In 1987, when China's long march to WTO began, Shunde, in Guangdong province, was a small agricultural county near the city of Foshan in the north. Today Shunde, situated between Guangzhou and Macau on the western edge of the Pearl River Delta, is the wealthiest city in China's wealthiest province. The Shunde municipal government is also arguably China's most successful incubator of corporate success stories, making the city a key proving ground as Guangdong province braces itself for the coming post-WTO economic order. Last year, Shunde's 1.1 million residents enjoyed an average annual income of 30,000 yuan (HK$28,300) - about double the average of all Guangdong. Shunde is also home to Hong Kong-listed white-goods manufacturer Guangdong Kelon, Galanz Electric Appliances (microwave ovens), Medea (air-conditioners) and Wanjiale (water heaters), all of which began life as town and village enterprises (TVEs) in the city. These brands are now widely recognised on the mainland, thanks to distribution networks stretching to second- and even third-tier cities in every Chinese province. In terms of sales revenue, Kelon and Galanz ranked fourth and 25th respectively among all Guangdong-based companies (including foreign-invested ones) in 1999, the last year for which complete statistics are available. Moreover, these four companies represent the tip of a formidable iceberg. In a recent interview, Shunde mayor Feng Runsheng said that last year his city's home appliances companies manufactured goods worth 45 billion yuan, accounting for 60 per cent of Shunde's total industrial output and 15 per cent of China's home appliances sector. Cities throughout the Pearl River Delta have been successful in attracting foreign direct investment (including that from Hong Kong and Taiwan), and in turn using this stock of accumulated foreign capital to develop a powerful export machine. But few have, like Shunde, been able to add a second dimension to their economies by also fostering the development of good local companies focused on China's domestic market. One notable exception is Shenzhen, which is home to leading television maker Konka and telecommunications switch manufacturers Huawei and Zhongxing. As such, Shunde is one of the few cities in China where it will be possible to measure the impact of WTO accession on both the export and domestic-manufacturing fronts. Consider first Shunde's export sector. Foreign-invested enterprises (FIEs) manufacture about 50 per cent of China's total exports. While Shunde's utilised FDI fell 24 per cent last year to a still-generous US$266.5 million, since the beginning of China's reform era the city has absorbed a total of US$2.83 billion in foreign investment. Some of this has come from Hong Kong tycoons Cheng Yu-tung of the New World Group and Lee Shau-kee of the Henderson Group, both of whom are Shunde natives. But most of their investments were made in the property sector in the early and mid-1990s. Far more investment has flowed into Shunde's export-oriented manufacturing sector from multinational corporations, including 11 of Fortune magazine's Global 500. According to Shunde's mayor, 35 per cent of the city's industrial output is exported. Last year, Shunde's exports grew 32 per cent year-on-year to US$2.86 billion - an amount equivalent to 71.5 per cent of municipal GDP. Shunde's exporters, foreign-invested and domestic, will benefit immediately from China's entry into the WTO. This is because Chinese exports are more vulnerable to discretionary non-tariff barriers than is commonly recognised. According to World Bank research cited by the China Economic Quarterly, more than 60 per cent of China's exports to the US - and almost half of its exports to the European Union - are subject to quotas and other non-tariff barriers. Protection from non-tariff trade barriers and continued access to important export markets is arguably the most important and most commonly overlooked advantage accruing to China from its entry to the WTO. But what about the implications of WTO entry for Shunde's local heroes, such as Guangdong Kelon and Galanz, that have risen to the top by focusing on China's own domestic market rather than export ones? The outlook might appear troublesome. Shunde companies have been burnt by oversupply and fierce price wars in every segment of the home appliances sector, which even occasional truces agreed on by major competitors have failed to stop. According to a senior Kelon executive, one such truce fractured last year after a distributor in Nanjing asked permission to cut prices on a small stock of fridges. Thinking it a minor matter, Kelon gave its approval. Little did Kelon know that its distributor intended to take out large newspaper adverts in the crucial Shanghai market, sparking howls of outrage from Kelon's competitors. With China committed to lowering its overall tariff level on industrial products to just 9.4 per cent (compared to 24.6 per cent in 1997) as a condition of entry to the WTO, and with foreign companies to be given a much freer hand in distributing their products on the mainland, it would seem that an influx of cheap imports will soon make a bad situation worse for Shunde's home appliance manufacturers. But such fears are exaggerated for two reasons. First, under the terms of China's WTO accession agreement, most of the measures that will make life easier for foreign companies on the mainland will not be implemented for three to five years, giving domestic companies ample time to steel themselves further. Second, and more importantly, Chinese home appliance companies have already whipped the foreign competition once. Over the last 10 years, they seized back markets once dominated by imports or foreign-invested manufacturers. It is hard to imagine that foreign home appliance makers would tilt at this windmill again. The windmill is sturdier than ever, given the current reality of over-supply, fierce price wars and local competitors who know the market so well that, as in case of Qingdao-based Haier, they have developed washing machines that can double as potato scrubbers - extremely popular amongst farmers. Ultimately, most manufacturers in Shunde and elsewhere in the Pearl River Delta have little to fear from the WTO. The competitive environment on the mainland will only change gradually, and it will change in ways that those thriving in fiercely competitive markets both at home and abroad are already familiar with. If only the same can be said of China's family farmers.