Chinas Cultural Industries - Case Study Example

What is the impact of WTO membership on China’s cultural industries? Introduction China got readmission into World Trade Organisation (WTO) in 2001 after protracted negotiations for more than 15 years. It had parted with GATT (erstwhile WTO) following the revolution in 1949. It was expected that with the population of 1.3 billion people, China would provide its people unhindered access to the markets of 142 other member countries. Before assessing the impact of the WTO membership on China’s cultural industries which is the theme of this essay, its impact on China in general and circumstances that necessitated China to seek membership need to be examined. The importance of accession to the WTO Although China had contracted to be governed by the General Agreement on Tariffs and Trade (GATT) in 1948 along with the other 22 countries, the process of readmission of China into WTO as a multilateral trading setup had kept China waiting for 15 years since its application for membership made in July 1986. At the time of 1949 revolution, the then China known as Taiwan declared in 1950 having left the GATT but later came forward in 1986 to rejoin it. The committee appointed for the purpose met 20 times prior to formation of WTO in 1995 without any decision for China’s readmission. It was only after the working party of the WTO formed for China’s accession met under the Chairmanship of Switzerland’s Ambassador on 18 occasions, that a decision was made to admit China into the WTO.and it came to be the 143rd member in December 2001. In the meanwhile, China had already entered into bilateral agreements with the U.S.in 1999 and E.U. in 2000. The accession has been subject to the five basic principles of the WTO and the GATT. (Gertler, 2002) They are “Non-discrimination, Market opening, Transparency and predictability, Undistorted trade and Preferential treatment for developing countries.”(Gertler, 2002 p 9) It is important to understand the significance of these principles for gauging favourable or adverse effects on the various sectors of Chinese economy. Non-discrimination This is driven by the Most Favoured Nation (MFN) principle which provides that a member country should not discriminate between other partner countries who provide goods and services. It should also ensure national treatment by which, in the domestic market, China must not show favourable treatment to its own products, services and nationals over that of foreign products, services and nationals. China has been given three years time to phase out dual pricing policies and other restrictions faced by foreign countries in the domestic market of China either in importing, exporting or trading. They should be treated on par with local enterprises. (Gertler, 2002, p 9-10) Market opening This principle seeks to engage the member countries through several rounds of talks to reduce trade barriers. Aspiring States are also to be encouraged to reduce tariffs and ease restrictions as preconditions for their admission for their entry in to the WTO. In fact China considerably liberalised its trade regime to join the WTO. (Gertler, 2002, p 10) Transparency and predictability The member States are expected to make all their respective trade related information like laws, regulations, court rulings accessible by prompt publications and to apply the laws impartially and to facilitate judicial review for rectification of mistakes wherever necessary. While these measures are to ensure transparency, quantifiable tariffs instead of non-tariff measures such as quotas and licences ensure predictability. Thus market openings are accomplished for goods and services. Especially in goods, tariff rates are fixed with ceilings. China has undertaken to provide for transparency, uniformity and judicial review. China has committed to phase out all tariff barriers by 2010. By 2004, it is supposed to have achieved most of the measures envisaged. Thus tariff level would reduce by 15 % in respect of agricultural items, 0-65% for cereals and 8.9% average for industrial goods which range from 0 to 47%, the maximum rates applicable for photographic and automobile items. In respect of services also, China has ensured transparency and predictability principle in respect of telecommunications, banking and insurance. (Gertler, 2002, p 10) Undistorted trade This principle allows a member to respond to countervailing duties and anti-dumping of other members by counter measures and also resort to safety measures at the time of unexpected flow of imports threatening the existence of local industry. China has already committed itself to abide by WTO’s directives in respect of the above measures envisaged. (Gertler, 2002, p 12) Preferential treatment for developing countries Developing countries and those transitioning to market economies are allowed transition periods and the least developed countries are treated with even more flexibility to adjust to the new system of WTO. Though China did not get such a preferential treatment, it got some concessions in some segments of its trade regime such as gradual removal of quotas and import licences and gradual admission of foreign firms to conduct business inside the country. Nevertheless, China agreed to have ceiling on production subsidies within the country and also not to grant export subsidies. It also agreed on immediate enforcement of TRIPS Agreement. (Gertler, 2002, p 10) With the above five principles of conduct as a member of the WTO, China was expected to ensure smooth multilateral relationship replacing bilateral relationships characterised by risks and uncertainties. Yet, even the WTO regime is expected to make China undergo painful experience due to the impact, the new measures would have on State owned enterprises which were making losses, under-developed agricultural farmers and several government funded projects in the country. Besides, several millions of people and families were expected to lose employment and get displaced during the transitioning or adjustment period. One small consolation was that China had already begun the reforms much earlier and its people have already been feeling the impacts. (Gertler, 2002, p 15-16) Ever since China’s open-door policy from 1978 onwards and its transition from command economy to market economy, the country had already achieved high economic growth with its GDP increasing at 10 percent every year and as a result, China had already become the seventh largest economy at the time of its entry into the WTO. From 1990 to 2000, China’s exports of merchandise increased by15 % per year and total value of its exports stood at US $ 249.3 billion while its imports amounted to US $ 225.1 billion. Thus China was already the eighth largest importing country and from a mere 10% in 1978, the trade sector had formed part of 43.9 percent of its GDP by 2000. During the same period, China also was attracting FDI with the result, the nil inflow as of 1978 grew to US$ 346.6 billion as the second largest FDI recipient in the world only next to the U.S. through some 203,208 foreign firms already operating in the country when it became a WTO member. Thus the WTO membership for China was expected to boost both the Chinese economy as well as world economy. (Agarwal and Wu, 2002) TRIPS Agreement The agreement under the aegis of the WTO on Trade-Related Aspects of Intellectual Property Rights (TRIPS) which deals with the protection of rights of the member countries on their intellectual properties binds the members to recognize the need to have a multilateral agreement to deal with counterfeit goods, that intellectual property rights are exclusively private, that it is a matter of pubic policy to protect intellectual property rights, that the least developed countries who are the WTO members must have some flexibility in order to develop a sound technological base, that tensions must be avoided or reduced by strong commitment to resolve disputes on intellectual property rights, and that the need to foster mutual relationship between the WTO and the World Intellectual Property Organisation (WIPO).(WTO & Chinese Culture) The TRIPS agreement is important in that it has significant bearing the cultural industries of China. China had already become a member of the WIPO in this context and had been negotiating with the United States and the European Union for intellectual property protection. (WTO and Chinese Culture, Content 43072) Chinese culture industry Since cultural activities are now viewed within the perspective of cultural economy, culture should be considered as an economic activity as a cultural industry regulated by the Government of the State. It is associated with policy changes in tune with trade and economy and culture is goods but unlike ordinary goods. China’s policy regarding commercialisation of culture has not been clear. It had proposed that news media sector should be portrayed as public institutions but run on commercial basis as a dual policy known as “shiye jituan qiye guanli” (Wang) Later in 2002, a different approach was adopted as “public cultural institutions (wenhua shiye) and commercial cultural enterprises (wenhua chanye)” (Wang, p 7) As this is still not clear enough, questions are asked as to what the rules are for capital investment in cultural industries. Performing arts, “tourism, industrial and cultural exhibition, audiovisual products, sports and entertainment, higher and professional education” (Wang, p 8) that are not highly sensitive to national culture and information security are thrown open to entry of capital from private, social and foreign sources. State investment in the existing cultural enterprises that are not consistent with the policy of open market economy should exit by way of asset sales, transfers, mergers, closures and bankruptcies. Non-commercial cultural sectors are identified as compulsory education, departments engaged in the preservation of national culture, libraries, museums, cultural workstations, and other sectors requiring ownership of the State. In these sectors, no private domestic or foreign capital is permitted. (Wang) China’s cultural industries scenario before WTO entry There were about 33.7 million entities engaged in cultural production activities employing about 1.6615 million people as in 1999. It comprised of art performance troupes, art performance places like theatres and cinemas and art exhibition places like galleries etc. There were also 2,767 public libraries with 490,000 employees. Besides, 44, 000 persons had been employed in 2,905 cultural centres and 720,000 employees in 42,543 cultural stations. In addition, there were 1,363 museums and 3,551 cultural relic preservation institutions employing 33,000 and 66,000 people respectively. Entertainment industry comprising of song ball-rooms, Kara OK halls, e-game play rooms, ping-pong halls, bowling, roller skating rinks, and other recreation places had employed 903,000 people in 174,700 enterprises. In 1999, Chinese art- troupes’ revenue had been RMB 4.9 billion through 469 million person times and the cultural departments had earned RMB 11.4 million through art performances attended by 118 million person times. China has international cultural exchange programmes with 160 countries. After the reforms of 1978, China had firmed up its cultural markets systems and management and achieved significant improvement in the enrichment of cultural life of the people of China. (WTO and Chinese Culture, Content 43072) General perspectives of China’s cultural industries from Canada’s view point. Beijing, the capital city of China, is a cosmopolitan city and has a huge consumer market for cultural products even during the normal times. Since Olympics was held in 2008, annual cultural event were proposed to be held from 2001 until the year of Olympics. As the host of Olympics, China was expected to give boost to promotion of cultural products especially after its WTO’s accession which enabled entry of foreign cultural products into China. China’s publishing industries are engaged in translation and publication of foreign works. Already 400 books on Canada were under print in China as in 2001. China has been transforming its financial capital Shanghai into a cultural centre also by establishing Shanghai Art Museum and Shanghai Grand Theatre. These centres conduct several domestic and international exhibitions and performances. Besides, annual Shanghai International Film and Shanghai Television Festivals are held regularly. There is one month-long Shanghai International Arts Festival having considerable scope for cultural exchange. Due to Shanghai’s growth as an international city, the Government has been encouraged to develop the cultural industries. On the east Shanghai bank, a newly built Science Museum houses two IMAX theatres which are offered for holding exhibitions of international artistes. The neighbouring provinces like Jiangsu, Zhejiang and Anhui have scope for performing arts by the International groups mainly patronised by the Government. Guangdong of South China is the hub of the country’s economic reform. The Central Government has made Guangdong as the lead state for promotion of economic reforms in other provinces too for taking advantage of the WTO accession. Guangdong held China’s 9th National sports games in order to promote China’s cultural industries. Besides, South China’s television consumers number about 34 million in Guangdong and 2 million in Xiamen and Fujian provinces who view channels beamed from Hong Kong and Taiwan respectively. Local channels also compete with them by showing quality programmes. Thus Guangdong has attracted international attention as a catalyst State for the promotion of multi-media in China. The WTO accession has made it possible for the foreign suppliers to access Chinese market for their audiovisual services such as videos, documentation, and entertainment software. A commitment was already made to allow distribution of foreign books, newspapers and magazines within three years of accession and their retailing within one year. This will throw open opportunities for foreign entities to market their multi-media and publication activities. It should be borne in mind that Chinese Government has the right to censor the cultural content which may amount to restrictive practice under the pretext of regulations. Some of the impacts of WTO on China’s cultural industries are as follows. By merger of China National Radio, China Radio International, Chinese Film Group Corp, a new entity known as China Radio, Film and Television Group has been floated. This is a demonstration of removal of Government’s political control over State owned institutions so that they could be run on commercial basis. Further, as a measure of copyright protection in the music industry, SONY was allowed to release its recordings in China. Thus Canadian pianist Glen Gould had the first opportunity to be introduced to Chinese audiences through SONY. This was in the year 2001. Hong Kong holds bright prospects for performing arts, Television, Film, IMAX, Multimedia, publishing of books and magazines, visual arts and arts and crafts. (The Canadian Trade Commissioner Service) China’s treatment of cultural imports China has a large deficit in its international trade of cultural products. It has more of imports than exports of products with copyrights. The ratio between imports and exports is 10.3:1. It has been found that the country has imported thousands of American movies but exported a very little quantity of Chinese movies to the U.S. as the ratio suggests. China fears that the adverse balance of trade in cultural products would not only impact upon economy but also on its traditional culture. It has opened its cultural market for foreign investors from non-governmental sector to actively participate in performing arts and in the production of TV films and feature films and to collaborate with the reform of state-owned cultural institutions to be run on commercial basis. China claims to have fulfilled promise to comply with WTO principles and that the regulations in respect of cultural institutions will give clarity to foreign investors about dos and don’ts in this particular domain. It also claims that the country’s authorities have overstepped the limits of foreign participation in the cultural sector by allowing their presence in the forbidden sectors of news reporting etc.The 2005 report says China will allow no more satellite television channels and it has prohibited foreign investment in the news media of the country. The regulations promulgated seek to ensure cultural security. (Greater China, 2005) Challenges for China in cultural sector posed by WTO membership China has predominantly a socialistic pattern of society with strong emphasis on inculcating a strict sense of discipline. The country has to carry forward its already established moral education, legal education and discipline education to further achieve a wholesome value of lofty ideals, moral integrity and value judgement. Since the culture plays very important role in this context, the country cannot afford to have negative effects of western culture and individualism penetrating the country sequel to WTO agreement though western culture can also help enhance the local culture through modernisation and technology. In its bid to preserve of the value of socialism, It took China nearly ten years to change the culture brought about during 1980s by western CD programs of sing and dance at the entertainment places of China. After the entry into the WTO, China’s cultural consumption was estimated to be RMB 550 billion by 2005. (WTO and Chinese Culture, Content 43072) Transition period Chinese age-old planned economy of the 20th century is transforming itself into market economy in the 21st century laying the foundation for which had been initiated at the close of 20th century itself. A strong market economy is the foremost requirement for absorbing the shocks as well as good effects of WTO entry. Cultural enterprises have to compete with multinationals with the lifting of non-tariff barriers by China in a phased manner. In the market economy at nascent stage there has been irrational allocation of factors of production with hardly 11% of the cultural sector representing large entertainment centres having been invested with 80% of the available capital. While this blind investment is yielding poor returns, the other 89% of the sector comprising of small and medium enterprises has been suffering for want of funds. This has to be corrected. Industrial infrastructure is not so sound since there has been maladjustment between import substitution and export orientation. The high tech areas of audio visual products and software have to undergo import substitution in order to rectify the maladjustment. WTO has banned subsides on import substitution. Hence the only way left to overcome the situation is to promote export oriented products through import substitution. Apart from the said maladjustment, there is no coordination between production and distribution of audio-visual products where timing is crucial. For example, the musical and other software products which are consumer goods and to be released in time are hampered by governmental barriers which reduce value of the products. Further, the enterprises having creative ability do not have production capacity for want of proper infrastructure. Besides, ownership of the cultural enterprises is collective with dependency on borrowed funds. It has been said that financial fund appropriation is a violation of WTO rules. The functioning of the country’s cultural industry is rather akin to workshop management style within households than a modern management system. Hence to survive the competition due to WTO entry, management of cultural industry must be modernised to improve production efficiency. (Heilongjiang Cultural Department) Strategy of China to develop cultural industry post-WTO China considers that its cultural industry is comparatively disadvantaged with that of developed countries in terms of management and marketing. Just at the time of WTO level itself, China lacks local support for local arts compared to the reception its people give for foreign audio-visual works which pose challenges not only to local culture but also cultural economy with no intellectual property rights protection to local artistes. However, WTO membership at the same time offers opportunities to Chinese culture industry. There is weak cultural consumption of RMB 80 billion as in 1999 with a potential of reaching up to RMB 300 billion shortly and later RMB 550 billion but with no significant input which was 0.02% in 1978 and 0.067% in 1999. In order to improve the lots of domestic culture industry against the onslaught of foreign cultural imports, China feels that its inputs in the domestic industry must be stepped up so that profits and cultural spirit are enhanced. Government must therefore relax its policies and infuse funds for the development of domestic culture industry. China would like to attract foreign capital for its cultural market but it will be at the cost of local culture as feared by the local culture industry. Therefore China has to strengthen its domestic culture industry by implementation of laws and polices as per prevailing international practices. One of them is not to allow more than 49% foreign equity in the cultural industry. (Kuanren, 2003) Comparative advantage Adopting the Comparative theory propounded by Ricardo, China’s official organ says that the country must identify the comparative advantages of its cultural industry and exploit them. Thus it can increase export of cultural products with national character. There are many products of high artistic value with low cost investment. It should also concentrate on labour intensive products due to its large labour force. . (Heilongjiang Cultural Department) Cultural security after WTO entry In order to ensure cultural security, China exhorts it people to welcome foreign culture and assimilate the essence to use it for China’s own cultural development rather than blindly resisting them. There must be social benefit and economic benefit in developing the cultural industry. Social benefit must be given priority in public interest and the two benefits must be judicially integrated. As the Information technology is the basis of international competition, China should not lag behind in development of I.T. and use for the protection of its cultural industry. (China Culture Newspaper) Film and TV industry post WTO-era China’s WTO agreement does not envisage openings for television and broadcasting for foreign sector though China has agreed to import twenty foreign films every year with the condition of revenue sharing and also audio visual products except feature films on contractual basis. 49% foreign ownership is allowed for setting up of cinema theatres. Domestic TV and Broadcasting are mostly state owned with the resultant poor capital and outdated equipments especially when these media are rather for idealism than for commercial exploitation. In a way, it is a part of knowledge industry according to a U.S. economist F.Machulp himself and it is supposed to be used for spreading knowledge and culture. Proliferation of TV stations and news papers numbered about 3,000 as in 2003 and 2,202 as in 1993 respectively which resulted in duplication and wastage of resources. Hence to consolidate the domestic presence against the onslaught of foreign presence post WTO, the Government policy is to limit their numerical growth and enhance their qualitative growth to survive competition. (Donghua) Postal Audio Video (AV) distribution China’s postal department’s latest entry into audio-video distribution sector has to be viewed in the aftermath of its WTO entry. The WTO agreement makes it obligatory for China to have maximum 49% foreign equity in the business of video and sound recordings, cinema ownership and operation which will pose fierce competition to China’s postal department’s newly acquired sector. The major brands in the world markets are Time Warner, Disney, Sony and Bertelsmann which enjoy 40% of world market for AV distribution. However, the aspiring foreign entities have to undergo three stages in the setting up of businesses in China for AV distribution. First, transferring copy right and second developing business operations through Joint ventures. In the final stage, they do the publicity, develop their own brand and set up their own network through mergers or acquisitions or joint ventures. China welcomes competition so that domestic enterprises can get the opportunity to learn from their advanced management techniques. The Government has spelt as many as ten ways of facing the challenge of foreign competition and develops its own domestic AV distribution business. (Jian’an) Periodicals market As early as in 1997, China’s Publishing Science Research Institute predicted that periodicals market of the country will be affected by the WTO entry in three ways i.e market access, tariff and intellectual property protection. Market access has both publishing access and distribution access. The WTO agreement has left it to the decision of member states to decide the opening level of service since periodicals are identified with ideology of the country. Thus periodicals will also cover telecommunications due to online periodicals. As China has already joined WIPO, it ensures protection of copy rights of the foreign entities operating in the country. China has to fully observe the TRIPS agreement in this connection. (abc88.com) Copy right industry Copy right has bearing upon books, recordings, music, films, videos, TV programming, computer programming etc. On the lines of bilateral agreement with the U.S. prior to its WTO entry, China is expected to offer similar openings to other countries. However its commitments vary on copyrights from sector to sector. It has offered to open its market for foreign entities through joint ventures with local firms in the audiovisual sector and computer software. The copy rights law of the country was expected to remove the double standards on copy rights that would go against the interests of the domestic works. (Jin Xu). Conclusion From the above, it would be apparent that is rather premature to assess the long-term impact of WTO’s entry on the China’s cultural industry at this stage. Unlike any other traditional industry involving buying and selling, the culture industry has the potential of serious ramification on the country’s culture if left unprotected. Every country has its own ideologies and they are greatly influenced by the media which is what cultural industry is all about. It is hardly eight years since the WTO accession of China took place and the statistics are yet to be firmed up. Most of the above findings are either forward looking or based on 1999 statistics when China had been engaged in WTO accession talks. Fortunately China had already initiated reforms as early as in 1978 and it was already in partial preparedness to meet eventuality of WTO entry in December 2001. Because of the advanced planning, China’s cultural industry has not had as much adverse impact as it would have been sans the well though-out preparedness. Besides, China had been having bilateral agreements with the U.S and the European Union prior to the entry into WTO. This must have already had the expected initial impact even before formally joining the WTO and afforded opportunity to correct adverse impacts now. As Fung (2006) says, “think globally and act locally”, should be the maxim for China when it comes to preservation of local culture and at the same time promotion of local culture outside China and patronization of foreign culture inside China. References Abc88.com, Prospects of Post-WTO Periodicals Market, accessed 10 February 2009< http://www.chinaculture.org/gb/en_focus/2003-09/25/content_43097.htm> Agarwal James and Wu Terry, 2003, China’s entry to WTO: global marketing issues, impact, and implications for China, accessed February 7, 2009 China Culture Newspaper, WTO and Chinese Cultural Security, accessed 10 February 2009< http://www.chinaculture.org/gb/en_focus/2003-09/25/content_43077.htm> Donghua Xu, China’s Film and TV industry after WTO entry, accessed 10 February 2009< http://www.chinaculture.org/gb/en_focus/2003-09/25/content_43080.htm> Fung Anthony, 2006, Think Globally, act locally, China’s rendezvous with MTV, Global Media and Communication [1742-7665(2006)2:1] Volume 2(1): 71–88 SAGE Publications (London, Thousand Oaks, CA, New Delhi: http://gmc.sagepub.com)/10.1177/1742766506061818 Gertler L Jeffrey, 2002. What China’s WTO Accession is all about, WTO Secretariat, accessed February 7, 2009 Greater China, 2005 Foreign Participation in ‘cultural industries’ limited, Asia Times August 23, accessed February 7. 2009 Kuanren Liu, 2003, How to Develop Culture Industry after WTO Entry< http://www.chinaculture.org/gb/en_focus/2003-09/25/content_43074.htm> Heilongjiang Cultural Department, Marketing Section, Culture Market in Transition-Period for WTO Entry, accessed 10 February 2009< http://www.chinaculture.org/gb/en_focus/2003-09/25/content_43075.htm> Jian’an, av.ccnt.com, Post WTO Challenges for Postal AV Distribution, accessed 11 February 2009, < http://www.chinaculture.org/gb/en_focus/2003-09/25/content_43092.htm> Jin Xu, Legal Daily, WTO Impacts on China’s Copyright Industry, accessed 10 February 2009< http://www.chinaculture.org/gb/en_focus/2003-09/25/content_43098.htm> The Canadian Trade Commissioner Service, Focus on: Cultural Industries, accessed February 7, 2009 < http://www.infoexport.gc.ca/docs/cn_chhktap02-6a-e.htm> Wang Jing, Framing Policy Research on Chinese `Culture Industry’: Cultural Goods, Market-State Relations, and the International Free Trade Regime, accessed February 7, 2009 WTO & Chinese Culture, Overview of TRIPS Agreement, accessed 11 February 2009, < http://www.chinaculture.org/gb/en_focus/2003-09/25/content_43069.htm> WTO and Chinese Culture, Content 43072, WTO Impacts on Culture Industry and Countermeasures, accessed 7 February 2009 < http://www.chinaculture.org/gb/en_focus/2003-09/25/content_43072.htm> Read More

Aspiring States are also to be encouraged to reduce tariffs and ease restrictions as preconditions for their admission for their entry in to the WTO. In fact China considerably liberalised its trade regime to join the WTO. (Gertler, 2002, p 10) Transparency and predictability The member States are expected to make all their respective trade related information like laws, regulations, court rulings accessible by prompt publications and to apply the laws impartially and to facilitate judicial review for rectification of mistakes wherever necessary.

While these measures are to ensure transparency, quantifiable tariffs instead of non-tariff measures such as quotas and licences ensure predictability. Thus market openings are accomplished for goods and services. Especially in goods, tariff rates are fixed with ceilings. China has undertaken to provide for transparency, uniformity and judicial review. China has committed to phase out all tariff barriers by 2010. By 2004, it is supposed to have achieved most of the measures envisaged. Thus tariff level would reduce by 15 % in respect of agricultural items, 0-65% for cereals and 8.

9% average for industrial goods which range from 0 to 47%, the maximum rates applicable for photographic and automobile items. In respect of services also, China has ensured transparency and predictability principle in respect of telecommunications, banking and insurance. (Gertler, 2002, p 10) Undistorted trade This principle allows a member to respond to countervailing duties and anti-dumping of other members by counter measures and also resort to safety measures at the time of unexpected flow of imports threatening the existence of local industry.

China has already committed itself to abide by WTO’s directives in respect of the above measures envisaged. (Gertler, 2002, p 12) Preferential treatment for developing countries Developing countries and those transitioning to market economies are allowed transition periods and the least developed countries are treated with even more flexibility to adjust to the new system of WTO. Though China did not get such a preferential treatment, it got some concessions in some segments of its trade regime such as gradual removal of quotas and import licences and gradual admission of foreign firms to conduct business inside the country.

Nevertheless, China agreed to have ceiling on production subsidies within the country and also not to grant export subsidies. It also agreed on immediate enforcement of TRIPS Agreement. (Gertler, 2002, p 10) With the above five principles of conduct as a member of the WTO, China was expected to ensure smooth multilateral relationship replacing bilateral relationships characterised by risks and uncertainties. Yet, even the WTO regime is expected to make China undergo painful experience due to the impact, the new measures would have on State owned enterprises which were making losses, under-developed agricultural farmers and several government funded projects in the country.

Besides, several millions of people and families were expected to lose employment and get displaced during the transitioning or adjustment period. One small consolation was that China had already begun the reforms much earlier and its people have already been feeling the impacts. (Gertler, 2002, p 15-16) Ever since China’s open-door policy from 1978 onwards and its transition from command economy to market economy, the country had already achieved high economic growth with its GDP increasing at 10 percent every year and as a result, China had already become the seventh largest economy at the time of its entry into the WTO.

From 1990 to 2000, China’s exports of merchandise increased by15 % per year and total value of its exports stood at US $ 249.3 billion while its imports amounted to US $ 225.1 billion. Thus China was already the eighth largest importing country and from a mere 10% in 1978, the trade sector had formed part of 43.9 percent of its GDP by 2000. During the same period, China also was attracting FDI with the result, the nil inflow as of 1978 grew to US$ 346.

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