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To: voop who wrote (67980)	2/26/2000 11:34:00 PM
From: Ruffian	Respond to of 152472

China WTO entry delay threatens reform - analysts By Bill Savadove SHANGHAI, Feb 27 (Reuters) - A delay in China's entry to the World Trade Organisation (WTO) would slow reforms needed to make the economy more efficient and undermine trade and foreign investment. With so much at stake, China and its major trading partners are still likely to push through a deal this year despite some opposition from the U.S. Congress and Beijing's failure so far to reach agreement with the European Union, financial analysts said. Leaders of a U.S. Senate committee said last week the trade agreement Washington made with China last November was in peril after Beijing threatened to attack Taiwan if it delayed talks on reunification. Meantime, negotiations between China and the EU ended on Thursday with no agreement and no date set for them to resume. ''I think there is a fair chance that China will still get in this year,'' said Chi Lo, chief Asia economist for HSBC in Hong Kong. ''But it is not going to be an easy process.'' ''WTO brings very strong discipline for China to keep pushing through economic reforms,'' he said. ''If WTO is delayed, it means that discipline is not going to be enforced.'' TRADE, FOREIGN INVESTMENT THREATENED The direct impact on the economy would be even more tangible. China's foreign trade, both imports and exports, could stagnate as tariffs remained in place. ''There will be negative impact on foreign trade if China fails to join the WTO this year,'' said an official of Shanghai Orient International Group, an exporter of garments, shoes and industrial products. The firm, Shanghai's biggest exporter, could find foreign markets blocked by quotas, he said. It would also have less business as China's own barriers stayed. China's foreign trade volume was around $360.7 billion last year with a surplus of $30 billion, according to official figures. Investment in China would probably slow as foreign companies waited to enter a market with more transparent rules and a level playing field, analysts said. ''Foreign investment inflows would probably not be as strong if the WTO deal is delayed,'' said Lo of HSBC. ''That would certainly help reduce the balance of payments surplus that we are expecting this year.'' China's foreign direct investment fell to $40.4 billion last year from a record $45.6 billion in 1998. Even with a delay to China's WTO entry, the expected fall in the balance of payments surplus would not be enough to tip the scales in favour of a currency devaluation, analysts said. DELAY MIXED FOR LISTED FIRMS For Chinese companies, delay to WTO entry would give them more time to prepare for foreign competition, analysts said. Although that might benefit firms which would be hurt by WTO entry, it would also delay changes that should help make them more profitable in the long run, they said. ''A delay of China's entry to WTO will put off corporate reforms and have a negative impact on China's stock market,'' said an analyst at Shenyin & Wanguo Securities. ''China's listed companies have felt the pressure of WTO and this has helped many firms to make efforts to improve their performances.'' Analysts expect Chinese and Hong Kong stocks to fall sharply if the U.S. Congress fails to grant China permanent normal trade relations, a crucial step for Beijing to join the WTO. But the tumble should be short lived if Internet issues which have powered the markets higher remained buoyant, they said. Delay to China's entry could also make a number of global stock offers by its biggest state firms less appealing to foreign investors, since underwriters have touted the companies as benefitting from WTO, analysts said. China's three major oil companies, its biggest steel producer and number two telecommunications firm all plan to list overseas this year. ''The demand could disappear,'' said an analyst at a foreign securities firm. ''All these deals are linked with each other, so if WTO doesn't go through it will cost China politically and economically.''