An Analysis of the Prospect of the Impact of WTO
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Table 1 The Impact of China''s Entry into WTO on the Main Sectors of Manufacturing Industry and the Development prospect of These Sectors
Category of industry Characteristics of globalization Degree of marketization Degree of market opening Degree of industrial maturity Potential of domestic demand Comparative advantages impact of wto accession & medium- and long-term outlook
Food processing and manufacturing 0 ++ + + + 0 In general, the short4erm impact is not tangible. In the medium and long nm, this sector has certain development space and potential competitiveness, but has no visible comparative advantage (the sugar-making industry has a visible comparative disadvantage). This sector has certain characteristics of localization. Local production and sales account for a fairly large proportion and the impact of international trade is not great. As most food manufacturing sectors have high degrees of marketizahon, market opening and industrial maturity (tariff quotas and 70 percent of state-operated trade are preselwed for sugar), the import attack after WTO accession is not severe. After 2004 and 2005, tariff rates will drop significantly for dairy products, butter products and vegetable oils. The import permit and quota management for granulated sugar and fine white sugar are abolished upon WTO accession. Therefore, these sectors will face more severe import attacks.
Beverage making 0(+ ) + + + + + 0 In general, the short-term impact is not tangible. In the medium and long run, this sector has certain development space and potential competitiveness, but has no visible comparative advantage. This sector has strong characteristics of localization (more so for tea, natural spring water, liquor, yellow rice wine) and therefore the impact of international trade is not visible (because of high transport costs and small trade proportions). Most beverage sub-sectors (such as natural spring water and carbonated water) have high degrees of marketization, market opening and industrial maturity and will not face severe import attacks after WTO accession. Domestic market demand is high, but is mainly met by domestic production capacities. Tariff rates will drop significantly as from 2005 for high-grade wine and a few other products, and this will have certain impact on the domestic wine industry.
Tobacco processing 0 - -- 0 0 - In general, the short-term impact is not tangible. But in the medium and long run, this sector has little development space and is in a position of comparative disadvantage. This sector''s trend of globalization is not visible. Due to state monopoly, the degrees of marketization and market opening are not high. The degree of industrial maturity is average. Due to the impact of anti-smoking campaign, the potential of domestic market demand is average. In the long run, mixed type of cigarettes will further squeeze out the flue-cured cigarettes. The domestic producers of mixed type of cigarettes are basically in a position of comparative disadvantages and competitive disadvantages.In general, the short-term impact is n
ot tangible. But in the medium and long run, this sector has little development space and is in a position of comparative disadvantage. This sector''s trend of globalization is not visible. Due to state monopoly, the degrees of marketization and market opening are not high. The degree of industrial maturity is average. Due to the impact of anti-smoking campaign, the potential of domestic market demand is average. In the long run, mixed type of cigarettes will further squeeze out the flue-cured cigarettes. The domestic producers of mixed type of cigarettes are basically in a position of comparative disadvantages and competitive disadvantages.
Textiles and garments + ++ ++ ++ + ++ In general, there will be certain positive impact in the short run. In the medium and long nm, this sector has certain development space and enjoys tangible comparative advantage. This sector has certain tendency of globalization (processing trade accounts for a considerable proportion). It is a typical labor-intensive industry and has fairly high degrees of marketization, market opening and industrial maturity. Its domestic market demand has certain space for growth. Thanks to the cheap skilled labor, this sector enjoys visible comparative advantages, but does not have competitive advantage in high-grade outside material or in high-grade ready-made garments. Despite WTO accession, China will continue to face the quantitative restrictions of the United States before December 31, 2008. In addition, because of the green barriers and technical barriers in other countries, the textile and garment exports will not grow significantly at the initial stage.
Leather, fur and down products + ++ ++ ++ + ++ In general, the short-term impact will be positive. In the medium and long run, this sector will have certain development space and enjoy visible comparative advantage. This sector has a certain trend of globalization (processing trade accounts for a considerable proportion). It is a typical labor-intensive industry, with fairly high degrees of marketization, market opening and industrial maturity. The domestic market demand has a certain space for growth. Thanks to the cheap skilled labor, this sector enjoys visible comparative advantage. However, the domestic enterprises do not have competitive advantage in the making of high-grade leather shoes, thinks and bags.
Paper making and paper products In general, the initial impact is significant. In the medium and long run, this sector has certain developmem space, but has no visible comparative advantage. This sector has a certain degree of globalization, a fairly high degree of marketization, an average degree of market opening (imported products have a 20 percent market share), and a fairly low degree of industrial maturity. Potential domestic demand, especially for packaging cardboard, is significant. The non-timber paper has certain comparative advantage, while most other varieties have no comparative advantage. Ordinary newsprint and ordinary packaging cardboard have certain competitive advantage, but hi gh-grade newsprint, high-grade packaging cardboard and art printing paper are in a position of visible competitive disadvantage. Petroleum processing & petro-chemistry ++ -- -- - ++ - In general, the initial impact is significant. In the medium and long run, this sector has a fairly large development space, but is in a position of visible comparative disadvantage. This sector has clear characteristics of globalization, but a low degree of domestic marketization (state price control mechanism is prevalent), a low degree of market opening (there are strict control over market access for petroleum and finished products and over import trade), and a low degree of industrial maturity (noted for low level of technical equipment and for reliance on foreign core technologies). But domestic market demand is great. Petroleum and petrochemical poducts are typical resource- and capital-intensive industries. China is in a position of visible comparative disadvantage. China''s extraction cost of upstream oil resources is relatively high and the country is in a position of visible competitive disadvantage for the downstream petrochemical products.
Chemical raw materials & products 0 +(o) 0 0 + - In general, the initial impact is significant. This sector has certain development space in the medium and long run, but is in a position of comparative disadvantage. This sector has a tangible trend of globalization (not tangible for basic chemical raw materials), relatively high degrees of marketization and market opening (there exist certain government control over the trade and price of chemical fertilizers and pesticides) and a low degree of industrial maturity (the variety of bulk chemical raw materials is incomplete, and core technologies and equipment have to be imported). The potential of domestic demand is great. This is a capital-intensive industry. China has no comparative advantage. Most of its chemical products have no strong international competitiveness.
Pharmacy + + 0 - ++ -- In general, the initial impact is significant. In the medium and long run, this sector has a fairly large development space but is in a position of comparative disadvantage. This sector has a distinctive tend of globalizatien (except Chinese traditional medicines), a relatively high degree of marketization (market competition is fierce for patent medicines), an average degree of market opening and a Iow degree of industrial maturity (patented technologies have to be imported). It has a great potential of domestic demand growth. This sector is a technology-intensive industry and as such China is in a position of visible comparative disadvantage. As China will have to etbrce the Trade-Related Agreement of Intellectual Property Rights after WTO accession, China will have to face severe external attacks in the field of chemical drug making. China has only a limited degree of competitive advantage in Chinese traditional medicine, but will find it difficult to expand the market share.
Chemical fiber 0 + 0 - + - In general, the initial impact is
not significant. In the medium and long run, this sector has certain development space and potential competitiveness, but will be irt a position of comparative dlisadvantage. It has an average degree of globalization, a high degree of domestic marketization, an average degree of market opening, and a low degree of industrial maturity. This sector has a promising future in terms of domestic market demand growth, but will be in a position
of long-term comparative disadvantage. This is a capital-intensive industry. China is a leading chemical fiber producer with its production capacity ranking first in the world. But the competitiveness of its products with high added value and high technical contents is weak. The dependence rate of acrylic tibet, polyamide fiber and polyester fiber on international market are respectively 42 percent, 30 percent and 17 percent. During the 2001-2005 period, tariff rates on chemical fibers will drop by about 70 percent, and therefore this will have a significant impact on the domestic chemical fiber industry.
Rubber products + + + 0 + - In general, the initial impact is not significant. But in the medium and long run, this sector will be in a position of comparative disadvantage. It has certain characteristics of globalization, higher degrees of marketization and market opening, and an average degree of industrial maturity. With the development of the auto industry, the potential of domestic market demand will be great in the future (especially tires). However, this sector will be in a position of comparative disadvantage, it is a capital- and technology-intensive industry. While large transnational corporations, such as Goodyear, Michelin, Bridgestone and Kumho intensify their investment in China for tire production, they also accelerated their business consolidation in their home countries. In the early years of WTO accession, external attacks will not be severe due to quota restrictions. For example, before the quota for natural rubber is removed in 2004, the annual import growth rate will be 15 percent on the base figure of 430,000 tons. The tire industry will face import attacks after the quota and permit control is removed as from January 1, 2004.
Plastic products 0 + + + + + In general, the initial impact is not significant. In the medium and long mn, this sector will have certain development space and comparative advantage. It aim has certain potential competitiveness. This sector has no distinctive characteristics of globalization, but has a very high degree of marketization. Its degrees of market opening and industrial maturity as well as the potential of market demand are relatively high. It enjoys certain competitive advantage in China. Non-metallic mineral products - + 0 + + + In general, the initial impact is not significant. In the medium and long run, this sector has Certain development space and comparative advantage. As this sector is mainly engaged in the production of building materials, it has distinctive characteristics of localizatio
n. For the products such as cement glass and ceramics, physical attribntes determine their tradability. This sector has high degrees of marketization and industrial maturity and a great potentia of domestic demand. As this is a typical resource-intensive, energy-consuming and labor-intensive industry that has a short radius of transport, it is unlikely to face/！/ the attack of massive import. As a result, China enjoys certain comparative advantage.
Ferrous metallurgy and rolling + 0 0 0 + 0(-) In general, this sector will face certain impact in the early stage. In the medium and long nm, it has certain development space but has no comparative advantage (a few products will be in a position of visible comparative disadvantage). This sector is mainly engaged in iron and steel production. It has a distinctive trend of globalization. The international market is divided among several large transnational corporations. It has average degrees of marketization, market opening and industrial maturity. It has a great potential of domestic demand. It is a capital- and technology-intensive industry. China ranks first in the world in terms of iron and steel output, and has a heavy dependence on import of the products with high added value and high technical contents. Domestic competitiveness is weak in the products such as hot-rolled sheet, cold-rolled sheet, galvanized plate and stainless steel.
Non-ferrous metallurgy and rolling 0 0 - + + + In general, the initial impact is not significant. In the medium and long run, this sector has Certain development space and comparative advantage as well as certain potential competitiveness. It is a resource- and capital-intensive industry and is subject to the influence of resource endowment. Therefore, while it has no distinctive characteristics of globalization, it has an average degree of marketization and a low degree of market opening. Foreign investment is not significant. It has a certain degree of industrial maturity and a relatively large potential of domestic demand, it has a strong international competitiveness in the ordinary, metallic products such as lead, zinc, tin, stibium ancl magnesium and the rare-metallic products such as wolfram, molybdenurn and rare earth. For example, China''s production cost of magnesium is the lowest in the world and therefore has a strong intemational competitiveness.
Metallic products 0 + + + + + In general, the initial impact is not significant. In the medium and long run, this sector has Certain development space and comparative advantage and certain potential COmpetitiveness. This sector has no distinctive characteristics of globatization and its production concentration is not high. It has high degrees of marketization and industrial maturity and the potential of domestic demand growth is sigmficant. It is basically a labor-intensive industry. By way of its cheap labor, China has certain comparative advantage in terms of inte rnational competitiveness, it has certain competitiveness in the making of containers and metallic products for daily use.
General machine making + ++ + 0 + 0 In general, the initial impact is not significant. In the medium and long run, this sector has certain development space and potential competitiveness. But it has no clear comparative advantage. This sector has a clear tendency of globalization, an extremely high degree of marketization, and relatively high degrees of market opening and industrial maturity. The potential of domestic demand is significant. Some products such as boilers, bear/ngs, general-purpose spare parts and casts and forgings have certain competitiveness. In addition, some products such as turbines, cranes and metallic cutting machines have no competitiveness.
Special equipment making + + 0 0 ++ - In general, the initial impact is not significant. In the medium and long run, this seetor has considerable development space. But it will be in a position of comparative disadvantage. It has certain potential competitiveness. This sector has distinctive characteristics of globalization and a high degree of marketizatiorL But its degrees of market opening and industrial maturity are average and its potential of domestic market demand is enormous. As &n