With China's membership of the WTO after fifteen years of negotiation, the country will undergo enormous changes in policies and laws that would be of great benefit to foreign companies doing business in China.

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With China’s membership of the WTO after fifteen years of negotiation, the country will undergo enormous changes in policies and laws that would be of great benefit to foreign companies doing business in China. With the decrease in tariff and quotas in both China and other countries such as the US, the opening of new markets, reduction in restrictions on foreign investors, amendments in laws on foreign funded firms and for the general public, encouragement from government and the fact China has to increase the quality of their products to international level will lead to the creation of new opportunities for foreign investors. Along with the new opportunities, as a result of the new international standard laws and policies China has to follow as it becomes a member of the WTO, its membership will also bring equality, security and stability for the foreign investors, encouraging them to invest in the ‘new’ China.

The most immediate effect from China’s membership of the WTO was the reduction in tariffs and quotas. Since the 1st of January, the average tariff dropped from the original 15.3% to 12% that affects more than 5,000 imported goods. It is then expected to drop a further 2% to 10% by 2005 (http://www.china.org.cn/english/BAT/29427.htm). For example, on average, the tariff on steel is expected to drop from 8.11% to 5.14%, while the tariff on transport vehicles are now 17.4% (http://www.china.org.cn/English/31152.htm). China has also cancelled quota licenses on products such as grain, wool, cotton and fertilizer. With these cancellations, foreign companies producing those products will be able to import more of their product into China, the fast growing market with increasing potential customers. With the expected falls in import quotas in other countries, many firms have been planning to move production sites to China. Even though the labor costs may be slightly higher in China than some other countries, but it will be more productive allowing the company to export more of their products (Einhorn 2001). With China’s continuous expanding market, the shipments to other countries from China are continuously improving as well. The shorter shipment time will be cost efficient and time efficient bringing benefits to the foreign companies that produce in China.

With China’s membership of the WTO, it would give greater access for foreign businesses in industries that were once highly protected from private organizations and foreign investments. These markets include telecommunications, insurance and banking. For example, foreign banks will now have the right to open up wholly owned subsidiaries anywhere in China and take deposits from the Chinese population in local currency. Foreign telecom operators will now be able to freely own parts of the Chinese networks (Einhorn 2001). With the accession to the WTO, China is expected to break up the telecom sector monopoly by introducing competition; both foreign and non-governmental investors are now allowed to invest in the Internet and telecom business. Apart from that, China would also open its tourist market allowing the overseas sides to take controlling stakes in the joint invested travel agencies by the end of 2002, and wholly owned foreign agencies will be allowed to operate by 2006 (http://www.china.org.cn/english/22435.htm). With the better employment benefits the foreign agencies can provide, they will be able to employ experienced employees to work for them making it a competitive advantage against its domestic competitors. The competitive advantage gained from the opening of new opportunities in different industries and not just tourism will lead to better market share and will benefit the foreign investors operating in China.

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To successfully become a member of the WTO, China must amend its laws and reduce its restrictions on foreign investors to meet the criteria for their membership in the WTO. Recently China has passed two draft amendments on two laws affecting foreign capital enterprises and Chinese foreign contractual joint ventures. According to the amendments, articles requiring foreign funded enterprises to keep balance of their foreign exchanges on their own will be deleted. The new law will also abolish stipulations requiring foreign funded enterprises to give priority to Chinese made raw materials for their production and report their production plans ...

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