The Impact of China's Induction into the WTO:Focusing on the Problem of Employment Surveys

No.81
May 2000
Research Fellow Jianmin Jin

1. In the 20 years since China began its "reform and liberalization" policies, the Chinese economy's level of foreign dependence has more than doubled. Further, almost 70 percent of China's trade surplus is earned through the U.S.; China's reliance has reached such a point that without the U.S. market, China cannot survive. Additionally, almost half of China's exports are carried out through foreign companies. The effect of this kind of trade and foreign funding on the growth of China's economy is substantial. Consequently, China's willingness to compromise through market liberalization and its desire to join the WTO stems from (1) the necessity of securing access to world markets, (2) the need to establish a framework to handle issues of trade protectionism thought to be targeted at China's export growth, and (3) a desire to project an international image of "continued reform and liberalization policies" in order to attract foreign funding that is indispensable to China's reforms and growth.
2. As stipulated by U.S.-China agreements, changes accompanying China's inclusion in the WTO can be summarized as follows: (1) China must undertake market liberalization (including goods, services, and investment) in fairly short order and on a large scale. (2) Market liberalization fundamentally consists of the one-sided abolition of China's trade and investment barriers, while other members of the WTO have no need to alter their own tariff or non-tariff barriers. (3) After entry into the WTO, TRIMs (trade-related investment measures) will be banned, thus making it possible for foreign businesses to rapidly increase the domestic sale of manufactured goods. (4) In accordance with the WTO's rules of transparency, upon entry China will become beholden to the WTO's statutes, regulations, and the transparency and stability of management stipulated therein.
3. As a result of market liberalization, China's industrial geography will change greatly. Labor-intensive industries and those industries involved with technological and capital accumulation are predicted to grow, but those industries protected by high tariffs and quotas-such as the commercial grain industry, the automotive industry, financial services, and the communications industry, among others-are expected to fall victim to inferior competitiveness. With the import of low-priced high-quality goods and the intensification of competition by foreign businesses, employment adjustment figures are predicted to be between several million to tens of millions of workers. With a cumulative total of around 17 million jobs that will be lost as a result of the reform of government-owned businesses and the restructuring of surplus labor in the agriculture industry, it is clear that employment is the most serious problem surrounding China's entry into the WTO.
4. Considering the necessity of business competition at the global level, it is clear that the conventional view-that the establishment of employment countermeasures, unemployment benefits, and other safety nets are sufficient-will not hold, and that a more proactive approach is necessary. This report proposes the following countermeasures: (1) eliminating policy burdens for businesses while improving policies for sustaining employment as a result of preparations for a competitive environment; (2) policies that increase job absorption through the abolition of regulations and the growth of efficient industry and businesses; (3) measures for employment creation via the reform of business-establishment regulations, support for venture businesses, and support for technological development, as well as other countermeasures such as providing an employment-adjustment buffer, systemizing emergency import-restriction mechanisms, and establishing an industrial adjustment fund.

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