China's trade with world surges ninefold after 20 years in WTO
Beijing keeps guard on state enterprises to Washington's chagrin
BEIJING -- In the 20 years since joining the World Trade Organization, China has increased its foreign trade by ninefold, vaulting ahead of the U.S. to become the top player, but little progress has been made on reforming entrenched state-owned enterprises.
Armed with inexpensive labor, China has steadily increased exports by assuming the role of the world factory since joining the WTO in December 2001. It has also increased imports by gradually reducing tariffs.
Its exports jumped 870% and imports surged 740% from 2001 to 2020, according to the United Nations Conference on Trade and Development. Total trade value surged 810%, far faster than an 180% increase for overall global trade.
But the lack of progress on such contentious issues as domestic subsidies and the special treatment of state-backed companies is likely to become an obstacle as China pursues its global ambitions by joining the 11-nation Pacific-rim trade pact known as the CPTPP.
Chinese President Xi Jinping touted his country's progress on trade liberalization during a speech Thursday at the China International Import Expo in Shanghai.
"China has fully delivered on its accession commitments," Xi said. "Its overall tariff rate has been cut from 15.3% to 7.4%, lower than the 9.8% accession commitment."
Right after joining the WTO, labor-intensive products, such as clothes, accounted for the bulk of Chinese exports. But in recent years, China has increased shipments of high-tech items, such as personal computers and smartphones.
China now accounts for 13% of global trade, up 4% from 2001, surpassing the U.S. in 2013. China is now the top trading partner for many countries, including Japan.
While the U.S. remains reluctant to join free trade pacts in the Indo-Pacific due to domestic opposition, China has aggressively pursued membership in such arrangements.
It is a member of the 15-member Regional Comprehensive Economic Partnership, which was negotiated over eight years and is slated to go into force in January.
In September, Beijing applied for membership in the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership, which demands a much higher level of market liberalization than the RCEP.
By claiming a place in trade pacts, China appears to want to position itself better in its rivalry for world supremacy with the U.S.
"China will take an active and open attitude in negotiations on issues such as the digital economy, trade and the environment, industrial subsidies and state-owned enterprises," Xi said in Thursday's speech, showing a willingness to meet the CPTPP requirements.
But it is uncertain whether China has the determination to do so. The international community has taken issue with China's special treatment of state-owned enterprises, which is banned under the CPTPP as detrimental to free trade.
Chinese Vice Commerce Minister Wang Shouwen has dismissed criticism leveled against state-backed businesses.
"The SOEs are independent market entities with self-management and self-financing," Wang said in a speech last month. "They participate in fair market competition, with no preferential policies attached."
Some experts in China argue that Beijing could win membership with minimum reform at those companies using the CPTPP's exemptions granted on national security grounds.
Chinese Commerce Ministry spokesperson Shu Jueting declined to elaborate on the use of national security exemptions, saying "we will share swiftly if we have any new information."
China has often carved out exemptions for itself. Even though China is now the world's second-largest economy, it continues to enjoy developing-nation status in the WTO. Wang has brushed aside U.S. criticism of the designation, citing regional disparities in economic growth.
As for market opening, China also faces other hurdles, such as the special treatment of domestic companies in government procurement and data controls.
In the WTO's review of China's trade policy conducted last month, member nations raised over 2,500 objections to China's practices, up 16% from the previous review in 2018, indicating growing concerns.