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CHINA,IN THE SAME BOAT WITH THE SOUTH FOR INDUSTRIAL DEVELOPMENT
WU JIA-HUANG
VICE-CHAIRMAN,
CHINA WTO RESEARCH CENTER
11th session
General Conference of UNIDO Industrial Development Forum
28 Nov.2005,Vienna
Mr.Chairman,
Thank you for providing me the opportunity to speak on the forum <Industrial Development, Trade, and Poverty Alleviation through South-South Cooperation> .
With your permission, I would like, first of all, to speak about the industrial development of my home country, China.
Importance of Industry in China’ GDP
Years 1990 37%
Years 2000 43.6%
Years 2004 45.9%
GROWTH RATE OF CHINA’S INDUSTRIAL SECTOR(2002-2004)
year 2002 10.0%
year 2003 11.8%
year 2004 11.5%
The Chinese Saved 44% of their Income
China’s GDP(2004)
Few countries could beat China’s high saving rate.
44.2% for capital formation 2.8%
Net export
53% for consumption
CONTRIBUTION OF FOREIGN INVESTMENT
FDI TO CHINA
year 2002 52.7(Billion USD)
year 2003 53.5(Billion USD)
year 2004 60.6(Billion USD)
FDI Contributed 27.8% of the total value added in industrial sector in 2004.
Over half of the FDI was from China’s separate customs territories.
China’s Experience in Industrial Development
In my perspective, there are two factors, which determine China’s fast industrial development.
One is successful mobilization of domestic resources through saving.
The other is continuous encouragement of inflow of FDI.
From Industrial Development to Trade Expansion
China’s industrial development
is closely related with trade
expansion .
China’s Trade Expansion of Manufactures
year 2002, by 23% increase
year 2003, by 35% increase
year 2004, by 37% increase
Over 50 percent of the industrial exports are manufactured by foreign investors.
China’s Trade with the South (2004)
Trade with Africa, grew by 87%
Trade with Latin America, grew by 46%
Trade with ASEAN, grew by 33%
Trade with India, grew by 80%
South-South Trade is not marginalized.
Zero Tariff Approach Towards LDCs
China applies zero tariff rates on
major products originated from
--- 4 LDCs of Asia,
--- 25 LDCs of Africa.
Trade Policy Choice When acceding to the WTO, China made
a painful but also gainful choice of its
trade policy between
---Encouraging competition, and
---Over-protecting domestic industries.
China’s Tariff Rates Reduced
12.0%11.0%10.4% 9.9%
43.2%
15.3%
23.0%
16.4%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
1992 1996 2000 2001 2002 2003 2004 2005
China’s Border Tariff Protection is Lower Than its Trading Partners
Products China’s tariff
Tariff China Encounters
natural resources 1.9% 3.1%
agric.pro.(primary) 15.5% 23.8%
agric.pro.(processed)
15.4% 24.5%
textiles 12.9% 17.7%
manufactures 6.1% 8.9%
Why China Became a Big Trading Partner?
Firstly, China is doing its best to lower trade
barriers.
Secondly, China is providing, all possible
facilities to both Chinese and foreign
businessmen, who combine the best world
resources and the cheapest domestic labor,
and make the Chinese products very
competitive in the world market.
China’s Welfare Gains from Growth of Industry and Trade
The Chinese are earning more, and living better .
The Chinese are living BetterPer capita income (RMB)
2002 2004 Increase by
urban 7,730yuan 9,421yuan +22%
rural 2,475yuan 2,936yuan +19%
Warning: Per Capita income (2004,rural) was only one US dollar per day!!
The Chinese are Housed Better
Per Capita Living Space
urban area 25 square meters
rural area 28 square meters
More Revenue Resources The government revenue are getting
bigger because of more production,
trade and income.
A 15.4% increase was recorded in 2002,
A 14.9% increase was recorded in 2003,
A 21.6% increase was recorded in 2004.
Tariff Reduction Leads to Revenue Loss?
Tariff Revenue accounts for 7.2 percent of China’s central budget.
Would tariff reduction cause serious loss of revenue?
Not really, in case of China.
Lower Tariff Rates, More Customs Revenue
Year Average Tariff Tariff Revenue
1992 43.2% RMB 21.3 billion
1996 23.0% RMB 30.2 billion
2002 12.0% RMB 70.4 billion
2003 11.0% RMB 92.3 billion
2004 10.4% RMB 104.4 billion
More Expenditure for Social Welfare
Consequently, China has more to expend
on social welfare and pension.
Expenditure on this budget item had
a 39.8% increase in 2002,
a 33.5% increase in 2003, and
a 13% increase in 2004.
Welfare Institutions Today, China has 87,000 welfare institutions
and enterprises, together with their 2 million
staff members engaged in welfare and relief
activities. In year 2004,
26 million poor people benefited from various
relief programmes.
Another 17 million poor people received
temporary assistance.
Much remains To Be Done In China On Poverty Alleviation
There are still as many as 60 million
poverty striken Chinese today , to
whom relief is absolutely necessary.
The government is heavily burdened.
Doha Development Round
As Doha Round is named a “Development Round”, I would like to speak on two specific items of the Round related to our Forum,
---Agriculture, and
---Trade facilitation.
Agriculture, A vital Issue
If the trade distorting subsidies are removed in the “North”, the “South” farmers would receive welfare gains as much as US 40 billion annually by selling their products at a better price.
Small Chinese Farmers
The Chinese Farmers are very small (as most of the/farmers in the south are ).
They till a piece of land of 0.7 hectare by average vis-a-vis big American farmers who own 200 hectares and European farmers with 20 hectares.
Poorly Protected by Tariff
The Chinese farmers are poorly protected on the border by a tariff
of 15.8%,
while the American farmers protected are by 23%,
the European farmers, by 73%.
With Little Domestic Support
China’s domestic support for farmers is tiny, composing only 1.5% of farmers’ income.
The US support, composing 18% of income,
EU support, 33% of income, Japan’s support, 56% of income.
China Supports G.20 The US, European Union, Japan … ,
they seems unwilling, (or unable?) to cut down their huge domestic support and subsidies, for sake of development of the South.
China and G.20 are in the same boat on agriculture issue in Doha Round.
Trade Facilitation Import and export accounts for 70%
of China’s GDP.
Every year the Chinese authorities have 35 million shipments of goods to clear at ports for import and export.
Trade facilitation, means a great deal……
Trade Facilitation has been discussed in Doha Round. The following is required :
transparency of rules and regulations,simple documentation,low service cost,smooth clearance of goods,quick SPS inspection ,efficient co-ordination among various
agencies
Reform in China’s Customs
Some 8 years ago, a reform was launched on the customs clearance system in China.
Clearance procedures were cut by half.
Clearance hours were shortened from 96 hours to 48 hours at seaport, and from 72 hours to 14 hours at airport.
An Electronic Clearance System is currently experimented in 17 customs in China.
The clearance hours are expected to cut further by two-thirds in foreseeable future.
Best Wishes for Doha Round
For trade interest of the South, for their development concern, let us hope for the best of the Doha Round.
Let us work hard together .
Thank you !