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. 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 % Years % Years %

GROWTH RATE OF CHINA’S INDUSTRIAL SECTOR( ) year % year % year %

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 (Billion USD) year (Billion USD) year (Billion USD) FDI Contributed 27.8% of the total value added in industrial sector in 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 LDCs of Asia, 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%

China’s Border Tariff Protection is Lower Than its Trading Partners ProductsChina’s tariff Tariff China Encounters natural resources1.9%3.1% agric.pro.(primary)15.5%23.8% agric.pro.(processed)15.4%24.5% textiles12.9%17.7% manufactures6.1%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 Better Per capita income (RMB) Increase by urban7,730yuan9,421yuan+22% rural2,475yuan2,936yuan+19% Warning: Per Capita income (2004,rural) was only one US dollar per day!!

The Chinese are Housed Better Per Capita Living Space urban area25 square meters rural area28 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 % RMB 21.3 billion % RMB 30.2 billion % RMB 70.4 billion % RMB 92.3 billion % RMB 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 !