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Climate for Change
ADB Review [ May 2005 ]

The PRC’s accession to the World Trade Organization provides many lessons for other developing countries

By Xiao Hua Peng, (xpeng@adb.org)
Principal Counsel

TEXTILE TRADE Progress in the PRC

Developing a rule of law in the People’s Republic of China (PRC) has been closely associated with the country’s deepening economic reforms. The law has played an important role in promoting economic policy and openness, and this has helped mobilize political will and push forward legal and judicial reforms.

Joining the World Trade Organization (WTO) in late 2001 prompted another wave of reform and development of the rule of law.

The PRC made specific commitments to open markets and general commitments to follow WTO principles, such as regulating the market and administering the regulatory system. The challenge was to do this as well as to inspire domestic industry, particularly the private sector, and attract foreign investment. Reforming the PRC’s legal and judicial system to achieve the Government’s long-term development objectives was another challenge.

The PRC can now provide valuable lessons to others. It has implemented tariff concessions, eliminated nontariff barriers, and opened its service markets. It is complying with WTO rules on antidumping, subsidy and countervailing duties, and safeguard measures.

The PRC is adjusting laws and regulations that protect intellectual property, and translating its laws and regulations into other languages. It has also introduced judicial review of decisions made by the administrative authority in WTO-related cases.

To meet an expected rise in competition and to improve the administrative and regulatory framework, the PRC has openedup sectors dominated or monopolized by state-owned enterprises to the domestic private sector. These include banking and financial services, infrastructure and public utilities, foreign trade, and even the defense sector.

The PRC is seeking further privatization and will develop a regulatory framework for transnational mergers and acquisitions by foreign investors. An administrative licensing law meanwhile will curtail the arbitrariness and discretion of government authorities to impose licensing restrictions or permit requirements.

It is formulating a policy on competition and an antimonopoly law, and developing further commercial law—amending company and securities laws, preparing a bankruptcy law, and developing a social security system.

While the opening up of the market exerts tremendous pressures on domestic industries, the greatest challenge is to use WTO commitments to push for more reforms.

A policy formulation mechanism and legal and regulatory system should be developed to respond to the challenges brought about by the interaction of global and domestic markets, where dividing lines are blurring.

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