China currently has regulations in place that, in theory, fulfill many of the market openings it promised for December 11, 2004 when it entered the World Trade Organization (WTO) three years ago. But several of those December 11 commitments remain unfulfilled, while for others--most notably distribution rights--implementation remains unclear, leaving many foreign companies unable to take advantage of changes. The chart below reflects our best efforts to track the status of China's year-three commitments as of the end of January 2005.
| China's WTO Commitments Due on December 11, 2004 |
Status and Relevant Laws
(links lead to previous CMI analysis) |
| Trading Rights |
- Allow foreign-invested and domestic companies to import and export goods
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| Distribution |
- Allow wholly foreign-owned enterprises (WFOEs) in wholesale, retail, and commission agents' service
- Allow franchising
- Allow direct sales
- Allow retailing and wholesaling of pharmaceuticals
- Allow retailing of refined fuel
- Allow wholesaling of printed matter
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- Regulations issued, but full implementation delayed pending clarification from the PRC Ministry of Commerce (MOFCOM). (Regulations on Management of Foreign Investment in the Commercial Sector)
- Done. FIEs can expand their scope to include franchising. (Administrative Rules on Commercial Franchising)
- Late. Direct sales draft regulation under consideration.
- Late. Rules for domestic firms exist, but MOFCOM is drafting separate rules for foreign participation.
- Late. Rules for domestic firms exist, but separate rules for foreign participation are forthcoming.
- Done, early (2003). (Rule on Management of Foreign-Invested Book, Magazine, and Newspaper Distribution Enterprises)
|
| Telecom |
- Allow up to 25% foreign investment in basic services (such as voice and fax) joint ventures (JVs) in Beijing, Guangzhou, and Shanghai
- Allow up to 49% foreign investment in wireless JVs in most major cities
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- Done, with large capital requirements and geographic restrictions.
- Done. One 49% foreign wireless joint venture is under review for approval. (Administrative Regulation on Foreign-Invested Telecom Enterprises)
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| Construction |
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| Banking |
- Open local currency business to foreign participation in Beijing; Kunming, Yunnan; and Xiamen, Fujian
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- Done, with Shenyang, Liaoning, and Xi'an, Shaanxi, added ahead of schedule.
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| Insurance |
- Allow FIEs to provide health, group, and pension/annuities insurance to both foreign and Chinese clients
- Permit up to 51% foreign investment in insurance brokerage JVs
- Lift all geographic restrictions
- Lower to 5% of primary risk the amount foreign reinsurance companies are required to reinsure with China Reinsurance Co.
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- Done. Aviva plc is approved to offer health insurance.
- Done.
- Done.
- Not yet confirmed. China does not annually announce reductions, although it has kept similar commitments in past years.
|
| Securities |
- Allow securities JVs, with up to 33.3% foreign investment, to underwrite A shares and to underwrite and trade bonds and B and H shares
- Allow up to 49% foreign investment in fund management JVs
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- Done. Two securities JVs were approved in 2003, and two in 2004.
- Done. UBS is awaiting approval for a 49% stake in a Chinese fund manager.
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| Freight Transport Services |
- Allow foreign majority rail JVs
- Allow wholly foreign-owned road enterprises
- Allow wholly foreign-owned storage and warehousing enterprises
|
- Done. (Revised Catalogue Guiding Foreign Investment in Industry)
- Done. (Second Revision to Administrative Regulations on Foreign Investment in Road Transportation Industry)
- Late. Only foreign majority storage and warehousing enterprises currently permitted.
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| Repair, Maintenance, and Leasing |
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- Late. MOFCOM regulations promised in 2003 not yet released.
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| Packaging |
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| Tourism |
- Lower capital requirement for joint venture travel agencies and tour operators to $300,000
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| Autos |
- Raise the level of auto manufacturing foreign investment that requires provincial government approval to $90 million
- Eliminate import quotas
- Lower tariff on imported vehicles
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- Late. New auto joint ventures still require approval of the National Development and Reform Commission. (Automobile Industry Development Policy)
- Done. (Implementing Rules on the Administration of Automatic Import Licenses for Auto Products)
- Done. Tariffs on imported autos dropped to 30% on January 1.
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| Tariff-Rate Quotas |
- Fix quota allocation for designated agricultural products
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- Done. Quotas bound January 1, 2004.
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China has also gone beyond its WTO commitments in several areas. It has allowed foreign firms that are active in Hong Kong to set up WFOEs early in advertising, travel agencies, and convention and exhibition services under a trade agreement with Hong Kong. And in the entertainment industry, it has allowed foreign majority ownership in theater management and up to 49 percent foreign investment in film production JVs.
