said, “Zhu’s fingerprints are all over
the streamlining of the Chinese economy, much of it in anticipation of entering the WTO.”2
Negotiating China’s Entry into the WTO

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Despite years of negotiations with WTO members (and before that, with members of the GATT,
the WTO’s predecessor), China had been unable to convince skeptics that its markets were
sufficiently well developed to merit membership. Although their economy was booming—and trade
shot to new highs every year—China’s leaders knew that the WTO would represent a new level of
global integration that China could not, in the long run, afford to do without. For starters, the
permanent “most favored nation” (MFN) status that they would be accorded immediately upon
China and the WTO: What Price Membership? 707-032
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accession would guarantee China the same trading privileges and market access enjoyed by current
WTO members. This would also eliminate the humiliating yearly review of China’s MFN status by
the United States, which, although it had so far always ended in MFN renewal, sparked protests over
sensitive topics such as China’s human rights record. And although the heightened competition from
abroad would hurt domestic businesses, China’s leaders recognized that the country also stood to
gain from lowering its barriers to trade and foreign enterprise. Competition would help iron out the
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many remaining inefficiencies in the Chinese economy. And as transnational production chains
became more prevalent (for example, in the computing electronics industry), China was poised to
become a crucial link in those chains, exporting intermediate goods that were manufactured from
imported inputs. If China maintained its trade barriers, inputs needed for production would be
expensive and would therefore make China’s exports less competitive. Finally, there was a non-
economic reason for China’s urgency in WTO negotiations as well. From China’s perspective, it
would be a devastating symbolic blow if Taiwan were to attain WTO status before the People’s
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Republic.
Still, the issues delaying China’s accession were manifold. When the country first started seeking
membership in the GATT in 1986, the consensus was that the state’s role in the Chinese economy was
still far too great. Price controls remained widespread, most industrial output was produced by state-
owned enterprises, and international trade was trivial and directed by the government. As the years
passed, China shed many of the institutions of its command economy in favor of market institutions.
Unfortunately, those years also brought other events that stalled China’s accession effort. In 1989,
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after a period of significant progress in the WTO negotiations, China earned the world’s opprobrium
and sanctions after the government killed hundreds of student demonstrators in Tiananmen Square.
In 1991, the collapse of the USSR created numerous transition economies, lending a new significance
to China’s application for membership: China became a template for the GATT’s protocol on
transition economies. Due to the large number of similar applicants, negotiators were more inclined
to be stringent in their dealings with China. By the end of the decade, the issues of both Tiananmen
and the former Soviet economies had receded somewhat, but a new and contentious issue had
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emerged—China’s lackadaisical attitude toward the rampant violation of American intellectual

property rights within its borders. Negotiators also argued about whether China should be allowed
in as a developing or developed country—a distinction that would have major implications for the
tariff rates and pace of market opening by which China would have to abide.
China’s negotiations ultimately bore fruit in 2001. After 15 years of negotiating both multilaterally
with WTO members and, at the same time, bilaterally with each interested WTO member, China was
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approved as a member on September 17, 2001, to take official effect on December 11. China’s
accession involved the assumption of the preexisting multilateral GATT/WTO agreements as well as
new requirements specific to China (some of which were unprecedented). The terms China agreed to
in its WTO negotiations can be roughly classified into three realms: reforms facilitating foreign
business, reforms promoting free trade, and systemic reforms to improve the transparency and
predictability of China’s laws. The opening of China to foreign business would be accomplished by
the substantial expansion of the rights of foreign businesses to distribute goods and provide services
(especially financial services). Trade-promoting reforms primarily entailed slashing tariffs on
imported goods and removing nontariff barriers by 2005. The systemic reforms were characterized by
the clear codification of trade and investment-related laws—most notably a crackdown on intellectual
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property violations, by improving both the official laws and their implementation. Enforcement of all
of these terms would be closely monitored. China was required to give a report on its WTO
implementation progress, to be evaluated by the other WTO members in a process called the
“transitional review mechanism,” every year for eight years and then again in the 10th year after
accession.
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Many observers saw the terms of China’s accession as unreasonably demanding. China scholar
Lardy called them “so onerous they violate fundamental WTO principles.”3 Despite China’s low level
of gross domestic product (GDP), WTO members were reluctant to give it full developing-country
status because of its enormous size and rapid growth. So in some areas, China was forced to agree to
stricter concessions than other developing countries, such as limiting its agricultural subsidies to 8.5%
of production cost, rather than the developing-country standard of 10%. In addition, China found
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itself subject to unusually punitive “safeguards” designed to protect the industries in the U.S. and
other WTO member countries from potential unfair trade practices or from a rapid surge in imports.
For the first 12 years of China’s WTO membership, other WTO members were allowed to impose
quotas on excessive Chinese imports, and specific safeguards for textiles were permitted for up to
seven years after accession. In addition, for the first 15 years of China’s WTO membership, countries
accusing China of “dumping” goods on their markets (i.e., selling at below production cost) were
allowed to estimate the production cost of Chinese goods using input costs from other, market,
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economies. Since production costs tended to be higher in these proxy countries than in China, it
became especially easy to find Chinese exporters guilty of selling below cost (see Exhibit 14)—thus
rendering China vulnerable to harsh antidumping penalties.
Reforms Facilitating Foreign Enterprise in China

China’s commitments Even before the WTO terms were negotiated, China had taken
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significant steps toward opening its markets to foreign enterprise. Foreign firms were often given
large advantages over domestic firms in the form of tax breaks, as the government attempted to
attract foreign investment to its special economic zones. However, at the same time, Beijing was
concerned with the protection of domestic Chinese industries. Up until the eve of accession, it
retained substantial restrictions on the operations of foreign-invested businesses, especially in sectors
it considered strategically important.
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For foreign-invested firms that sold goods, the most significant of those restrictions was on their
right to distribute their products in China—wholesaling, retailing, and franchising were reserved for
Chinese companies. For foreign-invested firms that provided services, the most limiting restrictions
were on the location and scope of their operations—for instance, banks in all but two cities could
transact only in foreign currency. In some cases (such as the telecommunications and insurance
sectors), foreign firms were barred from entry to Chinese markets altogether. And most foreign firms
(both manufacturers and service providers) suffered from discriminatory pricing and consumer taxes
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compared with domestic Chinese firms and were subject to domestic-content requirements, rules
requiring a minimum usage of local inputs.
To win membership in the WTO, China promised to phase in full trading and distribution rights
to all foreign-owned firms and joint ventures over the course of three years. The fundamental WTO
principle of nondiscrimination also required China to abolish dual pricing, meaning that foreign and
domestic companies could not be charged different prices for inputs. (This especially affected the
pharmaceutical and chemical industries, in which foreign companies had historically been
handicapped by discriminatory policies.) Foreign companies were to be allowed to hold majority
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shares in Chinese retailers within two years of accession and to provide their own retail services
within three years of accession. Service sectors such as telecommunications and insurance were
opened to foreign providers immediately upon accession, and all geographic restrictions were to be
eliminated within five years. In addition, foreign insurance suppliers were gradually allowed to
expand their scope of activity (e.g., to pension and health insurance in addition to life insurance), and
the maximum percentage equity share that foreign telecommunications suppliers were allowed to
hold in joint ventures was steadily increased to 49%–50% (depending on the subsector). The banking
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sector also enjoyed a phaseout of geographic restrictions; by 2003, foreign banks were permitted to
conduct domestic-currency business with Chinese enterprises, and by 2006 with Chinese individuals.
Implementation By 2006, over four years after China committed to these terms, observers
agreed that the country had made a solid effort toward full implementation of its commitments to
foreign enterprise.4 The U.S.-China Business Council surveyed its members and found that 97% of
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respondents were optimistic or somewhat optimistic about the outlook for their business in China in
the coming years. China’s implementation of its WTO commitments played a large role in that
optimism; over 80% credited China’s WTO accession as “meaningful to their business.”5 The effect on
foreign investment in China was striking—China became the world’s largest recipient of foreign
direct investment (FDI) in 2002,6 and in 2004, inward FDI surpassed $60 billion (up from $40.72
billion in 2000). (See Exhibit 6.) Although as of 2006 the manufacturing sector was still the largest
recipient of FDI—since China’s WTO commitments to open up its service sectors had only recently
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gone into effect—other sectors showed strong growth, especially the banking and retail sectors.7 As
of August 2006, there were over 1,000 foreign retailers in China (up from 314 in 2004), including
multinational behemoths such as Wal-Mart, France’s Carrefour, and Britain’s B&Q, which were
taking advantage of the nascent Chinese middle class’s spending power.8
In addition to bringing in funds, the increased FDI was widely believed to benefit China through
spillovers of technology and human capital. Foreign businesses brought with them not only superior
technology but invaluable expertise in management and strategy that Chinese companies—with little
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practice at operating in a market economy—sorely needed. Numerous surveys of foreign-invested
enterprises in China found that the majority introduced technologies that had been missing in
Chinese industry.9 In order to compete in the new technologically complex industries such as
computing, China was also in desperate need of more human capital. A 2003 study found,
fortunately, that 85.4% of foreign-invested export-processing firms trained their employees in China,
and when those employees left the foreign firms (as 90% of them did), their training had ripple effects
throughout the rest of the economy.10
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Scrambling to Clean House

The foreign investment that the WTO brought China nonetheless put China’s ailing state-owned
banks and enterprises in jeopardy. Although Beijing had been trying sporadically since the 1980s to
fix those sectors, the government now had an urgent incentive. Unless they ratcheted up their reform
efforts, they feared that foreign competitors would be able to steamroll right over their state-owned
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counterparts once the barriers to foreign investment were lifted.
Foreign competition in the banking sector China’s banking sector was perhaps the most
closely watched sector after accession, since it played such a critical role in the functioning of the
entire economy. On the eve of accession, four large state banks accounted for 67% of total bank
deposits.11 Under communism, China’s banks had been essentially an arm of the government,
lending as they were told to without regard to profit. In 1994 Beijing attempted to remedy the
situation by establishing four main commercial banks and relegating policy lending to other
institutions. But, lacking extensive experience in making lending decisions, the banks quickly
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accumulated a pile of bad debts, and most outside observers estimated China’s banking sector to be
officially insolvent by international standards (see Exhibit 16). Therefore, the Chinese government
was loath to allow foreign banks too much freedom in their operations in China, for fear that it would
prompt a financial collapse as Chinese customers transferred their savings to more reliable foreign
banks. And attempting to retain customers by offering more competitive interest rates would only
put state banks further in the red.
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Faced with WTO-imposed deadlines, Beijing recognized that foreign expertise would be its banks’
best hope of learning how to lend profitably. The government spent billions cleaning up the state
banks’ balance sheets in hopes of making them more desirable to investors. In 1998 Beijing dumped
$170 billion of the state banks’ bad loans into four newly created asset management companies and
simultaneously recapitalized the state banks to the tune of $32 billion. BusinessWeek recalled, “At the
time, this was billed by the government as the mother of all bailouts.”12 But new nonperforming
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loans rapidly accumulated again, and the government was forced to inject additional billions of
dollars into its banks from 2003 to 2005. Luckily, foreign firms were biting: In 2005, Bank of America
Corporation paid $3 billion for a 9% stake in China Construction Bank, and Merrill Lynch & Co.
partnered with the Royal Bank of Scotland Group to acquire a 10% share in the Bank of China for $3.1
billion.13 But although no one could be certain what would happen after the last restrictions on
foreign banks were removed in 2006, observers concluded that the outlook for China’s four major
banks after the completion of accession was worrisome. The World Bank in 2004 modeled likely
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outcomes for China’s banking sector and concluded that “the state banks will come under severe
pressure during post-WTO accession liberalization” and that by 2007 the four state banks would
likely still have negative capital.14
Foreign competition in the state sector Impending WTO-induced competition from foreign
businesses also spurred China to accelerate the privatization of its failing state-owned enterprises
(SOEs). Before Deng Xiaoping assumed leadership in 1978, SOEs had formed the backbone of China’s
economy but were bloated and inefficient. Reforms designed to transfer control of the SOEs to their
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managers had limited success in improving productivity, and as China’s economy took off during the
1980s and 1990s, SOEs increasingly lagged the burgeoning private sector. The share of SOEs running
losses rose from 26% in 1992 to 50% in 1996, by which time their combined losses equaled 1% of
China’s total GDP.15 The government was reluctant to shut down or merge the underperforming
SOEs, however, because they provided essential social services for their workers—such as pensions,
health care, and education—in the absence of a government-based system. By 2001, therefore, SOEs
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were a serious drag on the economy. They produced only one-third of industrial output but used
two-thirds of credit resources that could otherwise have been channeled into the more profitable
nonstate sector.16 In addition, since SOEs made up the majority of China’s listed companies, their
poor performance cost the equity market half its value between 2001 and mid-2005.17
Privatization began in earnest in 1995 when the government adopted a policy of “keep the large
and let the small go,” allowing all but the largest 500 to 1,000 SOEs to be sold or merged. But only
upon the eve of accession did Beijing begin privatizing the biggest SOEs, by selling off shares to
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managers or to the public. In March 2003, the creation of the State-owned Assets Supervision and
Administration Commission (SASAC) to supervise and hold shares in state assets helped further
distance the government from the management of SOEs. By that year, the number of industrial SOEs
had fallen to 34,000 (from 118,000 in 1995)—but that number still included most of the largest SOEs,
and as they continued to grow in size, their share in total enterprise assets remained essentially
unchanged. Their return on assets and profitability increased somewhat, but by the end of 2004 about
40% were still losing money (as opposed to 18% of nonstate enterprises).18 (See Exhibit 5.)
Furthermore, the government retained a tight hold on “strategic” industries, including energy, and
on the largest SOEs; Wharton management professor Marshall Meyer predicted that the government
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would never relinquish control of the 100 core SOEs, saying, “The role of the state in China can never
be underestimated.”19
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Reforms Facilitating Free Trade
As with China’s opening of its markets to FDI, many of China’s trade-facilitating reforms were
passed before accession was even granted. Throughout the 1990s the government steadily decreased
trade barriers; the average statutory import tariff declined from approximately 44% in 1991 to 15% in
2001.20 However, WTO reforms brought these barriers down even further, to levels lower than in any
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other developing country in the WTO.
China’s commitments China agreed to implement substantial tariff reductions on agricultural

and industrial goods immediately upon accession, even though such reductions were phased in
gradually for most other WTO members. Tariffs on the most important agricultural goods were to be
reduced from a 1997 average of 31% down to 14%, and tariffs on the most important industrial goods
were to be reduced from a 1997 average of 25% down to 7%. The most strongly affected industries
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were information technology (where tariffs were to be eliminated by 2005, from a preaccession
average of 13%),21 chemicals, automobiles (where tariffs were to be reduced from 80%–100% down to
25% by 2006), and wood and paper. (See Exhibit 8 for a summary of tariff-rate reductions.) The
impact of tariff reductions was to be eased with a tariff-rate quota system in which imports above a
set quota would still be subject to a higher tariff rate, even as below-quota imports enjoyed a lower
rate. Quota levels were to be steadily raised. China also agreed to eliminate most of its nontariff
measures (NTMs), such as (other) import quotas and restrictive licensing procedures, immediately
upon accession, and all NTMs within three years of accession.
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WTO negotiations also targeted other Chinese trade-distorting practices. China agreed not to
subsidize its exports, to cap subsidies of domestic industries, and to eliminate the state-controlled
monopolies for agricultural goods. China further promised that the sanitary and phytosanitary
standards by which it judged agricultural imports would be uniform and scientifically based. In
accordance with the WTO principle of national treatment, China committed to treat the exports of
WTO members as it treated domestic Chinese goods. Among other things, this meant that after
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import tariffs were paid, foreign goods could not be subject to internal taxes in excess of those paid
by domestic companies. National treatment also committed China to treating imported goods
comparably with domestic goods when making regulatory judgments, levying fees, and assessing
complaints. Finally, China also agreed, as per existing WTO rules, to adhere to standard customs
valuation procedures, which were designed to ensure that gains from reductions in tariff rates were
not undermined by increases in total tariffs from the overvaluation of imports.
Implementation China received plaudits for implementing all of its promised tariff and non-
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tariff reductions on or ahead of schedule. However, as of 2005, the U.S. trade representative reported
that a handful of nontransparent and capricious practices continued to impede trade. Customs
officials still often refused U.S. imports on dubious sanitary or phytosanitary grounds; in 2005, the
WTO estimated that only 32% of Chinese customs decisions followed international standards.22 U.S.
farmers also complained that it was not often clear what China’s official tariff-rate quotas were and
that administrative hassles were unfairly preventing their goods from qualifying for the in quota
tariff rates—in 2002, the percent of imports that actually qualified as “in quota” were only 0.1%, 7.5%,
and 6% for corn, wheat, and rice, respectively (see Exhibit 18). Furthermore, China’s export quotas
and subsidies remained a point of contention. WTO regulations prohibited most restrictions on
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exports except for taxes or other fees, but by 2004 China was still restricting its exports of coke, a
crucial resource for steel production. The high price of coke that resulted from this restricted supply
hurt steel producers in the U.S., the EU, and Japan. Also, China retained its export subsidies for corn,
causing consternation among U.S. farmers, who found their market share in South Korea and
Malaysia shrinking.
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Still, the effects of China’s trade-promoting reforms were impressive, even viewed against the
backdrop of China’s recent transformation. Trade levels had grown steadily since the 1990s, but WTO
accession and the ensuing tariff and nontariff reductions sent trade shooting to new heights (see
Exhibit 2). China’s imports of manufactured goods and raw materials more than doubled from 1998
to 2005. The country became the top market for iron and steel and the third-largest market for
manufactured goods overall. The new openness of the economy was all the more impressive when
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comparing China with other top trading countries. China’s imports as a percentage of GDP (the most
common measure of openness) were approximately 34% in 2005, compared with 13% for the U.S. and
10% for Japan.23 The U.S. was a major beneficiary of China’s newly open markets—American exports
to China since China’s 2001 accession grew at an average rate of 21% per year, over twice as quickly
as any other major export market during that period.24 And despite the still-frequent phenomenon of
U.S. agricultural products being turned away unpredictably by customs, U.S. agricultural exports to
China boomed. In 2004 they were five times their level in 1999, and by the end of 2005 China had
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become the U.S.’s biggest agricultural export market in the world.25 China’s exports also multiplied
rapidly—a 2004 study found that WTO liberalizations were responsible for 17% growth in exports,
most rapidly in the apparel sector, where exports more than doubled after clothing-export quotas
were removed.26 Thus, despite the huge growth in imports, China continued to run a trade surplus
after accession, as it had since 1994.
Systemic Reforms
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The third broad category of reforms to which China agreed was systemic: changes to the country’s
legal framework designed to remedy some of the main obstacles to foreign enterprise and trade.
Transparency Transparency was one of the fundamental principles of the WTO, on the
grounds that no market could operate freely without it. To that end, China committed to make its
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trade- and commerce-related laws more transparent by publishing them regularly, in at least one
official WTO language (English, French, or Spanish) as well as in Chinese, and by inviting comments
or questions on those laws prior to implementation. China also committed itself to the uniform and
fair enforcement of those laws and to the creation of a process for investigation of complaints of non-
uniform application. The U.S. trade representative’s 2005 review of China’s WTO implementation
progress gave China generally good reviews in this area. Almost all laws were made available to the
public before they went into effect, although not always in languages other than Chinese. However,
the 2005 review by the Office of the U.S. Trade Representative (USTR) noted that Beijing had not been
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as rigorous in adhering to its promise to allow for public comment on laws before they were passed
and hoped for more progress on this front quickly.
Protection of intellectual property rights Chinese theft of foreign intellectual property was at
epidemic levels before accession, with many firms losing proprietary technologies to their
competitors through employee defection, misappropriation, and copying of sensitive documents.
Intellectual property rights (IPR) violation was one of the major stumbling blocks in China’s WTO
negotiations, especially with the U.S., and so WTO members considered dramatic improvements in
this sphere to be an essential component of China’s commitments. In accepting the Trade-related
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Intellectual Property Rights (TRIPS) Agreement as part of its WTO negotiations, China committed to
tighten its legal protection of patents, trademarks, trade secrets, and copyrights—and the
enforcement of those laws—in accordance with internationally accepted standards.
Unfortunately, intellectual property violations showed no signs of abating as of 2005, and foreign
businesses cited this issue as one of the most serious gaps in China’s implementation effort. (See
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Exhibit 9.) The failure lay not in a lack of legal reforms, however—the USTR judged these to be
mostly satisfactory—but in the enforcement of those reforms. In 2004, less than 1% of administrative
trademark and copyright cases were transferred for criminal prosecution.27 Since the vast majority of
IPR violators faced only seizures and fines, these were simply factored into the cost of business and
served as little deterrent. In 2006, a U.S.-China Business Council survey found that most businesses
perceived no change in IPR enforcement since accession.28
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The still-epidemic rates of IPR infringement had serious consequences for foreign firms operating
in China. The State Council’s Development Research Center estimated the market value of Chinese
counterfeit and pirated goods in 2001 to be between $19 billion and 24 billion.29 But there were other
intangible costs that were perhaps just as significant, though harder to quantify. Foreign firms
claimed that widespread IPR violation made them more likely to employ older technologies in their
Chinese operations and less likely to engage in research and development in China or to give their
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employees technical training. Such decisions were not only suboptimal for the foreign businesses
themselves but also limited the beneficial spillovers of FDI for China’s economic development and
human capital.
Complications Caused by China’s Accession

Although the Chinese government strongly believed that WTO membership would be critical to
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China’s long-term successful growth, accession created serious short-term challenges for China, both
domestically and abroad.
Domestic Impacts
Threat to domestic sectors One of China’s most immediate concerns was the impact of
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lowering its trade and investment barriers on the more fragile, state-protected Chinese industries.
The motor vehicle industry was one of the most at risk. It had been central to China’s development
plan as one of the “pillar” industries and had been highly protected by import tariffs since 1985,
which had left it highly inefficient. The Organization for Economic Cooperation and Development
(OECD) described China’s auto industry as characterized by “widespread sub-optimal scale in
production facilities, fragmentation and duplication”30—as of 2002, it was composed of 200 separate
producers, most of which produced only a few thousand vehicles a year.31 Agriculture was another
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at-risk sector. Agricultural employment was estimated to drop by around 78 million from 1997 to
2010, since the price of Chinese grain was substantially higher than the global market price.32
Somewhat mitigating these job losses, however, were WTO-induced gains in employment in other
sectors—most notably in the apparel sector, where it increased by more than half after the elimination
of quotas.
Household welfare High unemployment was already a pressing concern in China, and the
jobs shed by industries trying (or failing) to compete with foreign businesses would worsen the
problem. According to official records, privatization of SOEs caused unemployment to rise from 2.9%
in 1995 to 4.3% in 2003.33 Even these numbers vastly understated the extent of the problem, since it
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was common for workers to be retained on employment rolls after they were laid off. In the decade
since the mid-1990s there were 200 million–300 million such xiagang (laid-off) workers, who received
subsistence pay but no safety net.34 (Estimates of the “true” urban unemployment rate including
these workers varied, but one paper calculated that it rose from 6.1% in 1995 to 11.1% in 2002.)35
Before the economic reforms, the SOEs, despite being inefficient, had at least provided social security
that their workers could count on. In the wake of mass layoffs, therefore, demands for the
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government to step in and provide social security and health care became more frequent and
vehement, but government spending on social services remained low.
The issue of household welfare was made more urgent by the fact that the pension system was
increasingly endangered. It was a pay-as-you-go system, but only about 120 million workers were
paying into it by the end of 2005, out of an urban labor force of 265 million. Population control
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measures—most notably the “one-child policy” implemented in 1979—gave China the most rapidly
aging population in history (see Exhibit 4), and it was estimated that China would have only two
workers supporting each pensioner by 2040 (compared with six as of 2004).36 Because pensions were
organized at the local level, mismanagement and lack of oversight worsened the problem. Due to
inadequate coordination, workers who moved away from the town in which they had worked could
not count on receiving pensions.
Corruption at the municipal level worsened the situation, since even the inadequate funds that
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did remain for pensions and social security were often misappropriated by local officials for other
purposes (see Exhibit 15). Besides embezzlement of public funds, other rampant forms of corruption
such as smuggling and tax evasion brought the total cost of corruption, by one estimate, to over 14%
of China’s GDP during 1999–2001.37 Recognizing the costs to their political legitimacy as well as the
economic costs of corruption, the government ramped up its anticorruption efforts in 2000 with
thousands of trials of managers and officials. The convictions included scores of death sentences,
including high-ranking government officials such as the former deputy governor of Jiangxi Province
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in March 2000. But despite the harsh measures, corruption remained ubiquitous even at the highest
levels—between 2002 and 2006, 20 officials at the ministry level of the central government were
arrested.38 And the problem of pension fund embezzlement persisted. In August of 2006, one of
China’s most powerful officials, Shanghai Communist Party leader Chen Liangyu, was arrested for
the alleged misappropriation of $400 million of the city’s social security funds.
Rural-urban inequality Funding for social services was especially scarce for rural Chinese.
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This heightened resentment over the increasing gap between rural and urban incomes, a gap that
would only be widened by the WTO accession. According to World Bank projections, WTO
provisions would result in greater drops in the producer prices of farm goods than labor-intensive
nonfarm goods by 2007. As a result, incomes of households that earned all of their money from
agriculture were predicted to fall by 1.6% by 2007.39 This would worsen an already-severe situation,
since a sizable minority of the rural population was idle, and rural incomes had stagnated even as
urban incomes rose throughout the 1990s.
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The principal culprits for rural poverty were the barriers that prevented rural poor from
migrating into the cities. These barriers were sometimes direct, as in the government’s strict
household registration system, which imposed restrictions on where citizens could live and work.
But barriers to internal migration were often indirect as well—as in peasants’ lack of property rights
to their own land. Although peasants technically possessed 30-year deeds to their land, they were not
allowed to trade those deeds, making their “ownership” of little use if they wanted to sell or
mortgage their land to raise money to move to the city. The situation also meant that peasants had no
clear rights when their land was requisitioned, as it often was by local officials who wished to sell it
to developers to raise money.
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Poverty and instability in the countryside and unemployment in the cities caused increasingly
frequent social unrest. By 2005, the number of labor disputes was estimated to be growing by 20% per
year.40 The government was making some efforts to address the complaints of its rural population. In
2006, Bejing announced the “Building a New Socialist Countryside” plan, which entailed significant
new spending on rural infrastructure, such as a repeal of agricultural taxes, an experimental health
insurance plan, and free schooling. But decentralization impeded progress. Central government
10
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officials were limited in their ability to control local officials, who were notorious for imposing illegal
levies and fees on peasants in order to generate revenue. Dissatisfaction over the widening income
gap, and the accompanying social unrest, threatened to become even more pressing problems after
WTO reforms. The government recognized that barriers to internal migration had to be eased to
create an outlet for the excess rural labor that would be created by falling agricultural prices from the
WTO. But fear of a mass exodus of peasants to the cities—and visions of sprawling shantytowns such
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as those in other metropolises—made Beijing reluctant to take any dramatic steps on this front.
Environmental damage Decentralization also limited the government’s ability to deal with
other repercussions of rapid growth, such as pollution, which was already a pressing concern for
China and would become even more critical with the accelerated economic development induced by
WTO membership. Decades of breakneck industrialization and disregard for the environment had
subjected China to desertification, deforestation, erosion, and some of the world’s worst air and water
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pollution. Pan Yue, vice minister of China’s State Environmental Protection Administration (SEPA),
wrote in November of 2006 that “China has made the kind of economic advances in three decades
that required 100 years in Western countries. But China has also suffered a century's worth of
environmental damage in 30 years.”41 By 2005, China had the dubious distinction of claiming 16 of
the world’s 20 most polluted cities,42 and its future growth was threatened by particulate-matter-
related health problems, clean-water shortages, and acid rain. SEPA’s regional branches were
charged with controlling pollution. But they often found themselves at odds with local officials who
resisted the central government’s attempts to cool down the economy and tended to adopt a “not in
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my backyard” outlook. Their paramount concerns were fostering growth and employment in their
own districts, so they had every incentive to try to skirt environmental regulations that threatened
those twin goals. Thus, in practice the fines levied on polluting companies were often simply
returned to them by the local government in the form of tax breaks. The government began to take
other steps to remedy the situation, such as pursuing renewable energy sources (it took on the goal of
raising China’s use of renewable energy from 7.5% of total energy in 2006 to 15% by 2020) and raising
fuel-efficiency standards for Chinese cars. However, these steps would be small in the face of the
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challenges.
Tensions with the West

China’s WTO membership generated tensions with the other major WTO members such as the
U.S., the EU, and Japan. Even though those regions stood to gain from the newly available Chinese
markets, they were also wary of their own markets being flooded with cheap Chinese imports and of
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China’s growing political and economic clout on the world stage.
Acquisition of overseas oil One major point of contention was China’s drive to acquire oil
assets overseas. China’s energy needs had been rapidly expanding, while its domestic supply of oil
dwindled, making the government determined to obtain alternative supplies (see Exhibit 12). China
became a net importer of oil in 1993, and as its cities swelled with automobiles, its needs become
more critical. By 2005 China was purchasing 5 million cars per year, making it second only to the U.S.
and Japan in automobile market size, and car sales were predicted to increase by 10%–20%
annually.43 As of 2006, China was importing about 45% of its energy needs, and that figure was
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expected to climb to 70% by 2015.44
Rather than remain subject to the whims of the market—and fearful of U.S. interference in key
markets such as the Middle East—China preferred to buy ownership shares in natural-resource
companies in other countries and extract and refine its own oil. This strategy, sometimes dubbed
“strategic mercantilism,” alarmed other countries, especially the U.S. To add to the U.S.’s displeasure,
11
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China often struck deals with countries the U.S. considered dangerous or rogue states. For example,
China’s oil interests in Sudan and Iran made it difficult for the UN Security Council to take action
against the genocide in Darfur or to sanction Tehran for its nuclear ambitions.
The U.S. attempted to convince Beijing that it would be in China’s own best interests to restrict
itself to purchasing oil on the market, citing the high premium China had been paying to obtain
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control over oil assets. But China continued to view energy acquisition in strategic terms, for several
reasons. The majority of Chinese oil imports had to travel through sea-lanes over which the U.S.
Navy had control—such as the strategically critical Strait of Malacca between Indonesia and
Malaysia. In the event of a conflict with Taiwan, Beijing feared that the U.S. could blockade those
lanes and cut off critical oil supplies. Also, Beijing felt that American actions revealed the U.S.’s desire
to impede China’s energy acquisition. Perhaps the most high-profile example occurred in 2005 when
the state-owned China National Offshore Oil Corporation (CNOOC) attempted to acquire the
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California-based oil refiner Unocal. Although its bid was the largest, at $18.5 billion, CNOOC
withdrew after vehement opposition from Congress (and a 398–15 vote to ask President Bush to
examine the bid), which saw CNOOC’s move as a bid for strategic control.
Was China’s trade boom hurting the West? Fears over China’s global quest for natural
resources and fuel were representative of a broader apprehension on the part of the West over
China’s growing role in the world economy. Critics pointed to two main ways in which China was
hurting Western economies. First, they argued that the yuan—which had been fixed at about 8.3 to
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the dollar since late 1994—was undervalued, giving Chinese exports an unfair advantage. As proof,
they cited the U.S.’s huge current account deficit with China and China’s buildup of foreign reserves.
Senators Charles Schumer and Lindsey Graham, two particularly active proponents of this argument,
proposed a bill in 2006 that would have imposed a punitive 27.5% tariff on Chinese imports if the
yuan was not substantially revalued. The second main argument was that Chinese imports were
costing the U.S. and EU jobs. Supporters of this view pointed to the fact that the overwhelming
majority of American states lost at least 15% of their manufacturing jobs just as manufactured
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imports from China surged across U.S. borders (see Exhibit 17).
But were accusations of China’s culpability justified? Many scholars believed not. In response to
claims that the yuan was undervalued (and thus responsible for the U.S. current account deficit), they
argued that the increased imports from China since its WTO accession had simply replaced, for the
most part, imports from other east Asian producers (such as Taiwan, South Korea, and Hong Kong).
Furthermore, even if the yuan were revalued, the effect on the prices of Chinese goods would be
muted. A large percentage of the value of Chinese exports came from imported components, so a
No
more expensive yuan would only increase Chinese sale prices in proportion to the (relatively low)
value added.
Similarly, many argued that complaints that China was costing American and European jobs were
overblown. Kristin Forbes, a member of the Council of Economic Advisers, testified to the House
Ways and Means Committee in 2005 that “[t]his long-term downward trend in [American]
manufacturing employment primarily reflects relative gains in manufacturing productivity that have
not been offset sufficiently by increased purchases of manufactured goods.”45 Furthermore, she
noted, with the exception of clothing, the biggest job losses occurred in industries in which Chinese
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imports to the U.S. were minor. Likewise, European job losses in manufacturing (e.g., textiles and
automobiles) clearly predated China’s export boom. Finally, any account of China’s economic effect
on the U.S. had to acknowledge that the tax cuts and real estate boom that fueled the U.S.’s recent
recovery were financed in large part with cheap credit from the huge quantities of U.S. Treasury
bonds and mortgage securities that China was purchasing (see Exhibit 13).
12
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Nevertheless, as was their prerogative under the terms of the WTO agreement, the U.S. and
Europe chose to impose “safeguard” quotas to protect their industries against Chinese goods. This
issue came to a head at the end of 2004, when the Multifiber Agreement expired, lifting quotas that
had protected textile industries in importing countries for 30 years. Europe and the U.S. were flooded
with cheap Chinese imports—for example, Chinese cotton trousers imported by America rose by
1,573%, and cotton T-shirts and blouses rose by 1,277%46 China tried to head off protectionist
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backlash by imposing a tax on its own exports, but the U.S. and European governments bowed to
pressure from industry lobbying and invoked the safeguards. China reacted angrily because freer
access to global textile markets had been a central attraction of WTO membership. It argued that the
safeguards were intended to be used as an ameliorative measure rather than a preventative one. The
situation was defused somewhat when China abandoned its dollar peg in 2005, revaluing the yuan
by 2.1% in July and switching to a heavily managed float. However, by the following year tensions
were running high again, as the U.S. and EU complained that China was illegally imposing import
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tariffs on auto parts and that the yuan had climbed only 1% more (to 8.0 Y/US$) since it was
revalued in 2005. Calls for punitive tariffs against China grew louder once more.
Incorporating WTO Reforms into China’s Long-Term Growth

As China’s five-year WTO anniversary passed, Premier Wen Jiabao found himself facing a
dissatisfied public in addition to pressure from the West. In its 2006 review, the USTR identified
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continuing “issues like IPR criminal enforcement thresholds, certain market access concerns and
WTO prohibited subsidies [that had] resisted resolution”47 thus far. Although the media had
remained quiet while the government negotiated WTO entry five years earlier, newspapers were
increasingly publishing criticisms of the mass layoffs that accompanied privatization and of the
foreign takeovers of Chinese companies and banks. The Economist observed earlier in 2006 that
“[s]eldom has China heard such openly expressed misgivings . . . over the impact of foreign
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investment and economic reform.”48 With foreign banks poised to descend upon China and the
remaining geographic and market restrictions on service providers about to disappear, it seemed
likely that conditions would get worse before they got better.
It also seemed likely that China’s resources would be stretched to their limit. Wen would have to
find the money to provide for the millions of workers losing their jobs due to privatization and
foreign competition and to overhaul the dangerously unbalanced pension system as China’s
population aged. At the same time, the government would need large stores of funds to keep the four
No
state banks sufficiently capitalized at all times, since the perception of insolvency alone could trigger
a bank run. The outcome of the previous recapitalizations was not encouraging, however, and it
remained to be seen whether foreign expertise could improve the lending practices of China’s banks.
Although the ultimate effects of China’s WTO accession were still unknown, one thing was clear:
Managing China’s global integration smoothly would involve some delicate balancing acts on the
part of Premier Wen. China’s need for oil and textile markets would have to be balanced against the
West’s strategic and protectionist concerns. Efficiency-boosting competition would have to be
balanced against the welfare of China’s laid-off employees. And the WTO’s demand for openness
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would need to be balanced against the protection of China’s internal stability.
13
707-032 -14-
Exhibit 1 China: Gross Domestic Product, 1988–2006
Year 1988 1990 1995 2001 2002 2003 2004 2005 2006a
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Gross domestic product (billions of yuan) 1,538.9 1,934.8 6,321.7 10,897.2 12,035.0 13,639.9 16,028.0 18,670.1 21,370.7
Gross domestic product (millions of current US$) 413,450 404,505 756,938 1,316,540 1,454,030 1,647,930 1,936,460 2,278,350 2,676,290
Of which (% of GDP):
Private consumption 51.13 48.85 44.88 45.16 43.68 41.67 39.83 37.98 36.90
Government expenditure 12.81 13.64 13.25 16.21 15.89 15.11 14.47 13.93 13.40
Investment:
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Gross fixed investment 30.55 24.95 33.04 34.65 36.25 39.22 40.63 41.49 42.90
Stockbuilding 6.49 9.92 7.25 1.85 1.61 1.81 2.53 1.12 0.70
Exports of G&S 11.10 14.20 19.50 22.70 25.10 29.40 33.90 36.70 39.00
Imports of G&S 12.10 11.50 17.90 20.60 22.60 27.20 31.30 31.30 32.90
Net exports (millions of current US$) -4,060 10,669 11,957 28,086 37,382 36,079 49,282 124,753 157,482
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Real GDP growth (%) 11.27 3.83 10.93 8.30 9.09 10.02 10.08 10.24 10.50
GDP per capita (US$) 372.4 353.8 624.9 1,031.6 1,132.0 1,275.2 1,489.7 1,742.4 2,030.0
GDP per capita at PPP (US$) 1,147.3 1,293.4 2,504.7 4,320.1 4,740.3 5,249.0 5,879.2 6,640.0a 7,500.0
Share of GDP attributable to:
Agriculture 25.7 27.0 20.5 15.8 15.3 14.4 15.2 12.5 11.9
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Industry 44.1 41.5 48.8 50.1 50.4 52.2 52.9 47.3 48.1
Services 30.2 31.3 30.7 34.1 34.3 33.4 31.9 40.3 40.0
Avg. exchange rate (Y/US$) 3.72 4.78 8.35 8.28 8.28 8.28 8.28 8.19 7.97
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Source: Compiled from Economist Intelligence Unit; Asian Development Bank, Key Indicators (2006).
aProjection.
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707-032 -15-
Exhibit 2 China: Balance of Payments, 1988–2005 (millions of current U.S. dollars)a
1988 1995 1998 1999 2000 2001 2002 2003 2004 2005
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Current account -3,802 1,618 31,472 21,115 20,518 17,401 35,422 45,875 68,659 160,818
Trade balance -5,315 18,050 46,614 35,982 34,474 34,017 44,167 44,652 58,982 134,189
Exports of goodsb 41,054 128,110 183,529 194,716 249,131 266,075 325,651 438,270 593,393 762,484
Imports of goodsb -46,369 -110,060 -136,915 -158,734 -214,657 -232,058 -281,484 -393,618 -534,410 -628,295
Services and income 1,094 -17,866 -19,421 -19,811 -20,267 -25,108 -21,729 -16,411 -13,221 1,244
Services 1,255 -6,093 -2,777 -5,341 -5,600 -5,933 -6,784 -8,573 -9,699 -9,391
Income -161 -11,774 -16,644 -14,470 -14,666 -19,175 -14,946 -7,838 -3,523 10,635
No
Transfers 419 1,435 4,279 4,944 6,311 8,492 12,984 17,634 22,898 25,385
Capital and financial account 7,133 38,674 -6,322 5,178 1,923 34,778 32,291 52,726 110,660 62,964
Foreign direct investment 2,344 33,849 41,117 36,978 37,483 37,357 46,790 46,925 53,131 67,821
Abroad -850 -2,000 -2,634 -1,775 -916 -6,884 -2,518 152 -1,805 -11,306
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In China 3,194 35,849 43,751 38,753 38,399 44,241 49,308 47,077 54,937 79,127
Portfolio investment 876 789 -3,732 -11,234 -3,991 -19,406 -10,342 11,427 19,690 -4,933
Other investment assets 3,913 4,035 -43,707 -20,566 -31,570 16,879 -4,107 -5,882 37,908 -4,026
Net errors and omissionsc -957 -17,823 -18,902 -17,641 -11,748 -4,732 7,504 17,985 26,834 -16,441
Overall balanced 2,374 22,469 6,248 8,652 10,693 47,447 75,217 116,586 206,153 207,342
Financing
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Reserve assets, exceptional financing, and
use of Fund credit and loans -2,374 -22,469 -6,248 -8,652 -10,693 -47,447 -75,217 -116,586 -206,153 -207,342
Memorandum items:
Gross official reserves, including gold 19,135 76,036 149,812 158,336 168,856 218,698 295,202 412,225 618,574 825,588
Current account balance (% of GDP) -0.9 0.2 3.3 2.1 1.9 1.5 2.8 3.2 4.2 7.2
Export growth (annual % change from
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previous year) 20.5 23.0 0.5 6.1 27.8 6.8 22.4 34.6 35.4 28.4
Import growth (annual % change from
previous year) 27.9 14.2 -1.5 18.2 35.8 8.2 21.3 39.8 36.0 17.6
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Source: Compiled from IMF, International Financial Statistics Online (2006); National Bureau of Statistics of China, Chinese Statistical Yearbook (1981–2005); Asian Development Bank, Key Indicators.
aNumbers may not add up correctly due to rounding; “…” data not available.
bExports and imports are calculated “free-on-board.”
c“Net errors and omissions” is a residual category needed to ensure that all debit and credit entries in the balance-of-payments statement sum to zero.
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d“Overall balance” is the sum of the balances on the current account, the capital and financial account, and net errors and omissions.
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Exhibit 3 Labor Force Composition (millions of workers) by Employment Category, 1978–2004a
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1978 1988 1998 2000 2002 2004
Total (millions of workers) 401.5 543.3 706.4 720.9 737.4 752.0

Category (% of total)
Urban employment 23.7 26.3 30.6 32.1 33.6 35.2
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State-owned units 18.6 18.4 12.8 11.2 9.7 8.9
Collective-owned units 5.1 6.5 2.8 2.1 1.5 1.2
Cooperative units … … 0.2 0.2 0.2 0.3
Joint ownership units … 0.1 0.1 0.1 0.1 0.1
Limited liability corporations … … 0.8 1.0 1.5 1.9
Shareholding corporations ltd. … … 0.6 0.6 0.7 0.8
Private enterprises … … 1.5 1.8 2.7 4.0
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Units with funds from Hong Kong,
Macao & Taiwan … 0.0 0.4 0.4 0.5 0.6
Foreign-funded units … 0.1 0.4 0.5 0.5 0.7
Self-employed individuals 0.0 1.2 3.4 3.0 3.1 3.4
Other b 0.0 1.4 15.0 … 22.4 …
Rural employment 76.3 73.7 69.4 67.9 66.4 64.8
Township and village enterprises 7.0 17.6 18.0 17.8 18.0 18.4
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Private enterprises … … 1.4 1.6 1.9 2.7
Self-employed individuals … … 5.4 4.1 3.3 2.7
Other … … 44.6 … 43.1 …
Source: Compiled from National Bureau of Statistics of China, China Statistical Yearbook (1981–2005).
aLaid-off workers (xiagang) are excluded since 1998. Numbers may not add up correctly due to rounding; “…” data not
available.
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bChina’s data collection methods make this residual difficult to classify, but it consists in large part of private-sector
employment.
Exhibit 4 Population Trends
Total Urban Rural Population

No
Population Population Population Growth Rate

b
Year (millions) as % of Total as % of Total (%)
1975 927.8 17.4 82.6 2.21

1980 998.9 19.6 80.4 1.48
1985 1,070.2 23.0 77.0 1.38
1990 1,155.3 27.4 72.6 1.53
1995 1,219.3 31.4 68.6 1.08
2000 1,274.0 35.8 64.2 0.88
a
2010 1,354.5 45.1 54.9 0.58
a
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2020 1,423.9 53.6 46.4 0.44

a
2030 1,446.5 60.5 39.5 0.07
Source: Compiled from UN Population Division, 2005.

a Projections.
b Growth rate for five-year period ending in given year.
16
707-032 -17-
Exhibit 5 Effects of Privatization on State-Owned Enterprises in China, 1999–2004
a
1999 2000 2001 2002 2003 2004
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Number of enterprises 154,882 158,749 168,799 178,876 193,483 212,648
SOEs as % of all enterprises 37 34 28 24 19 15
Total assets (billions of yuan) 11,238 12,398 13,418 14,479 16,707 18,984
SOE assets as % of total assets 68 67 65 62 57 53
Average asset size of SOEs (millions of yuan) 134 155 184 210 260 317
Average asset size of nonstate enterprises (millions of yuan) 36 39 39 40 46 50
No
Return on assets, SOEs only (%) 1.3 2.9 2.7 2.9 4.0 4.5
Return on assets, nonstate enterprises only (%) 3.5 4.6 5.0 5.4 6.1 5.2
Loss-making SOEs (% of all SOEs) 41 35 36 35 36 40
Loss-making nonstate enterprises (% of all non-SOEs) 22 19 19 17 15 18
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Source: Adapted from Ligang Song, Stoyan Tenev, Yang Yao, and Ross Garnaut, China’s Ownership Transformation: Process, Outcomes, Prospects, The World Bank, p. 9.
a Data for 2004 are until October 2004.
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Exhibit 6 Foreign Direct Investment in China (total and U.S.), 1995–2005
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Number of contracts 37,011 24,556 21,001 19,799 16,918 22,347 26,139 34,171 41,081 43,664 44,001
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a
Amount utilized ($ billion) 37.52 41.73 45.26 45.46 40.32 40.72 46.85 52.74 53.51 60.63 60.33
Number of contracts (U.S. only) 3,474 2,517 2,188 2,238 2,028 2,609 2,594 3,363 4,060 3,925 3,741
U.S. share of utilized investment (%) 8.21 8.24 7.16 8.58 10.47 10.76 10.37 10.24 7.85 6.50 5.07
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Source: Adapted from U.S.-China Business Council at http://www.uschina.org/statistics/fdi_cumulative.html, accessed on December 22, 2006.
a“Utilized” investment is the amount actually invested, as opposed to the value of signed investment contracts.
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Exhibit 7 Foreign Direct Investment by Type, 2004 and 2005
Number of Projects FDI Value ($ billion)

2005 2004 2005 2004
Total FDI 44,001 43,664 60.33 60.63
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Joint ventures 11,646 12,913 16.44 19.50
Wholly foreign-owned enterprises 32,308 30,708 42.96 40.22
Source: Adapted from U.S.-China Business Council at http://www.uschina.org/statistics/

fdi_cumulative.html, accessed on December 22, 2006.
Exhibit 8 Protection to Industrial Sectors in China (% tariff)
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Post-
1995 2001 accession
Processed food 20.1 26.2 9.9
Beverages & tobacco 137.2 43.2 15.6
Extractive industries 3.4 1.0 0.6
Textiles 56.0 21.6 8.9
Apparel 76.1 23.7 14.9
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Light manufactures 32.3 12.3 8.4
Petrochemicals 20.2 12.8 7.1
Metals 17.4 8.9 5.7
Automobiles 123.1 28.9 13.8
Electronics 24.4 10.3 2.3
Other manufactures 22.0 12.9 6.6
Total manufactures 25.3 13.5 6.9
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Source: Will Martin, Deepak Bhattasali, and Shantong Li, “China’s Accession to the WTO:
Impacts on China,” in Kathie Krumm and Homi Kharas, eds., East Asia Integrates: A Trade
Policy Agenda for Shared Growth (Washington: World Bank, 2003), p. 45.
Exhibit 9 China’s WTO Implementation: Perceptions of U.S. Firms in China, 2006

No
Most Significant WTO Commitment % Most Significant WTO Commitment %

China Has Implemented Responded China Has Failed to Implement Responded
Trading/distribution rights 25 Intellectual property rights 31
Market access 21 Financial services 14
Tariff/duty reductions 16 Transparency 12
Foreign ownership/investment 10 Local content requirements 5
Financial services market openings 9 National treatment 5
Direct selling 3 Tariff/duty reductions 5
Express delivery services 3 Trading/distribution rights 5
Government procurement 3 Construction and engineering 3
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Other 10 Direct selling 3

Government procurement 3
Other 14
Source: Adapted from U.S.-China Business Council at http://www.uschina.org/public/documents/2006/08/member-
priorities-survey.pdf.
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Exhibit 10 Principal Imports and Exports for China, 2005
Principal Exports Billion $ Principal Imports Billion $

Electrical machinery & equipment 172.3 Electrical machinery & equipment 174.8
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Power generation equipment 149.7 Power generation equipment 96.4
Apparel 65.9 Mineral fuel & oil 64.1
Iron & steel 34.1 Optical & medical equipment 50.0
Optics & medical equipment 25.5 Plastics & articles thereof 33.3
Furniture & bedding 22.4 Inorganic & organic chemicals 32.8
Toys & games 19.1 Iron & steel 31.9
Inorganic & organic chemicals 19.1 Ore, slag, & ash 26.0
Footwear & parts thereof 19.1 Copper & articles thereof 12.9
Plastics 17.8 Vehicle & parts other than rail 12.3
yo
Source: Compiled from U.S.-China Business Council from PRC General Administration of Customs, China's Customs
Statistics. Available at http://www.uschina.org/statistics/tradetable.html.
Exhibit 11 China’s Principal Import Suppliers and Export Destinations in 2005
Import Supplier Billion $ Export Destination Billion $

op
Japan 100.5 United States 162.9
South Korea 76.8 Hong Kong 124.5
Taiwan 74.7 Japan 84.0
United States 48.7 South Korea 35.1
Germany 30.7 Germany 32.5
Malaysia 20.1 Netherlands 25.9
Singapore United Kingdom
tC
16.5 19.0
Australia 16.2 Singapore 16.6
Russia 15.9 Taiwan 16.5
Thailand 14.0 Russia 13.2
Source: Compiled from U.S.-China Business Council from PRC General Administration of Customs,
China's Customs Statistics. Available at http://www.uschina.org/statistics/tradetable.html.
Exhibit 12 China's Estimated Demand for Oil Imports, 1990–2025

No
12
Domestic Production
10
Millions Barrels per Day
Domestic Consumption
8
4
Do
0
1990 2001 2005 2010 2015 2020 2025
Source: Compiled from Energy Information Administration (EIA), “International Energy Outlook 2003.”
19
t
os
Exhibit 13 Holdings of U.S. Debt by Chinese Central Bank, 1994–2006 (billions of U.S.
dollars)a
700
rP
Short-term
600 Share of U.S. debt in total Chinese
Long-term corporate
foreign exchange reserves 74%
Long-term agency
500
Long-term treasury
Billions of US$
400
72%
yo
300 63%
62%
200
55%
100
34%
0
Dec. 1994* Mar. 2000* June 2002 June 2003 June 2004 June 2005 Nov. 2006
op
(estimate)*
Source: Data from the U.S. Department of the Treasury, http://www.treas.gov/tic/shlhistdat.csv and
http://www.treas.gov/tic/s1_41408.txt, and http://www.chinability.com/Reserves.htm.
a Other top holders (both public and private) of U.S. securities as of June 2005 are Japan ($1,091 bn), United Kingdom ($560
bn), Luxembourg ($460 bn), Cayman Islands ($430 bn), Belgium ($334 bn), Canada ($308 bn), Netherlands ($262 bn),
tC
Switzerland ($238 bn), Bermuda ($202 bn), and Germany ($200 bn). Source: “Report on Foreign Portfolio Holdings of U.S.
Securities as of June 30, 2005,” U.S. Dept. of the Treasury, http://www.treas.gov/tic/shl2005r.pdf.
*Data on short-term debt unavailable.
Exhibit 14 Top Targets of Antidumping Investigations, 1995–2006
Jan-
No
June
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Total
China 20 43 33 28 40 43 53 51 52 49 56 32 500
Korea 14 11 15 24 34 22 23 23 17 24 12 4 223
United States 12 21 15 15 14 12 15 12 21 14 12 6 169
Taiwan 4 9 16 11 23 16 19 16 13 21 13 6 167
Japan 5 6 12 13 22 9 13 13 16 9 7 4 129
India 3 11 8 12 13 10 12 16 14 8 14 3 124
Do
Indonesia 7 7 9 5 20 13 18 12 8 8 14 2 123
Thailand 8 9 5 2 19 12 16 12 7 9 13 5 117
Russia 2 7 7 12 17 12 9 18 2 8 3 2 99
Source: Selected data from World Trade Organization, http://www.wto.org/english/tratop_e/adp_e/adp_stattab1_e.xls.
20
t
os
Exhibit 15 Cross-Country Corruption Ratings, 2006a
rP
yo
op
tC
Source: Compiled with data from Transparency International, at http://www.transparency.org/policy_research/

surveys_indices/cpi/2006, accessed November 22, 2006.
aCPI, or “Corruption Perceptions Index,” is a scale with 0 representing the most corruption and 10 representing the least
corruption.
No
Exhibit 16 China’s Four State-Owned Banks, End of 2002 (billions of yuan)
Industrial and
Commercial China Agricultural
Bank of China Bank of China Construction Bank of China
(ICBC) (BoC) Bank (CCB) (ABC)
Total loans 2,957.8 1,311.7 1,766.4 1,910.0
Total deposits 4,056.9 2001.0 2,599.6 2,480.0
Assets 4,734.2 2,905.7 3,083.2 2,976.5
Do
Net profit 6.5 9.4 4.3 2.9

Nonperforming loans (NPLs) 759.9 408.5 333.8 573.0
Ratio of NPLs to total loans 0.26 0.31 0.19 0.30
Number of branches 25,960 12,090 21,616 39,286
Source: Compiled with data from the Economist Intelligence Unit (“China Hand,” March 2004, chp. 3, section 2).
21
t
os
Exhibit 17 Manufacturing Job Losses in the United States, June 1998–February 2005
State Jobs Lost State Jobs Lost State Jobs Lost State Jobs Lost
CA -353,700 TN -92,900 MD -37,400 DE -10,300
rP
NC -228,000 IN -91,200 AZ -37,300 ID -10,000
IL -224,000 VA -79,400 LA -36,900 VT -8,100
NY -222,000 SC -77,900 OK -35,000 NM -7,900
OH -216,600 AL -74,900 IA -32,100 SD -5,300
MI -210,000 FL -72,600 OR -28,000 MT -3,500
TX -201,100 MO -65,500 KS -28,000 AK -3,100
PA -199,600 MN -60,500 NH -24,200 DC -1,600
MA -109,600 MS -57,400 ME -20,800 WY -1,000
yo
GA -107,600 CT -52,000 RI -19,800 HI -300
NJ -104,800 KY -43,800 NE -17,400 ND 1,700
WI -104,500 CO -42,500 WV -16,300 NV 5,500
WA -102,400 AR -41,500 UT -12,700
Source: Compiled with data from U.S. Bureau of Labor Statistics.
Exhibit 18 Chinese Tariff Quota Utilization Rates (in 1,000s of tons), 2002–2005
op
2002 2003 2004 2005
Wheat Quota level 8,468.0 9,052.0 9,636.0 9,636.0
Out-of-quota imports .. .. .. ..
In-quota imports 632 450 7,260.0 ..
Utilization ratea 7.5 5.0 75.3 ..
tC
In-quota MFN tariff rate (%) 1-10 1-10 1-10 1-10

Out-of-quota MFN tariff rate (%) 71.0 68 65 65
Corn Quota level 5,850.0 6,525.0 7,200.0 7,200.0

In-quota imports 10 <5 <5 ..
Out-of-quota MFN tariff rate (%) 28-71 24-68 20-65 20-65
No
Rice Quota level 3,990.0 4,655.0 5,320.0 4,767.0

In-quota imports 237 260 770 ..
Out-of-quota MFN tariff rate (%) 22-71 16-68 10-65 10-65
Soybean Oil Quota level 2,518.0 2,818.0 3,587.1 3,587.0

In-quota imports 870 1,880 2,520 ..
Do
In-quota MFN tariff rate (%) 9.0 9.0 9.0 9.0

Out-of-quota MFN tariff rate (%) 52.4 41.6 30.7 19.9
Source: Selected data from World Trade Organization, “Trade Policy Review: Report by the Secretariat,”
http://www.wto.org/english/tratop_e/tpr_e/s161-5_e.doc, p. 296; “…” data not available.
a Utilization rate is calculated by in-quota imports divided by quota level.
22
t
os
Exhibit 19 China’s Remaining WTO Commitments, 2006–2015
2006 2007 2008 2012 2015

Agriculture WTO China-
specific
rP
safeguard on
all other
imports
expiresa
Textiles WTO China
textile-
specific
safeguard
expires
yo
Trading China's
rights commitment to
maintain its status
as a nonmarket
economy for anti-
dumping expires
Distribution 100% foreign ownership
permitted for distribution
services in all goods
op
Telecom Foreign investment in fixed All geographic
line services may be restrictions lifted for
increased to a maximum of fixed line services.
35% ownership. All Foreign investment in
geographic restrictions fixed line services may
lifted on mobile voice and reach a maximum of
data services. 49% ownership.
Banking All nonprudential measures
restricting ownership and
tC
operation eliminated.
Allow foreign banks to
provide local currency
services to all Chinese
clients.
All geographic restrictions
eliminated.
No
Source: Compiled from the WTO Web site at http://www.wto.org/english/news_e/pres01_e/pr243_e.htm; and

The China Business Review, Vol. 30, Number 5, September/October 2003, pp. 12, 14–15.
Do
23
t
os
Exhibit 20 World Socioeconomic Developmenta
Infant
mortality % of
rate, population Employment Employment Employment
rP
GNI per 2004 (per living on in agriculture, in industry, in services,
Gini capita, 2005 1,000 live less than 2004 2004 2004
b d c c c
Country index ($U.S.) births) $1/day (% of total) (% of total) (% of total)
Australia ... 32,220 4.6 ... 4.0 21.2 74.8

Brazil 58.0 3,460 31.8 7.5 19.8 21.6 58.4
China 44.7 1,740 26.0 16.6 44.1 17.7 16.1
yo
France ... 34,810 4.2 ... ... ... ...
Germany 28.3 34,580 4.2 ... 2.5 31.9 65.5
Japan ... 38,980 3.0 ... 4.6 28.8 65.6
Mexico 49.5 7,310 22.6 4.4 16.3 25.0 58.4
Norway 25.8 59,590 3.5 ... 3.8 22.1 74.0
United Kingdom 36.0 37,600 5.3 ... 1.2 23.5 75.0
United States 40.8 43,740 6.7 ... 2.5 21.6 75.9
Vietnam 37.5 620 17.4 2.2 59.7 16.4 23.9
op
Source: Compiled from World Bank, World Development Indicators.
aNumbers may not add up correctly due to rounding; “…” data not available.
b“Gini index” measures inequality over the entire distribution of income or consumption. A value of 0 represents perfect
equality, and a value of 100 perfect inequality. Represents most recent available figure from 1999 to 2005.
tC
c2002–2003 data used if 2004 not available.

d Represents most recent available figure from 2001 to 2003.
No
Do
24
t
os
Endnotes
1 Mark O’Neill, “China’s Open and Shut Case for WTO,” South China Morning Post, February 11, 2004.
2 Nicholas R. Lardy, “Zhu Rongji’s Promise,” Newsweek, October 28, 2002.
rP
3 Quoted in Neil C. Hughes, “A Trade War with China?” Foreign Affairs, July–August 2005, p. 94.
4 Some problems remained for foreign firms, especially in the areas of licensing and taxation. Even though
foreign businesses were newly permitted to operate, it still took a long time to obtain the necessary licenses for
business. Also, even though China had officially eliminated its requirement that foreign firms use a minimum of
local inputs, firms reported that Beijing continued to unofficially “encourage” use of local inputs with the
implication that firms that did not comply might not be approved for loans or investment. Domestic producers
were sometimes granted exemptions or rebates from the value-added tax and were better able to manipulate the
yo
system to avoid paying the full VAT they owed, giving them an advantage over importers. See USTR 2005.
5
“U.S. Companies Gain in China, Still Face Hurdles,” The U.S.-China Business Council, August 30, 2006.
Available at http://www.uschina.org/public/documents/2006/08/member-priorities-survey.pdf.
6 “China ahead in foreign direct investment,” OECD Observer, No. 237, May 2003. Available at
http://www.oecdobserver.org/news/fullstory.php/aid/1037/China_ahead_in_foreign_direct_investment.
html.
7 “Foreign Investment in China,” The U.S.-China Business Council, April 2006. Available at
op
http://www.uschina.org/info/chops/2006/fdi.html.
8 “Ready for warfare in the aisles,” The Economist, August 5, 2006, pp. 59–61.
9 Guoqiang Long, “China’s Policies on FDI: Review and Evaluation,” in Theodore H. Moran, Edward M.
Graham, and Magnus Blomström, eds., Does Foreign Direct Investment Promote Development? (Washington, D.C.:
Institute for International Economics, 2005), p. 327.
tC
10 Ibid.
11 Deepak Bhattasali, Shantong Li, and Will Martin, Impacts and Policy Implications of WTO Accession for China
(Washington, D.C.: The World Bank, 2004), p. 10.
12 Frederik Balfour, “Will China’s Bank Bailout Do the Trick?” BusinessWeek, January 26, 2004.
13 “Foreign Investment in China,” The U.S.-China Business Council, April 2006. Available at
http://www.uschina.org/info/chops/2006/fdi.html.
No
14 Deepak Bhattasali, “Accelerating Financial Market Restructuring in China,” in Deepak Bhattasali,

Shantong Li, and Will Martin, eds., Impacts and Policy Implications of WTO Accession for China (Washington, D.C.:
The World Bank, 2004), p. 188.
15 “China 2020: Development Challenges for the New Millennium” (Washington, D.C.: The World Bank,
1996), p. 28.
16 Aaditiya Mattoo, “The Services Dimensions of China’s Accession to the WTO,” in Deepak Bhattasali,
Shantong Li, and Will Martin, eds., Impacts and Policy Implications of WTO Accession for China (Washington, D.C.:
The World Bank, 2004), p. 136.
Do
17 Diane Farrell and Susan Lund, “A Tale of Two Financial Systems: A Comparison of China and India,”
McKinsey Global Institute, September 2006.
18
Ligang Song, Stoyan Tenev, Yang Yao, and Ross Garnaut, China’s Ownership Transformation: Process,
Outcomes, Prospects (Washington, D.C.: The World Bank, 2005), p. 7.
25
t
os
19
“The Long and Winding Road to Privatization in China,” Knowledge@Wharton, May 10, 2006. Available
at http://knowledge.wharton.upenn.edu/article.cfm?articleid=1472&specialid=53&CFID=2833069&CFTOKEN
=77562869.
20 Nicholas R. Lardy, Integrating China into the Global Economy (Washington, D.C.: Brookings Institution
rP
Press, 2002), p. 34.
21
“2005 Report to Congress on China’s WTO Compliance,” United States Trade Representative,
December 11, 2005, p. 22.
22 “Trade Policy Review: Report by the Secretariat, People’s Republic of China,” World Trade Organization,
February 28, 2006, p. xi.
23 Kristin J. Forbes, Testimony Before the Full Committee of the House Committee on Ways and Means,
yo
April 14, 2005, p. 5. Available at http://www.whitehouse.gov/cea/Forbes-April-2004.pdf.
24 “China’s Implementation of its World Trade Organization Commitments,” The U.S.-China Business
Council, September 28, 2006.
25
December 11, 2005, p. 54.
26
Deepak Bhattasali, Shantong Li, and Will Martin, eds., Impacts and Policy Implications of WTO Accession for
China (Washington, D.C.: The World Bank, 2004), p. 12.
op
27 “2005 Report to Congress on China’s WTO Compliance,” United States Trade Representative,
December 11, 2005, p. 73.
28 “U.S. Companies Gain in China, Still Face Hurdles,” The U.S.-China Business Council, August 30, 2006.
Available at http://www.uschina.org/public/documents/2006/08/member-priorities-survey.pdf.
29
tC
December 11, 2005, p. 70.

30
“China in the World Economy: The Domestic Policy Challenges,” OECD Synthesis Report, 2002, p. 15.
Available at http://www.oecd.org/dataoecd/45/57/2075272.pdf.
31 Ibid., p. 16.
32 “No rural idyll,” The Economist, June 15, 2002, pp. 10–12.
33 Ligang Song, Stoyan Tenev, Yang Yao, and Ross Garnaut, China’s Ownership Transformation: Process,
No

34 “Keep Growing,” The Economist, March 25, 2006, pp. 12–14.
35
36 “A Brother for Her,” The Economist, December 18, 2004, pp. 51–52.
37
Hu Angang, “Public Exposure of Economic Losses Resulting from Corruption,” China & the World
Economy, No. 4, 2002, pp. 44–49.
Do
38 Jim Yardley, “The Chinese Go After Corruption, Corruptly,” The New York Times, October 22, 2006, p. 3.
39 Kym Anderson, Jikun Huang, and Elena Ianchovichina, “The Impacts of WTO Accession on Chinese
Agriculture and Rural Poverty,” in Deepak Bhattasali, Shantong Li, and Will Martin, eds., Impacts and Policy
Implications of WTO Accession for China (Washington, D.C.: The World Bank, 2004), p. 110.
26
t
os
40
41Quoted in Jason Dean, “How Capitalist Transformation Exposes Holes in China’s Government,” The Wall
Street Journal, December 18, 2006.
rP
42 “A great wall of waste,” The Economist, August 19, 2004, pp. 55–57.
43 “Dream Machines,” The Economist, June 4, 2005, pp. 24–26.
44 Jeffrey A. Bader, “China’s Rise: What it means for the rest of us,” speech delivered at the Brookings
Institution, September 7, 2006. Available at http://www.brookings.edu/views/speeches/bader/20060907.htm.
45 Kristin J. Forbes, Testimony Before the Full Committee of the House Committee on Ways and Means,
yo
April 14, 2005, p. 10. Available at http://www.whitehouse.gov/cea/Forbes-April-2004.pdf.
46 “The great stitch-up,” The Economist, May 28, 2005, pp. 61–62.
47 “2006 Report to Congress on China’s WTO Compliance,” United States Trade Representative,
December 11, 2006, p. 5.
48 “The white peril,” The Economist, April 1, 2006, pp. 34–35.
op
tC
No
Do
27

China and The WTO What Price Membership

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t

Negotiating China’s Entry into the WTO

emerged—China’s lackadaisical attitude toward the rampant violation of American intellectual

Reforms Facilitating Foreign Enterprise in China

Scrambling to Clean House

counterparts once the barriers to foreign investment were lifted.

China’s commitments China agreed to implement substantial tariff reductions on agricultural

Complications Caused by China’s Accession

Tensions with the West

China’s growing political and economic clout on the world stage.

expected to climb to 70% by 2015.44

Incorporating WTO Reforms into China’s Long-Term Growth

would need to be balanced against the protection of China’s internal stability.

Exhibit 1 China: Gross Domestic Product, 1988–2006

Exhibit 2 China: Balance of Payments, 1988–2005 (millions of current U.S. dollars)a

bExports and imports are calculated “free-on-board.”

Total (millions of workers) 401.5 543.3 706.4 720.9 737.4 752.0

Exhibit 4 Population Trends

Total Urban Rural Population

Population Population Population Growth Rate

1975 927.8 17.4 82.6 2.21

2020 1,423.9 53.6 46.4 0.44

Source: Compiled from UN Population Division, 2005.

Exhibit 5 Effects of Privatization on State-Owned Enterprises in China, 1999–2004

Number of Projects FDI Value ($ billion)

Total FDI 44,001 43,664 60.33 60.63

Source: Adapted from U.S.-China Business Council at http://www.uschina.org/statistics/

Exhibit 8 Protection to Industrial Sectors in China (% tariff)

Exhibit 9 China’s WTO Implementation: Perceptions of U.S. Firms in China, 2006

Most Significant WTO Commitment % Most Significant WTO Commitment %

Other 10 Direct selling 3

Principal Exports Billion $ Principal Imports Billion $

Exhibit 11 China’s Principal Import Suppliers and Export Destinations in 2005

Import Supplier Billion $ Export Destination Billion $

Exhibit 12 China's Estimated Demand for Oil Imports, 1990–2025

Exhibit 14 Top Targets of Antidumping Investigations, 1995–2006

Source: Selected data from World Trade Organization, http://www.wto.org/english/tratop_e/adp_e/adp_stattab1_e.xls.

Source: Compiled with data from Transparency International, at http://www.transparency.org/policy_research/

Exhibit 16 China’s Four State-Owned Banks, End of 2002 (billions of yuan)

Net profit 6.5 9.4 4.3 2.9

Source: Compiled with data from U.S. Bureau of Labor Statistics.

In-quota MFN tariff rate (%) 1-10 1-10 1-10 1-10

Corn Quota level 5,850.0 6,525.0 7,200.0 7,200.0

Rice Quota level 3,990.0 4,655.0 5,320.0 4,767.0

Soybean Oil Quota level 2,518.0 2,818.0 3,587.1 3,587.0

In-quota MFN tariff rate (%) 9.0 9.0 9.0 9.0

2006 2007 2008 2012 2015

Source: Compiled from the WTO Web site at http://www.wto.org/english/news_e/pres01_e/pr243_e.htm; and

Australia ... 32,220 4.6 ... 4.0 21.2 74.8

c2002–2003 data used if 2004 not available.

14 Deepak Bhattasali, “Accelerating Financial Market Restructuring in China,” in Deepak Bhattasali,

December 11, 2005, p. 70.

Outcomes, Prospects (Washington, D.C.: The World Bank, 2005), p. 90.

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