2. China’s rise from a poor developing country to a major economic power in about four decades has been spectacular. From 1979 to 2017, China’s GDP grew at an average annual rate of nearly 10%. According to the World Bank, China has experienced the fastest sustained expansion by a major economy in history—and has lifted more than 800 million people out of poverty. China has emerged as a major global economic power. For example, it ranks first in terms of economic size on a purchasing power parity (PPP) basis, value-added manufacturing, merchandise trade, and holder of foreign exchange reserves. 3. China’s Economy Prior to Reforms 4. Prior to 1979, China, maintained a centrally planned, or command, economy. During the 1950s, all of China’s individual household farms were collectivized into large communes. To support rapid industrialization, the central government undertook large-scale investments in physical and human capital during the 1960s and 1970s. As a result, by 1978 nearly three-fourths of industrial production was produced by centrally controlled, state-owned enterprises (SOEs). A central goal of the Chinese government was to make China’s economy relatively self-sufficient. 5. The traditional foreign trade system was entirely unsuited to the opening of the Chinese economy to the outside World and the new development strategy that began to emerge in the late 1970s. Decentralization of foreign trade The central government, as one of its first steps to encourage the growth of exports, decentralized the authority to be into foreign trade transactions. In effect, it abandoned the monopoly on foreign trade it had exercised. In 1979 a dozen national foreign trade corporations processed all foreign trade transactions. By the mid-1980s the Ministry of Foreign Economic Relations and Trade had approved the formation of 800 separate import and export corporations, each licensed to engage in international trade transactions within specified product ranges. Only a few years later the number of trading companies had soared to more than 5,000. New Forms of Trade Even as the decentralization of foreign trade authority and the reduction in the scope of the state foreign trade plan proceeded, the state introduced new forms of trade primarily as means of promoting exports. Among the most important of these were export processing and compensation trade. These developments have led to the formation of free trade zones. Import and Export License As the scope of foreign trade planing shrank and new forms of trade expanded, the state instituted a system of import and export licensing to control the volume and commodity composition of trade. The main propose of the licensing is to control unplanned import financed through retained foreign exchange earnings. On the exports side, they were used to prevent 'excessive' exports of goods that remain significantly underpriced on the domestic market.

1. China’s Foreign Trade Refoms and
WTO Rules
• Huseyin Tekler IBW2017539015

2. Chinese Real GDP Growth 1979-2017 (Percent)

3. China GDP per capita:
1950-1978 $ billion PPP
basis
Comparison of China
and Japan GDP per
capita 1950-78 $ bil.
PPP basis

4. China’s Economy Prior to Reforms
• State-Owned Enterprises
• Self-sufficent Economy
• Average annual GDP growth rate of
6.7% from 1953 to 1978/ 78-2017
%10

5. Foreign trade reforms
• Decentralization of trade
• New trade forms
• Import and export licensing
• Tariffs and tax rebates
• Exchange rates

6. Source: Researchgate.com

7. The evolution of China’s exchange rate
regime 1979–Present
Source: People’s Bank of China.

9. Reforms
Rural Reforms Industrial Reforms
• Household responsibility system
• Price and marketing reforms
• Rapid growth of TVEs
• Dual-track system
• Privatization
• State-owned enterprise reform
Fiscal Reforms Financial Reforms
• Decentralization and centralization
• Local taxation
• Reducing soft budget constraints
• Liberalizing interest rates
Opening Up Social Policies
• Special enterprice zones (SEZs)
• Foreign direct investment (FDI)
• WTO entry and trade liberalization
• Poverty alleviation
• Social insurance and protection
• Labor regulations

10. Historical background of WTO
• The WTO began life on 1 January 1995,
succeeding the General Agreement
on Tariffs and Trade (GATT) which
had regulated world trade since 1948.
• The World Trade Organization (WTO) deals with
the global rules of trade between nations.
• Its main function is to ensure that trade flows as
smoothly, predictably and freely as possible.
• It has a membership of 164 countries with its
headquarters in Geneva, Switzerland

11. WTO Head quarters in Geneva

12. Functions of WTO
• Facilitate the implementation,
administration, and operation
of the multilateral trade agreements
• Trade Negotiations
• Dispute Settlement
• Implementation and monitoring
• Supporting development and building trade Capacity
• Outreach
• Reviewing national trade policies
• Cooperate with IMF and World Bank

13. China and WTO
• China’s economy was initially managed by a communist
government which kept it closed from other economies
• China in the early 1980s began to open
its economy and signed a number of
regional trade agreements.
• China gained observer status with GATT
and from 1986, began working towards
joining that organization.
• China’s aim to be included as a WTO founding member was
thwarted because US, European countries and Japan
requested China to reform its tariff policies ( tariff
reduction, open market, industrial policies)
• After a lengthy process of negotiations and required
significant changes to the Chinese economy, China became
a member of the World Trade Organization (WTO) on 11
December 2001

14. China’s Commitments to WTO
• Foreign trade became more open as was
previously only limited to the state
• Change from permission
to registration
• Exceptions for state trading goods
(state trading enterprises were given the right to
carryout such function)
• Trade restrictions and prohibitions, import license
and quotas were removed
• None discrimination
• Protect the environment

15. Implications of China’s WTO Accession
Successes
• China’s WTO accession has driven structural changes in its
economy, which have given Chinese
people a better standard of living
and more personal freedom.
• Since 2001, per capita urban household
income rose by 431 per cent in China.
• Inflows of foreign direct investment rose exponentially
from practically zero in the early 1990s to $108 billion in
2009.
• China’s WTO entry has also facilitated greater South-South
trade [trade between developing countries].
• China’s inclusion in the WTO has been a boom to many
companies around the world.
• Becoming a WTO member has increased competition in
China’s domestic market

16. Implications of China’s WTO Accession
Challenges
• Rise of trade tensions between the
world’s two largest economies
( US & China)
• Restriction of market acces
s for foreign firms in sectors such as technology,
pharmaceuticals, financial services and
accounting
• Challenges of IPR enforcement; IPR protection
needs to be improved.
• Doubt as to whether China should have been
accepted into the WTO

17. Conclusion
• China’s accession to the World Trade
Organization is a landmark event,
one that has wide ramifications
for China, the United States, the WTO, and
the world as a whole.
• With US and China present trade dispute, this
signal a recipe to undermine the existence of
the WTO