Chamber China Committee's study mission to the capital learns latest developments on China's WTO entry

With China's imminent entry into the WTO and the approval of the "10th Five Year Plan" by the National People's Congress in March, 2001, the timing of the Chamber's Feb. 14-15 mission to Beijing couldn't have been better.

Led by Chamber China Committee Chairman and DragonAir CEO Stanley Hui, and Chamber Director Dr Eden Woon, the 22-member delegation collected the latest information on trade and investment policies in China firsthand, and exchanged views with authorities on practical business issues.

Ministry of Foreign Trade and Economic Cooperation (MOFTEC) Assistant Minister An Min (above, centre) told the delegation that China's negotiations to enter the WTO were still ongoing. Although some progress has been made, some outstanding issues still need to be discussed. For the forthcoming 16th Session of the Working Party for China's Accession meeting at the end of February, Mr An said he did not expect the coming session would yield any significant breakthrough given the change of leadership and the lack of mid-level negotiators in place in the United States.

Last year China amended several laws and regulations to comply with WTO rules, but there have been worries that preferential treatment for foreign investors will be abolished after China's entry into the WTO as part of these amendments. However, Mr An stressed that these incentives will be liberalised to allow all investors to enjoy the same treatment.

Therefore, it is only the concept of "preferential" treatment that will no longer exist, he said, adding that businesses can expect to see a more open, fair and transparent system for both domestic and foreign businesses. Future "preferential" treatment will be sectoral rather than for "foreign" or Hong Kong enterprises.

Mr An also told the delegation that although Hong Kong has long been the number-one investor in the Mainland, the era of preferential treatment has passed. Still, this should not adversely affect Hong Kong investors, he said, citing the SAR's proximity to the Mainland, its long relationship, and cultural and language similarities. As such, Hong Kong businesses don't need to ask for special market access before foreign businesses, but instead should concentrate on preparing for the challenges.

Lastly, on the issue of Taiwan's WTO membership and Hong Kong's role in the economic relationship between the Mainland and Taiwan, Mr An said China did not object to Taiwan's membership into the WTO as a separate customs area, but Taiwan's entry must come after China, as the sovereign state.

According to China's statistics, the trade volume between Taiwan and the Mainland amounted to US$30.5 billion in 2000, and the accumulated volume since 1978 amounted to US$199.9 billion. Over 48,000 Taiwan invested enterprises operate in the Mainland, and more than 50 per cent of listed companies in Taiwan have investments in the Mainland, almost all of which has passed through Hong Kong.

Although China and Taiwan's WTO entry means investors will no longer need to go through Hong Kong, the territory's role will not diminish, Mr An said. Instead, it will shift to provide essential services -- finance, insurance, legal, etc -- to those investors.

The delegation also discussed changes to taxation laws with State Administration of Taxation Deputy Director Hao Zhaocheng (right, centre). On the issue of the unification of income tax for foreign and local enterprises, Mr Hao said that the main purpose of any taxation system reform plan is to provide a fair environment for enterprises.

The administration has studied the possibility of unifying income tax for foreign and local enterprises for years and is now working on the concrete rules, he revealed. The three basic concepts are: comply with WTO rules; continue necessary preferential taxation treatment for foreign enterprises according to the needs of national development; and to provide a transition period for any changes.

In a separate meeting, Policy and Regulation Department of the General Administration of Customs Deputy Director General Meng Yang explained to members the New Customs Law and introduced the development process of the 15 export processing zones.

In their meeting with the International Department of the People's Bank of China Deputy Director General Ge Huayong, delegates learned that China's state-owned banks were planning to implement various measures to remain competitive in the post-WTO era. These efforts include attracting more talented staff ?as well as investing more in personnel training ?reducing redtape on revising rules and regulation, and providing greater transparency in the sector.

Besides meeting Central Government authorities, the delegation also called on the Beijing Vice Mayor Liu Zhihua (right) and the Zhongguancun Science Park Administration Committee.