ERICY mentioned in this piece from WSJ($):
Review:New China Opportunities If WTO Accepts Zhu's Plans
Dow Jones Newswires -- April 14, 1999
By Shawn W. Crispin and Bruce Gilley
-
WASHINGTON (Dow Jones)--In fits and starts, China has been trying to gain membership to the General Agreement on Tariffs and Trade, and later its successor, the World Trade Organization, for the past 13 years. Earlier this month, Beijing brought its most far-reaching offer yet to the negotiating table: It promised to dismantle trade barriers on goods ranging from pork to life insurance. If an agreement is struck as a result of those concessions, it could represent a sea of change in how business is conducted in China, reports (the Shroff column of) the Far Eastern Economic Review in its latest edition published Thursday.
Although doubts linger concerning U.S. congressional foot dragging on the deal, the broad form of an agreement has been reached. And both the Clinton administration and Chinese Premier Zhu Rongji hope it will be finalized in time for the WTO's annual conclave of the group's 134-member countries in Seattle this November. Indeed, the latest Chinese offer marks a sharp break from the past, making huge market-opening concessions in industries that have been largely off-limits to foreign competition. For years, powerful domestic interests in the banking and insurance sectors and the Ministry of Information Industry's monopoly on telecommunications had prevented China's foreign-trade ministry, known as Moftec, from opening markets to foreigners. But under heavy pressure from reform-minded Zhu, Moftec's most recent proposal to the U.S. broke critical new ground in these three contentious areas.
Proof of China's commitment to liberalizing its economy won't be apparent until it puts its pledges into practice, but even critics concede that the length it says it is now willing to go to gain WTO entry is stunning. And most importantly, after years of frustration in trying to wring access to China's markets, U.S. business leaders themselves are set to lead the charge on Congress to win approval for China's plan. "The deal represents a major breakthrough for American farmers, manufacturers and service providers," says Calman Cohen, president of the Emergency Committee for American Trade, a Washington-based lobbying group. "And it will have resounding support from the U.S. business community."
During the first two months of 1999, foreign investment into China slid 48% compared with the same period a year earlier. By opening key industries, Zhu hopes to reverse that trend. His offers in the area of telecommunications may open the biggest opportunities for foreign investors.
Under the deal worked out with Washington, Beijing would eliminate all tariffs on information-technology products - now averaging 13.3% - by 2005. It would also adopt the key principle of not legislating in favor of any one telecommunications technology. Beijing agreed to license a national mobile-phone network using U.S.-developed code division multiple access, or CDMA, technology in addition to the European global system for mobile, or GSM, standard it currently uses.
Under the plan, China Unicom would be awarded the first licence this year, with a $10 billion capital investment. That network would capture an estimated 35 million subscribers by 2003. There are currently 25 million mobile-phone subscribers in China, but the figure is growing by 1 million a month.
U.S. winners could include Motorola Inc. (MOT) , Lucent Technologies Inc. (LU) and Qualcomm Inc. (QCOM), while Samsung (Q.SSN) of South Korea could also benefit by supplying equipment to the new CDMA system. However, while Washington heralded this as a victory for U.S. firms, a difficult U.S.-Europe distinction is increasingly blurred.
For example, Motorola already sells to GSM networks in China, while Ericsson (S.ERC) is gearing up to compete for new CDMA business. Ericsson's nine Chinese joint-venture telecom-equipment makers will make the Swedish firm a favoured supplier for CDMA networks because of local content. "We have the right to build CDMA networks in China if we want, so we may be one of the suppliers to the first network," says Per Bengtsson, Ericsson's spokesman in New York.
Zhu's efforts to open up China's insurance industry, meanwhile, are long-standing. As the governor of Shanghai, he allowed the American International Group, or AIG, to set up shop in 1994, making it the only foreign insurance company operating in China at the time. In doing so, he has said he met severe bureaucratic resistance and "was accused of being a traitor to my country." Although still grumbling, Zhu's critics likely lack the political clout to derail the deal, which will open huge opportunities for European and American insurance companies alike. China's newly outlined policy promises a new era of freedom for foreign insurers, which at present are restricted to conducting business in Shanghai and Guangzhou.
|
