CHINA,IN THE SAME BOAT WITH THE SOUTH FOR INDUSTRIAL DEVELOPMENT

WU JIA-HUANG

VICE-CHAIRMAN,

CHINA WTO RESEARCH CENTER

11th session

General Conference of UNIDO Industrial Development Forum

28 Nov.2005,Vienna

Mr.Chairman,

Thank you for providing me the opportunity to speak on the forum <Industrial Development, Trade, and Poverty Alleviation through South-South Cooperation> .

With your permission, I would like, first of all, to speak about the industrial development of my home country, China.

Importance of Industry in China’ GDP

Years 1990 37%

Years 2000 43.6%

Years 2004 45.9%

GROWTH RATE OF CHINA’S INDUSTRIAL SECTOR(2002-2004)

year 2002 10.0%

year 2003 11.8%

year 2004 11.5%

The Chinese Saved 44% of their Income

China’s GDP(2004)

Few countries could beat China’s high saving rate.

44.2% for capital formation 2.8%

Net export

53% for consumption

CONTRIBUTION OF FOREIGN INVESTMENT

FDI TO CHINA

year 2002 52.7(Billion USD)

year 2003 53.5(Billion USD)

year 2004 60.6(Billion USD)

FDI Contributed 27.8% of the total value added in industrial sector in 2004.

Over half of the FDI was from China’s separate customs territories.

China’s Experience in Industrial Development

In my perspective, there are two factors, which determine China’s fast industrial development.

One is successful mobilization of domestic resources through saving.

The other is continuous encouragement of inflow of FDI.

From Industrial Development to Trade Expansion

China’s industrial development

is closely related with trade

expansion .

China’s Trade Expansion of Manufactures

year 2002, by 23% increase

year 2003, by 35% increase

year 2004, by 37% increase

Over 50 percent of the industrial exports are manufactured by foreign investors.

China’s Trade with the South (2004)

Trade with Africa, grew by 87%

Trade with Latin America, grew by 46%

Trade with ASEAN, grew by 33%

Trade with India, grew by 80%

South-South Trade is not marginalized.

Zero Tariff Approach Towards LDCs

China applies zero tariff rates on

major products originated from

--- 4 LDCs of Asia,

--- 25 LDCs of Africa.

Trade Policy Choice When acceding to the WTO, China made

a painful but also gainful choice of its

trade policy between

---Encouraging competition, and

---Over-protecting domestic industries.

China’s Tariff Rates Reduced

12.0%11.0%10.4% 9.9%

43.2%

15.3%

23.0%

16.4%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

1992 1996 2000 2001 2002 2003 2004 2005

China’s Border Tariff Protection is Lower Than its Trading Partners

Products China’s tariff

Tariff China Encounters

natural resources 1.9% 3.1%

agric.pro.(primary) 15.5% 23.8%

agric.pro.(processed)

15.4% 24.5%

textiles 12.9% 17.7%

manufactures 6.1% 8.9%

Why China Became a Big Trading Partner?

Firstly, China is doing its best to lower trade

barriers.

Secondly, China is providing, all possible

facilities to both Chinese and foreign

businessmen, who combine the best world

resources and the cheapest domestic labor,

and make the Chinese products very

competitive in the world market.

China’s Welfare Gains from Growth of Industry and Trade

The Chinese are earning more, and living better .

The Chinese are living BetterPer capita income (RMB)

2002 2004 Increase by

urban 7,730yuan 9,421yuan +22%

rural 2,475yuan 2,936yuan +19%

Warning: Per Capita income (2004,rural) was only one US dollar per day!!

The Chinese are Housed Better

Per Capita Living Space

urban area 25 square meters

rural area 28 square meters

More Revenue Resources The government revenue are getting

bigger because of more production,

trade and income.

A 15.4% increase was recorded in 2002,

A 14.9% increase was recorded in 2003,

A 21.6% increase was recorded in 2004.

Tariff Reduction Leads to Revenue Loss?

Tariff Revenue accounts for 7.2 percent of China’s central budget.

Would tariff reduction cause serious loss of revenue?

Not really, in case of China.

Lower Tariff Rates, More Customs Revenue

Year Average Tariff Tariff Revenue

1992 43.2% RMB 21.3 billion

1996 23.0% RMB 30.2 billion

2002 12.0% RMB 70.4 billion

2003 11.0% RMB 92.3 billion

2004 10.4% RMB 104.4 billion

More Expenditure for Social Welfare

Consequently, China has more to expend

on social welfare and pension.

Expenditure on this budget item had

a 39.8% increase in 2002,

a 33.5% increase in 2003, and

a 13% increase in 2004.

Welfare Institutions Today, China has 87,000 welfare institutions

and enterprises, together with their 2 million

staff members engaged in welfare and relief

activities. In year 2004,

26 million poor people benefited from various

relief programmes.

Another 17 million poor people received

temporary assistance.

Much remains To Be Done In China On Poverty Alleviation

There are still as many as 60 million

poverty striken Chinese today , to

whom relief is absolutely necessary.

The government is heavily burdened.

Doha Development Round

As Doha Round is named a “Development Round”, I would like to speak on two specific items of the Round related to our Forum,

---Agriculture, and

---Trade facilitation.

Agriculture, A vital Issue

If the trade distorting subsidies are removed in the “North”, the “South” farmers would receive welfare gains as much as US 40 billion annually by selling their products at a better price.

Small Chinese Farmers

The Chinese Farmers are very small (as most of the/farmers in the south are ).

They till a piece of land of 0.7 hectare by average vis-a-vis big American farmers who own 200 hectares and European farmers with 20 hectares.

Poorly Protected by Tariff

The Chinese farmers are poorly protected on the border by a tariff

of 15.8%,

while the American farmers protected are by 23%,

the European farmers, by 73%.

With Little Domestic Support

China’s domestic support for farmers is tiny, composing only 1.5% of farmers’ income.

The US support, composing 18% of income,

EU support, 33% of income, Japan’s support, 56% of income.

China Supports G.20 The US, European Union, Japan … ,

they seems unwilling, (or unable?) to cut down their huge domestic support and subsidies, for sake of development of the South.

China and G.20 are in the same boat on agriculture issue in Doha Round.

Trade Facilitation Import and export accounts for 70%

of China’s GDP.

Every year the Chinese authorities have 35 million shipments of goods to clear at ports for import and export.

Trade facilitation, means a great deal……

Trade Facilitation has been discussed in Doha Round. The following is required :

transparency of rules and regulations,simple documentation,low service cost,smooth clearance of goods,quick SPS inspection ,efficient co-ordination among various

agencies

Reform in China’s Customs

Some 8 years ago, a reform was launched on the customs clearance system in China.

Clearance procedures were cut by half.

Clearance hours were shortened from 96 hours to 48 hours at seaport, and from 72 hours to 14 hours at airport.

An Electronic Clearance System is currently experimented in 17 customs in China.

The clearance hours are expected to cut further by two-thirds in foreseeable future.

Best Wishes for Doha Round

For trade interest of the South, for their development concern, let us hope for the best of the Doha Round.

Let us work hard together .

Thank you !