China markets face WTO deadline

China, under mounting pressure from the US and EU to reform its financial systems and loosen control over its currency policy, is expected to witness stiffer competition from foreign banks once it opens its markets in compliance with World Trade Organization (WTO) requirements.

On the sidelines of the World Bank and IMF annual meeting in Singapore in September, this year, the EU and the US had detailed negotiations with the Chinese representatives on the need for wide-ranging trade and currency reforms. (See: EU wants China to open its markets)

They had argued that keeping the yuan artificially weak to boost exports, had made it harder for Western firms to compete with China whose trade surplus had been ballooning at the expense of Western counties.

China's trade surplus rose to a record $22.9 billion in November, taking the year's total surplus to an all-time high $156.52 billion, latest figures released by the customs department showed. (See: China's trade surplus hits $157 billion; November surplus at record $22.9 billion)

China, which was admitted to the WTO five years ago, is required to lift its controls that have limited the access of foreign banks to retail banking. If China fails to open its banking sector, it faces the threat of a case against it from the WTO. The US is expected to mount a case against China as American banks have been asking for a dilution of the limits to their participation in the retail segment.

A US Trade Representative report on China complying with the WTO requirements was handed over to the US Congress yesterday pointing out the areas where China has not done enough in areas of such as intellectual property right protection, easing of subsidies and currency reforms.

The issues of trade and currency are expected to be discussed next week when US representatives, including the treasury secretary Hank Paulson and Federal Reserve chairman Ben Bernanke, will be in Beijing later in the week.