Impact of WTO accession on China s mining industry


Impact of WTO accession on China's mining industry

One of the key impacts of China's WTO accession will be on the current institutions, operating modes and marketing practices of China's mining industry. The WTO rules require the establishment of new institutions and mechanisms for the Chinese mining industry, which will fundamentally change the relationship between enterprises and the government. Government support in terms of low interest government loans and debt-equity swaps will be under the scrutiny of the WTO rules. Commercial loans will have to be provided under commercial arrangements, which means no bad debt write-offs will be possible. This will greatly impact on the old-fashioned state-owned mining enterprises which have relied heavily on government support. In addition, WTO-driven changes will also take place in the administrative systems and modes of management of China's mining industry.

WTO entry will also have an impact on the brain- drain, while the improvement of the investment environment will stimulate foreign interest in greater participation in the mining industry. One of the entry strategies will be localization, which means that foreign participants in the market will employ local specialists effectively to capture the local market. Retaining local talents in the state-owned mining operations will present a great challenge.

The reduction of entry barriers as a consequence of WTO entry will lead to an influx of foreign investment and import. The advantages of foreign mining companies, such as capital, technology, management, information and marketing networks will manifest themselves in the competition with local mining enterprises for advantageous mining resources. In fact, this competition has been ongoing since the 1990s and many local mining operations have collapsed as a result. The reduction of tariffs as an inevitable by-product of the post- WTO era will weaken the level of protection erected by tariffs. According to the projection by the China Exploration and Engineering Bureau, imports will increase as the level of tariff protection weakens (see Table 6.8.1 below).

Table 6.8.1: Forecast changes in the rate of tariff protection after China's WTO entry

Year

Rate

2000

4.7%

2002

4.1%

2004

3.5%

2006

3.2%

2010

3.2%

Source: China Exploration and Engineering Bureau

In addition, output, employment and foreign trade will also change (see Table 6.8.2)

Table 6.8.2: Forecast changes in China's mining industry
 

Output

Employment

Import

Export

Metal mining

“2.5%

“1.7%

0.6%

“3.9%

Non-metal mining

1.6%

0.4%

6.7%

“2.2%




Doing Business with China
Doing Business with China
ISBN: 1905050089
EAN: 2147483647
Year: 2003
Pages: 648
Authors: Lord Brittan

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