Chinas entrance in the WTO and its effect on major financial institutions in China

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Introduction

Fifteen years of hard bargaining and endless multilateral and bilateral negotiations finally culminated in China 's accession in to the World Trade Organization as its 143rd member . This is regarded as the most remarkable economic achievement since the initiation of a more open economy in 1978 under Deng Xiapong . China 's WTO accession has huge impact in the domestic , regional and would economies . China wanted the WTO membership to enhance its economic integration with the world economy as an emerging world

power . The WTO on its part could no longer exclude China as it now produced significant volumes of the world trade The WTO embodies free market principles while China embraces communist ideals . The Chinese government had undertaken reforms that would see it become a socialist market economy and WTO accession provided an impetus in this direction . Such reforms would not be complete without touching on the financial sector . This was a very sensitive sector under strict government control and limited foreign ownership . WTO regulations would oversee a gradual reduction in government ownership and control and relaxation of barriers to entry in the sector

This touches China 's economy before and after WTO accession . It also gives the procedure of attaining the WTO membership . Finally the explores the impact WTO status has on the financial sector

China 's Economy Prior to WTO Accession

The People 's Republic of China undertook major reforms to open up its command economy in 1978 after Deng Xiapong gained leadership of the Chinese Communist Party . This was on the realization that a planned economy had numerous demerits , which led to the country 's lagging behind its Southeastern Asia neighbors . The same growth disparities could be witnessed all over the world between various ideological blocks such as Western and Eastern Europe and North and South Korea . The Cultural Revolution had also left the masses in the country agitated and demanding for change . These reforms cutting through most sectors of the economy set the foundation upon which the China 's entrance into the WTO was based

In agriculture , which formed the economy 's backbone and major source of employment , key changes were initiated such as loosening up of the commune system and encouragement of individual effort . Some reforms were also carried out in the state owned enterprises where they were allowed a limited degree of output , sales and research determination . In the financial sector , institutions were set up and markets established . The People 's Bank of China assumed the role of the central bank and stopped offering other banking services . Most of the banks set up were specialized to offer banking services to specific sectors such as agriculture , construction , industrial and commercial and financial sectors . Numerous non-bank financial institutions were also set up (Chow , Gregory , 2002 : 40

The continued reforms through the 80s and 90s had great expansionary effect on the country 's economy . Foreign trade grew from 20billion to 475billion over that period . It over took Japan to...