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 Article Published in The Economic Times  30 August, 2001

Will China change for the better?

China’s impending accession to the World Trade Organisation (WTO) has raised huge expectations that the Chinese will become more rule-bound and transparent in their behaviour. With 3.9% share of world trade, China is now seventh largest exporter in the world and foreign businesses are expecting for more commercial fairness. They hope their contracts will have greater sanctity and terms of trade will be governed by the WTO rules. The award of 2008 Olympic games to China has also raised the hope that the Chinese leadership will develop a respect for human rights and personal freedoms by curtailing the arbitrary state power.

While there are strong reasons to believe that the Chinese leadership is willing to accommodate claims of the emerging social and economic groups out of newfound prosperity, ban of social groups like Falun Gong and a harsh action against their members suggests China still treats social plurality as a national threat. Even in the release of Chinese-Americans, Li Shaomin and two others on charges of spying for Taiwan, China treated them like bargaining chips. Historically Chinese have been master strategists and do not lose an opportunity where they can get something in return. They would not mind attaining their objective even through backdoor manipulation, as could be seen in the transfer of missile technology to Pakistan. In spite of November 2000 pledge of nonproliferation, China shipped components to Pakistan and has also been indulging in surreptitious transfer of sophisticated technology with an avowed objective of keeping its neighbour (India) in check.

Then there are genuine internal constraints, which cast doubt on China becoming rule-savvy. China’s domestic economy has become more and more fragmented, riddled with local protectionist measures from roadblocks to sophisticated technical standards. WTO undertakings require open access throughout the Chinese territory for goods, services and capital, whereas each of 27 provinces and the four vast province-level cities has erected barriers on flow of goods and agricultural commodities. WTO membership will affect the inefficient agricultural sector and state enterprises throwing millions out of jobs. Threat of social instability may force the Chinese leadership to intensify repression of those raising their voice. Press freedom may suffer further. Would China in that case follow the WTO rules and terms of accession or create hurdles by going back on its commitments? Experience of US farmers after Chinese lifting of ban as part of WTO negotiations in 1999, on import of US Pacific Northwest suggests that Chinese have created difficulties of one sort or another. 

 Then there is lack of proper judicial infrastructure, as judges do not have experience in dealing with international disputes. Local communist leadership also influences those judges. There is a fierce regional competition and sometimes even central leadership has felt helpless before the power of the regional barons, who dictate decision-making in disputed cases. A shortage of law graduates has further exacerbated the problem. Many judges do not hold a law degree, so adjudicators have no experience of working under common or civil law systems and understanding of finer nuances of interpretation of laws.

Therefore the world community should not expect a sudden turn in the behaviour of the Chinese after China’s entry in WTO. They are likely to fight tooth and nail to settle commercial disputes in their favour even in cases of blatant disregard of contracts and other rules and regulations. China will likely create its own loyal groups within the trade body and in the long run try to carve out an area of influence. Chinese leadership has been raising specter of fierce nationalism at home, which it can exploit in any international dispute. They are also not afraid of taking any harsh action, as they have demonstrated in the seizing of American spy plane and arrest of the entire crew or in slapping a retributive tariff on import of Japanese mobile phones, cars and air-conditioners. China already thinks like the next superpower and has been aggressively expanding its area of political and economic influence.

There is an important lesson for India, which had quickly negotiated to say ‘yes’ to the Chinese membership. With a tiny share (0.6%) of world trade, India hardly wields any influence in the trade body. Shorn of the leadership title of the NAM or third world, as many of these countries have embraced free market policies, India is a loner looking now for some influence in the SAARC community. Beset by a poor international image and seen to be a tortoise in liberalizing, India cannot count for many friends in the 142-member body. Rise of the Chinese will create another pole, to the disadvantage of India, as it will bring many changes in the way disputes are raised and resolved.