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Chinas WTO entry to help India news
Our Economy Bureau
08 January 2002

Bangalore: Chinas recent entry into the World Trade Organisation (WTO) will provide a fresh impetus to the Chinese economy and will present an export opportunity for India. A majority of speakers at a plenary session, What Drives China? Learning from the Peoples Republic, in the Partnership Summit, organised by the Confederation of Indian Industry (CII) here, seems to express the above view.

Addressing the session, Indias former ambassador to China C V Ranganathan said while India was defensive about WTO, China was using its entry into WTO as a tool to quell opposition to economic reforms and to carry out reforms on many fronts including state-owned enterprises and the banking sector.

JM Morgan Stanley Securities vice-president Chetan Ahya said the take-off of the Chinese economy is likely after WTO restructuring and pointed out that most emerging economies of the world have grown at a faster rate and become globally competitive once they have become integrated and their products have become globally accepted.

CII senior advisor T K Bhaumik said by 2005, China will have to undertake 2,000 legislative changes to comply with WTO commitments. "When these changes are made, China will emerge as a transparent and a true-market economy. The country will grow at a phenomenal pace and there will be a significant shift in physical, financial and capital resources to China."

By 2005, Bhaumik said, there would be a drastic reduction in both industrial and agricultural tariffs in China. "While industrial tariffs would go down to 8.9 per cent, agricultural tariffs would be reduced to 17.5 per cent. With Indias current food-grain surplus situation, reduced agricultural tariffs will result in an attractive export opportunity for Indian food grain.

Moreover, he said, Chinas total imports are estimated to grow by an additional $350 billion to touch $600 billion by 2005 and if India is able to secure even a 1 per cent share of the additional market, Indias exports will double. "At the same time, however, having made huge commitments, China at the next ministerial meet in 2003 will demand similar concessions from other countries including India."

Describing a high-level of capital accumulation as an important reason for Chinas economic success, Ahya said contrary to popular perceptions, foreign direct investment accounted for just 10 per cent of Chinas capital accumulation and the remaining 90 per cent came from domestic sources. "Focus on the manufacturing sector, emphasis on primary education, a well-developed infrastructure, incentives for foreign investors, decentralisation of economic decision-making and reform of SOEs are the other factors responsible for Chinas economic achievements."

Commenting on SOE reforms, Ahya said China has used the divestment route to infuse fresh funds into SOEs, while at the same time ensuring that there was one strategic investor in each of the divested SOEs.

The Financial Express editor Sanjaya Baru said between 1978 and 1996, Chinas GDP had grown annually by 9 per cent. Much of this growth around 5 per cent had come from productivity. This productivity of the last two decades was based on the work done between 1950 and 1980 when China invested heavily in people and infrastructure and created the framework for growth.

Chinas increased share in world trade, he said, was mainly due to the export of labour intensive products like toys and textiles and much of Chinas economic progress can be attributed to labour-intensive industrialisation. "China had taught India that a large population need not be a liability and this so-called liability could be converted into an asset by empowering people with appropriate skills."

Commenting on Chinas thriving tourism industry, Manas Advisory chief executive Ravi Bhoothalingam said Chinas annual inbound and outbound tourist traffic amounted to 27 million and 9 million tourists respectively as against Indias 2.5 million and 4.8 million respectively. "By 2020, it is estimated that China will be the largest tourist destination in the world with inbound and outbound tourist traffic projected to be 120 million and 100 million tourists respectively."

In comparison, CII has set a target of 50 million inbound tourists and 50 million outbound tourists for India by 2020. Bhoothalingam attributed Chinas success in tourism to a conducive policy-making, well laid-out strategy, well-developed infrastructure and a friendly facilitation mechanism.

Earlier, CII past president and SRF vice-chairman Arun Bharat Ram introduced the theme of the session and said India has much to learn from China. "CII is convinced that India must engage with China and increase its trade with that country. In order to give a boost to that process, CII is planning to open offices in Hong Kong and Beijing in the near future and in Shanghai thereafter."




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Chinas WTO entry to help India