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Asia divided on China's WTO entry

A Vietnamese hawker selling fruits passes by the place where Southeast Asian ministers will attend the 34th ASEAN Ministerial Meeting beginning today. Only 5.6 of foreign business people living in Vietnam regard China's entry into WTO as beneficial to the Southeast Asian country. PHOTO: AFP

The pending entry of China into the WTO has sharply divided Asian businesses, according to a regional survey as companies factor in the positives and negatives.

"Getting China into the organization is not the end of the challenge, but the beginning," said Political and Economic Risk Consultancy (PERC) in its latest Asian Intelligence report.

"It is a challenge that has major implications for every other country in Asia."

China's 15-year march to the WTO was left with just one main hurdle, a dispute over the ownership of insurance companies, after the latest round of negotiations which ended in Geneva on Friday.

But negotiators remained hopeful China's accession could be inked at a WTO conference in Doha, Qatar, in November.

A PERC survey of expatriate businessmen in 12 Asian economies on how China's entry will affect the region found an even split on whether there would be advantages.

In China and Taiwan the result was 100 percent that the outcome would be positive, followed by South Korea (92.3 percent), Japan (85.7 percent), Hong Kong (82.1 percent) and Indonesia and Thailand (66.7 percent).

The most negative views were held in Singapore, where only 40 percent see a positive impact, the Philippines (30.8 percent) Malaysia (9.1 percent), Vietnam (5.6 percent) and then India where no one saw any benefit at all.

Probably the most outstanding feature of the survey was that virtually no respondents in economies close to China were indifferent to China's membership," PERC said.

"It is a development that they have to factor into their own business equations."

From the mid-1970s when China was regarded as a mysterious, over-crowded country hiding behind a bamboo curtain it has become the largest trading partner for most Asian countries.

It also attracts more foreign direct investment than the rest of Asia combined, with the influx stimulated by the prospect that China's entry into the WTO will happen soon.

"China has grown from nowhere to become one of the largest trading partners for most countries in Asia ... In most cases it is a far more important external influence on Asian countries than Japan," PERC said.

In addition to a business impact, there was also the risk of an economically powerful China becoming a source of ethnic tension in the region.

"Many Asian countries already have a history of tensions between their native population and local ethnic Chinese," PERC said.

"The mainland's emergence as an economic and political power could add to these tensions, particularly if other Asian countries feel that China's economic success is somehow at their expense."

India which fought a border war with China in 1962 is wary of China as both a military and an economic threat.

Multinationals dealing with both countries are getting better returns from their Chinese investments and "India is justifiably afraid that China could become an even bigger competitive threat after it gains entry," the report said.

The survey showed Taiwan stands to gain more than any other place in Asia, and possibly more than China because of its heavy investment in production facilities in the mainland and the likelihood China's entry will open the WTO door for Taipei.

In addition to China's impact on Asia, the WTO itself will also face pressures, and getting Beijing to comply with WTO rules will not be easy, PERC said.

"Even if it wanted to, Beijing does not have the power to stop abuses outright.

"There will always be industries that try to test the limits of what is permissible under WTO rules, and China is likely to be involved in a large number of trade disputes once it gains entry.

"This will put the WTO's effectiveness as a body in question."
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