• Sun
  • Aug 24, 2014
  • Updated: 4:52am

A new trading power emerges

PUBLISHED : Thursday, 18 December, 2008, 12:00am
UPDATED : Thursday, 18 December, 2008, 12:00am

The year 1986 was a big one for China in terms of opening itself up to the world.

It was the year the central government decided to roll out various fiscal and financial incentives to encourage foreign companies to set up factories in China.

But it was also the year of something that would eventually play an even bigger role in shaping China's status as one of the world's top exporting nations - the resumption of its talks to join the General Agreement on Tariffs and Trade (Gatt) in July that year.

It went largely unnoticed at the time, as nobody appeared to fully understand what its implications were for the country.

This understated beginning was followed by 13 years of ups and downs, culminating in a landmark moment in China's foreign trade history in November 1999, when representatives from China and the US signed an agreement in Beijing on China's entry into the World Trade Organisation, Gatt's successor.

China went on to finalise all bilateral talks with the rest of the world and became a formal WTO member in 2001 in Doha, Qatar.

Few people, including those involved in the talks, had a real idea of where the negotiations would eventually go, according to Shen Jueren , China's chief Gatt negotiator from 1986 to 1991.

'[The negotiators from other countries] didn't really know China's economic system. They raised about 2,000 questions on China's economic system, such as what is your planned economy, how do you make plans, and why do you make such plans?' Mr Shen said in a documentary on the WTO negotiations.

China was still operating under the planned economy in 1986, which meant that every product was a result of state planning rather than need.

Mr Shen and colleagues limited the initial contacts with Gatt members to 'promoting mutual understanding' rather than addressing issues, for 'we were both afraid of giving out too much information'.

Those contacts came to a standstill in 1989, when the central government ordered the military to crack down on the pro-democracy student protests. But talks resumed in 1991 and the old questions resurfaced.

China's former chief WTO negotiator Long Yongtu admitted that it was hard to explain why China's factories needed a party secretary to lead along with a chief executive officer.

'They said the party secretary represented the planned economy, and the CEO represented the market economy, and kept asking who played a bigger role in China's two-leadership business models. Obviously, we were not clearly told [by the Chinese government] how to answer that question,' Mr Long said.

Paramount leader Deng Xiaoping clarified the issue in 1992, when he said China's socialist system should allow a market-based economy.

The Chinese delegates followed up by announcing in Geneva in October that year that China would adopt a market-based economy.

Nevertheless, Chinese negotiators still had to hammer out their bilateral WTO entry agreement with the world's No 1 trade power, the US.

The US clashed with China almost every year on whether to renew it most-favoured nation treatment, a trading status that allowed lower tariffs.

'Every June, US lawmakers reviewed China's trade status with all kinds of references like trade, human rights, and even the Tibet issue,' Mr Long said. 'It was like a huge time bomb between China and the United States that could have exploded at any time.'

Trade negotiations progressed little by little in the mid-1990s until the two countries finalised an agreement in 1999 in Beijing.

Global workshop

In 1986, Beijing offered incentives to foreign companies to set up factories in China. As a result, it is dubbed the world's workshop and has become one of the top trading nations.

Total value of exports (US$)

1978: $9.8b

2007: $1.21trillion

Total value of imports (US$)

1978: $10.9b

2007: $956b

Share of world trade by value

1978: Less than 1%

2007: Nearly 8%

Road to WTO

1986 China applies to join the General Agreement on Tariffs and Trade (Gatt)

1989 Negotiations on hold following the Tiananmen Square crackdown

1992 Paramount leader Deng Xiaoping says China can develop a market economy under its socialist system

November, 1995 China introduces economic and trade reforms aimed at winning US backing to join the World Trade Organisation (WTO). Plans to cut import tariffs by 30 per cent and allows joint venture companies

April 8, 1999 Premier Zhu Rongji and US president Bill Clinton sign a joint statement in Washington DC, promising to conclude bilateral WTO talks by the end of the year

November 15, 1999 China and the US announce a WTO pact. China agrees to open a wide range of markets ranging from agriculture to telecommunications. Mr Clinton promises to persuade the US Congress to grant China permanent normal trading status

May 19, 2000 The European Union signs a WTO accession pact with China

September 14, 2001 WTO members agree on terms for China?s entry before the end of the year

November 10, 2001 Trade ministers from across the world unanimously approve China's WTO entry at a meeting in Qatar



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