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Estimating the Effects of China’s Accession to the World Trade Organisation

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  • Mai, Yinhua
  • Horridge, Mark
  • Perkins, Frances

Abstract

Accession to the World Trade Organization (WTO) marks a new era in China’s economic reform. In this new era, state capital will lose its dominance of heavy manufacturing and key services industries, heralding significant productivity gains in these so-called strategic industries. This study uses a computable general equilibrium model of China to estimate the economic benefits from China opening its heavy manufacturing and key services industries to private foreign and domestic capital. To estimate the likely productivity benefits of WTO entry, the study draws on China’s experience in the early to mid 1990s when the withdrawal of state capital from light manufacturing industries led to a massive inflow of foreign direct and local investment into these light manufacturing industries. The study anticipates that opening the previously protected heavy manufacturing and key services industries to non-state capital will boost productivity by encouraging new competition and foreign direct investment (FDI) inflows into these industries. As a result of the expected productivity gains in these previously protected strategic industries, this study concludes that WTO accession will not adversely affect production and employment in these industries. This result contrasts with the findings of most general equilibrium analyses of China’s WTO entry that focus only on resource reallocation impacts following the removal of tariff and non-tariff barriers. In the long term, productivity gains related to WTO accession should place China in a position to become an important production base for capital-intensive manufactured products as well as light manufacturing.

Suggested Citation

  • Mai, Yinhua & Horridge, Mark & Perkins, Frances, 2003. "Estimating the Effects of China’s Accession to the World Trade Organisation," Conference papers 331081, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:331081
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    References listed on IDEAS

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    Cited by:

    1. Eromenko, Igor, 2010. "Accession to the WTO. Computable General Equilibrium Analysis: the Case of Ukraine. Part I," MPRA Paper 67476, University Library of Munich, Germany.
    2. Yinhua Mai & Peter B. Dixon & Maureen Rimmer, 2010. "CHINAGEM: A Monash-Styled Dynamic CGE Model of China," Centre of Policy Studies/IMPACT Centre Working Papers g-201, Victoria University, Centre of Policy Studies/IMPACT Centre.
    3. Yinhua Mai & Philip Adams & Mingtai Fan & Ronglin Li & Zhaoyang Zheng, 2005. "Modelling the Potential Benefits of an Australia-China free Trade Agreement," Centre of Policy Studies/IMPACT Centre Working Papers g-153, Victoria University, Centre of Policy Studies/IMPACT Centre.
    4. Rae, Allan N., 2008. "China’s agriculture, smallholders and trade: driven by the livestock revolution?," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 52(3), pages 1-20.
    5. Yinhua Mai, 2005. "The MONASH-Multi-Country (MMC) Model and the Investment Liberalisation in China's Oil Industry," Centre of Policy Studies/IMPACT Centre Working Papers g-150, Victoria University, Centre of Policy Studies/IMPACT Centre.
    6. Mai, Yin Hua & Adams, Philip & Dixon, Peter & Menon, Jayant, 2010. "The Awakening Chinese Economy: Macro and Terms of Trade Impacts on 10 Major Asia-Pacific Countries," Working Papers on Regional Economic Integration 66, Asian Development Bank.
    7. Jiao Wang & David G. Mayes & Guanghua Wan, 2005. "Income Distribution and Labour Movement in China After WTO Membership: a CGE Analysis," WIDER Working Paper Series RP2005-38, World Institute for Development Economic Research (UNU-WIDER).
    8. Hübler, Michael, 2009. "Energy saving technology diffusion via FDI and trade: a CGE model of China," Kiel Working Papers 1479, Kiel Institute for the World Economy (IfW Kiel).
    9. Yin Hua Mai, 2003. "Effects of Reducing Tariffs and Endogenous Productivity Growth," Centre of Policy Studies/IMPACT Centre Working Papers g-139, Victoria University, Centre of Policy Studies/IMPACT Centre.
    10. repec:zbw:bofitp:2005_018 is not listed on IDEAS
    11. Wim Naudé & Riaan Rossouw, 2011. "Export diversification and economic performance: evidence from Brazil, China, India and South Africa," Economic Change and Restructuring, Springer, vol. 44(1), pages 99-134, April.
    12. Eromenko, Igor, 2011. "Accession to the WTO. Computable General Equilibrium Analysis: the Case of Ukraine," MPRA Paper 67535, University Library of Munich, Germany.
    13. Terrie L. Walmsley & Thomas W. Hertel & Elena Ianchovichina, 2006. "Assessing The Impact Of China'S Wto Accession On Investment," Pacific Economic Review, Wiley Blackwell, vol. 11(3), pages 315-339, October.
    14. Wang, Jiao & Mayes, David & Wan, Guanghua, 2005. "Effects of WTO membership on income distribution and labour movement in China : A CGE analysis," BOFIT Discussion Papers 18/2005, Bank of Finland, Institute for Economies in Transition.
    15. Allan Rae, 2008. "China's agriculture, smallholders and trade: driven by the livestock revolution? ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 52(3), pages 283-302, September.

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    More about this item

    Keywords

    International Relations/Trade; Agricultural and Food Policy;

    JEL classification:

    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • F15 - International Economics - - Trade - - - Economic Integration
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models

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