Effects of China's accession to the world trade organisation

Abstract

Before China launched its so-called ‘reform and open-door policy’ in the late 1970s, itit was an insignificant participant in the international economy. In 1977 its total trade was less than US$15 billion, its share of world trade was only 0.6 per cent, and it was only the 30th largest exporting country in the world. In the late 1970s China was also a negligible participant in world capital markets. China was not a borrower either in international commercial markets or from international financial organisations such as the International Monetary Fund (IMF) and the World Bank. It also did not receive private foreign direct investment and did not invest abroad. Thus China was largely isolated from the world economy. In 1998 China’s total trade recorded US$ 324 billion, accounting for 3 per cent of world trade and became the world’s 10th largest trading country. Currently, China is a significant borrower in international capital markets. In 1998 foreign capital actually utilised in China reached US$58.9 billion. In particular, the total amount of foreign direct investment reached US$45.6 billion, far larger than any other developing country, ranking second in the world behind only the United States. In 2000 China was the 7th leading exporter and 8th largest importer of merchandise trade - exports: 249.2 billion dollars (3.9% share), imports: 225.1 billion dollars (3.4% share). For commercial services China was the 12th leading exporter and the 10th largest importer - exports: 29.7 billion dollars (2.1% share), imports: 34.8 billion dollars (2.5% share)1. Thus China plays a major role in the world economy. The International Monetary Fund (IMF) found that on a purchasing power basis the Chineseeconomy in 1990 accounted for just over 6 per cent of world output, ranking third behind only the United States and Japan. A more recent research by the World Bank suggests that based on purchasing power parity China ranked the second largest economy in the worldonly behind the United States. In addition, the World Bank projects that China’s share of world trade will be around 10 per cent by 2020, making it the world’s second largest trader.