CHINA'S move towards the establishment of a socialist market economy is irreversible. In the past few years, the country has been working hard towards restoration of its status in the General Agreement on Tariffs and Trade (GATT). For example, the unification of the yuan exchange rates on January 1 is a key element in the effort to create a favourable environment for re-entry to GATT. What other major issues have to be addressed? And what further improvement could be made in economic reform and opening to the outside world? First, foreign trade. The existing import quota, import licence system cannot meet the requirements of GATT. But foreign trade system reform is necessary and China is making progress. Minister of Foreign Trade and Economic Co-operation Wu Yi has promised that the management mechanism of China's foreign trade will be implemented in accordance with the principles of fairness and openness - a system of tender and auction will be adoptedfor distributing import quotas and licences. The import licence for the majority of commodities will also be abolished very soon. China will also take substantial steps in the area of import tariffs. In 1992, China abolished import adjustment tax, and twice lowered import tariffs. At the end of last year, China further lowered its import tariffs. To attract foreign investment, China still needs to speed up reforms and expand the scope of foreign involvement. According to GATT requirements, domestic and foreign companies should be allowed to compete fairly in all trade-related investment. China's difficulty in the past with this requirement was that domestic enterprises had yet to become fully autonomous entities responsible for their own profits and that a market price mechanism had yet to evolve. Domestic enterprises had to be subsidisedby the Government. The economic reform measures adopted in recent years have created a favourable environment for the narrowing of the disparity between domestic and foreign enterprises. With the relaxation of price controls and unification of exchange rates, the prospectslook even brighter. Lastly, China will have to open up its tertiary industries to foreign businessmen step by step. Trading in services has become important in international trade. The opening of fields such as commerce, finance, insurance, securities, transport and technological consultancy undoubtedly will put pressure on Chinese enterprises, but in the long term, this would be beneficial to the modernisation of the industries. At the same time, it will also absorb foreign investment and enhance the country's economic development. China is willing to adopt measures favourable to the entry of foreign companies in tertiary industries, but foreign companies will still be excluded from areas in which national security and social and public interest might be endangered, China's international obligation might be breached, or others areas which are forbidden by law. Domestic enterprises will not enjoy any advantage in this regard because they will be subject to the same restrictions. Up to now, there is still no foreign trade law in China. But the State Council put forward the draft foreign trade law to the Standing Committee of the National People's Congress in December last year. The draft law is being revised by the legislature and is expected to be passed early this year. This law will play an important role in China's re-entry to GATT and the development of its foreign trade. Professor Li Yining is head of Beijing University'sdepartment of economics and management and is a standing committee member of the National People's Congress.