China should achieve its aim of doubling per capita GDP by 2010, but several key challenges still stand in the way, according to a WTO report released yesterday.
Beijing may need to change part of its focus from export-oriented manufacturing to expanding the services sector, which will employ more people who may lose out because of agricultural restructuring, the 303-page trade review said.
"Given the pace of economic growth and reform in the past two decades, there is no reason to believe that the goal of doubling GDP per capita by 2010 cannot be achieved," said the report, a copy of whose summary was originally leaked to the media last month. "There remain, however, a number of key challenges."
The review praised China for economic reforms that have helped cut by more than half the number of Chinese living in poverty and increase per capita GDP nine-fold.
"At the same time, however, income disparity has increased, especially between the coastal and inland regions and between urban and rural areas," the WTO said.
About 100 million new jobs will likely have to be created over the next decade to compensate for the restructuring of the farm sector and state-owned enterprises. The government also has to raise the quality of the labor force to move away from traditional, low-skilled and labor-intensive industries which are losing their competitiveness in foreign markets.
Another challenge is the widening disparity in incomes between cities and the countryside, as well as between different regions, which the government is trying to address with investment incentives. China also faces problems because its rapid growth is overtaxing the supply of land, water and energy, as well as causing environmental problems.
Although trade and investment barriers have declined considerably, in part due to commitments made by China when it joined the WTO in 2001, the government still intervenes to "manage" trade flows, including controls on its domestic supply, the report found.
The WTO report said China faced several other challenges, including currency policies, protection of intellectual property rights and slow liberalization of key service sectors such as banking and telecommunications.
US manufacturers contend that China is blatantly manipulating its currency, keeping it undervalued by as much as 40 percent to make Chinese goods cheaper for US consumers and make US products more expensive in China.
The government is concerned that a more flexible exchange rate could hamper economic growth and impact on stability and employment. But currency liberalization could allow China to operate a more independent monetary policy, encouraging low and stable inflation and allowing market forces a greater role, the report said.
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