The Chinese divide

When China became the 143rd member of the World Trade Organisation (WTO) five years ago, the world hoped the giant economy will lift the veil of secrecy and deal with the outside world in a transparent manner. Also expected was its adherence to WTO discipline in external trade, internal business and labour-related policies. China, on its part, had committed itself to letting foreign companies compete in more sectors, including the highly protected ones like finance and distribution. Five years down the line, the track record has been patchy.

On the positive side, China has altered or eliminated over 3,000 laws and regulations and has lowered import duties to open up its market to the world. China's average tariffs worked out to around 9.9 per cent in 2005, against about 15.3 per cent at the time of its entry into the WTO. While the industrial tariffs have been scaled down to 9 per cent, those on farm products have been slashed to 15.3 per cent. Moreover, the country has granted foreign trade rights to all individuals, private business houses and foreign-invested companies. The foreign-funded banks, too, have been allowed to operate in China from this month.

However, misgivings continue to exist about the country's poor enforcement of intellectual property rights. As a result, the multinational firms doing business in China have to take special measures to safeguard their intellectual property. The liberalised world seeking economic growth with social justice is also not happy with the human rights and labour standards, which have worsened in the post-WTO era. A sizeable chunk of Chinese farmers is a hapless lot as their operational holdings are being handed over to industry. According to estimates, about 2 million farmers are deprived of land every year. What is worse, the much- needed transparency and fair play in production and external trade are still a far cry as reflected by the growing trade friction between the Chinese and foreign businesses. This is borne out also by the growing incidence of anti-dumping cases against China. While only about 15 per cent of all such cases in the world were targeted at China in 2001, the proportion doubled to 30 per cent last year and further to 37 per cent in the first three quarters of this years.

However, the net gainer seems to be the Chinese macro-economy. The country has emerged as the world's third-largest trader with its share in global trade surging from 3.9 per cent to 7.7 per cent in five years. The country's gross domestic product (GDP) growth, too, has averaged 9 per cent during this period. But at the same time, the lot of the country's poor has worsened. A World Bank study has shown that the rich is becoming richer and the poor poorer. Besides, the emphasis on investment in the manufacturing sector has left public services like healthcare and education under-financed. But then this is perhaps the cause as well as the effect of China's failure to move towards democratisation even after shedding its isolation from the global community.