DATE=11/16/1999 TYPE=BACKGROUND REPORT TITLE=CHINA W-T-O NUMBER=5-44767 BYLINE=AMY BICKERS DATELINE=HONG KONG INTERNET=YES CONTENT= VOICED AT: INTRO: Monday's breakthrough bilateral trade pact (concluded Monday) between Washington and Beijing will have a wide variety of effects on businesses and workers in China. As Amy Bickers reports from Hong Kong, the deal will strengthen some companies and sectors, while others will have to contend with heavy foreign competition. TEXT: The long-awaited trade deal is a vital step in China's drawn-out campaign to join the World Trade Organization. While Beijing still has to seal deals with other nations, the two way trade pact will have a tremendous impact on China's economic landscape. It will increase competitive pressures, but it will also mean many more products on store shelves. Ken Davies (PRON: DAVIS), a Hong Kong-based economist, says that as American products find their way to Chinese stores, prices will fall on items and services such as cars, furniture and mobile telephone rates. /// DAVIES ACT /// It means that consumers in China are going to have much more choice in what they buy in the shops. They will be able to buy American cars with American credit so that major companies will be able to bring in their own credit companies like GM Card and Ford Credit. So it will increase the range of goods and the number of films they can see from abroad. So it is generally a very good thing for consumers in China. /// END ACT /// Chinese banks and insurance companies will also have a run for their money, since they will have to compete with U-S financial institutions. Chinese hotels will also face a squeeze, since the accord allows for wholly owned U-S hotels to open their doors in just three years. More western food products - including staples such as corn and wheat - will also be for sale. But economist Li Kui Wai, of Hong Kong's City University, says not all Chinese consumers will encounter the new products and services. /// LI ACT /// Some of the coastal regions will have the opportunity to consume Western agricultural products, while for the remote areas, it will be some time for them to catch up. Probably this will also lead to some reform of agricultural production and output. For other industries such as I-T (information technology), more firms and individuals will begin using this industry and there will be bigger demand and foreign investment in this area. /// END ACT /// Mr. Davies says China's countless farming communities are likely to face tougher times, since the tariff on agricultural goods will drop to 14-and-a-half percent from the current rate, which is more than double that figure. /// DAVIES ACT /// What this deal does is to present quite a serious challenge and part of the result of it will be that a lot of farmers stop farming and move to the cities and engage in other pursuits. So yes, in the short term it is a challenge, in the long term it will be met by readjustment of production. /// END ACT /// Major readjustment will also take place in China's state-owned sector, where many unproductive firms now languish. Mr. Davies says reformers in the Chinese government hope the foreign competition will accelerate a drive to create leaner, meaner public firms. /// DAVIES ACT /// What it does is to take an axe to the inefficient enterprises by lowering tariff barriers, providing access, distribution and trading rights to foreign companies to bring their products into China and to compete head on in the Chinese consumer market with domestically produced goods. So those state owned enterprises that are extremely inefficient and have been able to pass their goods off on consumers will no longer be able to do so. Many of them will go out of business eventually. /// END ACT /// That is one of the most politically sensitive issues related to China's membership in the world trade body. Many in the country fear that as companies close, unemployment will rise rapidly and lead to social unrest. (SIGNED) NEB/AB/FC/JO 16-Nov-1999 05:56 AM EDT (16-Nov-1999 1056 UTC) NNNN Source: Voice of America .
