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What were the principal costs and benefits to China of accession to the WTO?
Cost Benefit
Imports grew by 24% annually Real GDP growth accelerated from 8-9%
China was subjected to several punitive level to 10-11% annually.
safeguards - Quotas imposed by WTO Exports grew - toys, textiles, footwear and
member countries etc. furniture
Agriculture subsidies were limited to 8.5% of FDI inflow increased
production cost Remittance inflows increased threefold
China had to relax over 7,000 tariffs, quotas Foreign Exchange reserves grew rapidly
and other trade barriers
On balance, was it a good thing for China? On balance, was China's WTO accession a good
thing for the United States? Was it a good thing for India?
WTO Accession was good for China, as it enjoyed one of the best decades in global
economic history. Its exports grew almost five folds and GDP grew almost four folds.
For United States: US investors earned a return For India: It opens up both opportunities as well
of 13.5% in China, compared with 9.7% in as threats to Indian industries. Since both share
worldwide. US enjoys lower tariffs compared to same export market, China imposes competition
Brazil or India. US firms faces competition from to Indian export. Chinese may dump cheap
Chinese firms . Huge supply of Chinese goods goods in the Indian market threatening local
may dampen the manufacturing sector produce firms. On the positive side, Chinas huge market
leading to unemployment. provides a potential market for Indian goods.
Will China overtake the US as the world's largest economy?
China is growing at a pace higher than USA. Based on IMF and World Bank data related to
2015, the GDP at exchange rate shows USA ahead of China. Although, it shows that China
has already overtaken USA in terms of Purchasing Power Parity.
Country Million Annual $ Billion Country Growth Per Capita $ Billion Country
2015 Growth 2015 Rank 2015 Income $ 2015 Rank
(%) 2015
2010-2015
(%)
Forbes
US believes
321 that China will
0.75 overtake 1US in 2018
17,947 2.6 and 55,805 17,947 2
Bloomberg
China predicts0.52
1,367 it to be 2026.
10,982 Following
2 are the
6.9 reasons
7,990 19,392 1
which suggest China will overtake US:
China is already worlds largest trading country
Worlds highest GDP growth at 9.5% and labour productivity growth
at 8.5%
Rural to urban migration supporting growth with reduction in market
share of SOEs
High FDI resulting in better technologies coupled with investment in
infrastructure
What are the principal threats to continued Chinese growth, and how should the
Chinese leadership respond?
Problem Solution
Lack of energy and raw materials to keep pace Investing in countries live Sudan, Angola, Latin
with the growing economy demand American countries etc. resulting in dependence
on other countries for source of raw materials
Global Financial crises reduced growth rates of (i) Provide subsidies to promote private
export from 25% to (-)1.65%. Thousands of consumption
plants were closed and 130 Million lost jobs (as (ii) Focus on key growth industries like iron and
case relates to 2010) steel, equipment manufacturing, petrochemical,
automobile etc.
Increasing inequality and unemployment Lay down a plan such as progressive taxation,
sustaining rural areas and promoting financial
inclusion.
Expensive medical and healthcare causing poor
(i) Subsidise for impoverished people
to suffer (ii) Establish low cost primary health services
Wen Jiabao adopted a new development strategy because-
(iii) Reform and regulate pharmaceutical market
Independent innovation capability for China is not strong
Slow growth of agricultural production and farmers income
Banking and finance sectors latent risks are increasing
Rising inequality and unemployment
Lack of energy and raw materials to keep pace with the growing economy demand
Need of better structuring and solution to healthcare, education and housing
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