Select Committee on Foreign Affairs Tenth Report



109. We argue above that at the heart of the Government's new China policy has been a focus on promoting the United Kingdom's commercial interests.[291] We examine here the reality of our commercial stake in China, and whether the size of China's market is sometimes overstated. The question of the size and potential of the Chinese market is relevant to the question of what resources should be allocated to promoting trade with and investment in China. It also has bearing on the question of what price the United Kingdom will pay if a tougher line is adopted on human rights, given the link the Chinese government makes between political relations and the allocation of contracts and licences. We also examine the assistance the Government gives to British businesses in China.

Trade and investment performance

110. There are two ways of comparing the United Kingdom's performance in the Chinese market—casting some light on how successful the United Kingdom's business promotion efforts are—first by examining how the United Kingdom compares to other countries' trade and investment performance, and second by examining how the United Kingdom's success in China compares with that in other markets.

Table 1, Total value of selected markets, and UK market share

$ billion 1999
Total value of market
Value of UK exports
UK market share %
Hong Kong*

* Hong Kong acts as an entrepot for much of China's trade. See para. 147.

Table 2, Exports from selected OECD economies to China, Hong Kong and Taiwan, 1998-1999

$ billion
Hong Kong*

*Hong Kong acts as an entrepot for much of China's trade. See para. 147.

Sources: IMF Direction of Trade Statistics, Taiwan Statistical Databook 2000.

111. The Foreign Secretary told us: "China is a significant market. During 1999 we exported as much to Finland as to China, in 1998 we exported as much to Denmark as to China."[292] Table 1 above demonstrates that this is correct, although in fact, much of our trade with China passes through Hong Kong,[293] and so the Foreign Secretary's observation somewhat understates China's importance. The Chinese market is much larger than, for example, that of India, but the United Kingdom lags somewhat behind our European competitors in terms of our export share of that market. The United Kingdom's market share in China is around two per cent (once exports through Hong Kong have been taken into account) against a world market share of 5 per cent. To some extent this must reflect the distance between the two countries, but the same consideration should apply to France and Germany, both of which have higher exports to China than the United Kingdom. As in many markets, the United Kingdom's performance is much stronger in foreign direct investment. According to BTI, the United Kingdom is the sixth largest overseas investor in China, and the biggest European investor, with cumulative pledged investments totalling $16 billion in 1999.[294]

Is the Chinese market special?

112. It is often said that China is an exceptional market, with such potential that short term losses are worth bearing in order to acquire a position in what will become the world's largest market. According to British Trade International "in the medium long-term China continues to offer massive potential prospects as a destination for an increasingly wider range of British business and investment."[295] Stephen Perry of the China Britain Business Council and London Export Ltd notes that "China may soon become the third power in the world, after the US and Europe, surpassing Japan."[296] The CBBC wrote in evidence to us that "The CBBC exists because of the special nature of the Chinese market—potentially vast, culturally complicated and developing on a scale unprecedented in the world."[297] Glaxo Wellcome described the Chinese market as having "enormous potential for growth."[298]

113. Clearly those companies which have already invested in the Chinese market have a vested interest in promoting its potential, but at the same time, most companies which have been in China for some time take a realistic view of the state of the market. For example, we heard during our visit that Unilever considers the Chinese market for its products to consist currently of perhaps 200 million out of the overall population of 1.27 billion.

114. One of the most notable proponents of the view that the Chinese market has been over-rated was the late Gerald Segal, who posed the question "does China matter?" and concluded that China was a "normal middle power," and that it had "great potential, and always will."[299] He pointed out that China accounts for only 3.5 per cent of the world's GDP, is ranked 107th according to the UN Development Index (bracketed by Albania and Namibia), and contributed only 3 per cent of the world's trade in 1997, equivalent to South Korea, and less than the Netherlands. Richard Cobbold and Damon Bristow of the Royal United Services Institute took a similar line in evidence to us, arguing that "the perception in the West, that China provides a business opportunity which should not be missed, has given China more international leverage than it merits."[300] They conclude that

    "less attention should be paid by the Government to the optimistic predictions favoured by the business community and some government departments about China's future potential, and more to the statistics, the problems that China faces with its economy, its relative ability to influence developments internationally, and the huge challenges faced by its military."[301]

Lorna Ball of the World Service agreed

    "the myth of the 1.2 or the 1.3 billion market is indeed largely a myth. If you ask any of the Western companies just how much profit they are making from China I think you would be surprised at some of the answers. Although they do regard it as an important market, it is much smaller than we commonly think of.....but it is very competitive in all of its products, not least because China is still a developing and sometimes quite a poor country that varies from place to place. People do not have the disposable income to spend on huge amounts of consumer goodies, although I am sure in time maybe that will come."[302]

The competitiveness of the market was confirmed by anecdotal evidence we received during our visit: one factory we visited was unprofitable despite having its most efficient plant in China operating at full capacity. We conclude that China is a significant market—but not an enormous one.

Economic challenges

115. China's economy has grown rapidly since Deng Xiaoping's reforms began twenty years ago: we note elsewhere that this has led to a quadrupling of incomes.[303] Party leaders have seen economic growth—while maintaining political obedience—as the Communist Party's salvation. The assumption is that meeting the people's material needs will obviate the need for political reform. Since the late 1970s the Chinese economy has grown rapidly, but there are now a number of challenges, both to continuing rapid economic growth, and to the continuing monopoly of power held by the Communist party.


116. In the countryside, mechanisation and the replacement of collective socialist motivations with private and profit motivations have resulted in the loss of an average of six million jobs a year in the 1990s, and around 120 million rural workers are without work for most of the year.[304] This has resulted in large-scale migration to the cities. The natural increase of the urban population is 6 million per year, and 4-7 million city-dwellers are made unemployed by state-owned enterprises each year (although the government continues to support loss making state-owned enterprises, with the financial system heavily indebted to the state sector—debts which are unlikely to ever be repaid). This means that overall the economy must create around 18 million urban jobs over each of the next few years if urban unemployment is not to rise.[305] We were told by a labour activist we met that urban unemployment might be as high as 15 per cent. However, from a peak in 1992, economic growth has been declining, to a level of around 8 per cent this year. Social services have in the past been provided by enterprises, but liberalisation is removing this safety net, and it has not yet been replaced by state run services.


117. The World Bank estimates that China is the seventh largest economy in the world, but is ranked 140 in terms of GNP per capita. Two thirds of China's population live in the countryside, and rural poverty is still profound in many areas. 9 per cent of men but a striking 25 per cent of women are illiterate.[306] While this compares favourably with, for example, India (33 per cent of men, 57 per cent of women), it nonetheless represents a great challenge for China's development. We learnt during our visit of the activities of the All-China Women's Federation. One of the primary aims of the Federation is to alleviate poverty among women, and to this end it provided training to 100 million rural women in 1999, and has promoted literacy among Chinese women.

118. It is undeniable that the Chinese economy has grown rapidly from 1979 onwards, when Deng Xiaoping's reforms began: British Trade International informed us that since then China "has enjoyed average annual growth rates of around eight per cent. Average per capita income has quadrupled."[307] However, much of the interest in the Chinese market results from views about future growth, rather than existing profits. Regardless of the assessment of China's potential—which must be speculative—there remain some distinctive features of the Chinese market. We examine these briefly in turn.

Regional disparities

119. The rapid growth of the Chinese economy since 1979 has been concentrated along the coast, which benefits from easier communication with overseas markets (including the economically important Chinese diaspora), and with Taiwan and Hong Kong. China's poorest province, Guizhou, has a GDP per capita of $280, on a par with Bangladesh; Sichuan has $525, around Pakistan's level; Shanghai has around $3,400, the level of Turkey or South Africa. China's size, poor infrastructure (although improving rapidly, as we saw during our visit), and regional variations (of language, climate, and development) mean that it is in practice several markets rather than one. The British Chamber of Commerce in China argues that China is "more like the European Community in the 1970s than the United States of America today."[308] Reflecting the business opportunities available on the coast, three of the United Kingdom's four diplomatic posts are in coastal provinces or municipalities: Beijing, Shanghai and Guangzhou. Only one (newly opened) is in the interior, in Chongqing. One Chinese government programme which is attempting to address these disparities is the "Great Western Development Strategy" which aims to divert resources to the west of China in order to spur development.

State control

120. Lord Powell told us that it was a country where "the state dominated the market and one had to deal with state institutions."[309] Hugh Davies argued that "because of China's centralised and Party-dominated structure, the role of foreign diplomatic missions has been and still remains a crucial one in trade promotion."[310] The country has been described as having a "very political economy". We heard from James Richards of Rolls Royce that:

    "political considerations, and in particular the state of the bilateral political relations...can have an impact on high profile, sensitive deals involving areas of the economy which the Chinese regard as sensitive and involving large bucks. It is very difficult to say that, because of this or that event or this or that tiff, a particular piece of business has been lost, or indeed to say that, because things have got better, you have won a piece of business that you might not have won anyway, but there is a widespread feeling and impression...that at least at that high level of business the Chinese do quite deliberately show pleasure and displeasure by allowing things to happen or making it difficult for them to happen."[311]

James Richards went on to say that "before my time with Rolls Royce, the bad feeling which existed in China over Governor Patten's conduct was generally felt to disadvantage us in relation to our American competitors at that time."[312] Clearly the aerospace sector is a sensitive one, subject to state control in many countries. However, controls on businesses extend beyond these sectors: there is a culture of controlling and licensing businesses—particularly foreign ones—which has existed for centuries. Permission to undertake an activity must often be sought from numerous offices. This represents a hindrance to British businesses, and is an area where the United Kingdom government can be of assistance, both in general by lobbying the Chinese government to liberalise particular sectors, and by helping companies in specific cases. We heard during our visit of the myriad restrictions facing, for example, banks, attempting to do business in China. The FCO listed many of the restrictions imposed by the state on businesses—particularly foreign businesses—in China.[313]

121. The state control of business creates an opportunity for the Chinese government to exert pressure on other governments by granting licences or contracts to companies from favoured states, while denying them to companies from countries which act in an "unfriendly" manner, as we have referred to earlier.[314] In part this happens because the Chinese authorities often do not see a clear distinction between official United Kingdom bodies and United Kingdom companies—reflecting the fact that the distinction between the two is rather blurred in China.

122. The financial sector is particularly subject to state control. David Brewer of British Invisibles told us that the WTO negotiations opened up the possibility of additional licences being granted to United Kingdom financial companies: "Two British companies already are [operating in China]: one is Sun Alliance with a licence to write non-life business in Shanghai; and Prudential to write life business in Guangzhou. There are two other companies that want to get in—CGNU and Standard Life...We have had strong support from the government on that and we need that; because you will know in Germany, France and America there is strong government support from the very top for applications, and that is needed in addition to the efforts of the individual companies. We do very much hope that two of the seven licences, that were promised to Pascal Lamy [European Commissioner for Trade] at the end of the European Union negotiations, will be awarded to those two companies. We believe they have proved themselves by huge investment in training and in support for the Chinese insurance industry before they go there."[315] Hugh Davies wrote that

    "the issue of licences to insurance firms has taken on an overtly political direction, and firms have found their attempts to obtain licences almost entirely subject to the degree of favour in which their governments are held by the Chinese government. British insurers made no progress so long as Sino-British relations were clouded by disputes over Hong Kong."[316]

123. There are signs however, that the economy is becoming less dominated by the state, or at least, the central government. Stephen Perry told us that none of his clients had been affected by difficulties in the bilateral relationship, perhaps because "our areas of business are less directly influenced by the state in some ways."[317] It is difficult to imagine such areas existing twenty years ago. Professor Yahuda told us that "with the growth of the non-state sector, with the increasing professionalism of banking, accountancy, a whole range of things of this sort which are taking them out of the direct political control of the Communist Party."[318] The emphasis here must be on the words "direct political control": business and politics remain intertwined, with business people joining the party to get ahead, and party officials going into business and retaining close links with state and party structures. However, if there is political control of businesses, it often operates at the local or regional level, rather than from Beijing.

124. The FCO informed us that, while Chinese statistics must be treated with caution, the number of urban employees in the state sector had fallen from 112 million in 1994 to 91 million 1998, against a rise in the number of private and self-employed workers from 15 million to 32 million over the same period.[319] State owned enterprises produced 75 per cent of China's output in the late 1970s, but only 28 per cent now, although they still account for 44 per cent of employees.[320] Many state enterprises are insolvent: the most dynamic business partners for United Kingdom companies are likely to be found in the private sector, which is less subject to state control (although still more so than in market economies). And Hugh Davies noted that now "many more channels exist for firms seeking to sell goods and services in China" compared to the early days of reform.[321]

125. The Chinese market has grown, and therefore become more commercially interesting, because the state and the Communist party have to some extent relaxed their control over the economy. So while it is still the case that the central state authorities have more control over businesses in China than in most economies, there appears to be less scope than there was for the bilateral relationship to influence commerce. As we discuss below, this will be still more the case once China is governed by multilateral rules under the WTO.


126. One aspect of the business environment we heard much of during our visit was counterfeiting. We were told, for example, that Yiwu City in Zhejiang Province had an economy of $3 billion based almost entirely on counterfeit goods. Counterfeited goods are often exported via third countries to disguise their source. Poor protection of intellectual property has in the past been a consequence of official reluctance to "penalise" Chinese businesses and consumers by making them pay the full price for goods such as films and compact discs (pirate copies of which are widely available in China), and partly because, as Lord Powell told us, "the best guide is the old Chinese saying that valleys are deep, the mountains are high and the emperor is far away. A great deal goes on in China which the people in Beijing cannot in the end control."[322] Laws protecting intellectual property are now largely in place, but enforcement is a serious problem. This is one of the issues which is currently an obstacle to Chinese membership of the WTO: we discuss this issue below.[323]

Official assistance for businesses

127. Lord Powell argued that, because of the difficulties of doing business in China, "It is a market in which foreign companies, including British companies, need a great deal of help—help from government institutions, help from bodies like ours, the Business Council."[324] We examine here the question of whether United Kingdom companies do indeed need more help in China than elsewhere, and which bodies are best placed to provide that help.

128. A number of witnesses stressed to us the importance of the Export Credit Guarantee Department (ECGD), which provides medium and long term risk guarantees to British capital goods exporters to China. Lord Powell told us "ECGD support is of great importance to British companies in China. At the moment it is forthcoming. We worry sometimes there are signs of weakening commitment to it... amongst our members, continuing ECGD support would be very high up their list of priorities."[325] James Richards of Rolls Royce elaborated on this concern: "The fear arises because the mission and status of ECGD have been under review and we have noticed some changes in ECG practice, not yet in relation to China, although we hope that new business will be coming up requiring that support in China very soon, but those changes in our view begin to place us at a disadvantage."[326] He then submitted a detailed example of where ECGD policy had caused problems for his company.[327] We have not taken sufficient evidence on this issue to come to a judgement, but maintaining ECGD cover equivalent to that of our competitors is clearly a priority for many businesses operating in China.

129. For historical reasons, promotion of China as a market in the United Kingdom is more complicated than it is for most markets. We turn now to the main bodies which are engaged in promoting United Kingdom-China business.


130. BTI is staffed jointly by the FCO and the DTI. The China section consists of five staff, plus five export promoters seconded from the private sector based in London, 10 UK-based and 15 locally engaged staff in the Commercial section in Beijing, three UK-based and six locally engaged staff in the Commercial section in Guangzhou, five UK-based and seven locally engaged in the Commercial section in Shanghai and one UK-based and four locally engaged in the Commercial section in Chongqing.[328] The Foreign Secretary told us that "the whole point of BTI is it brings together the DTI's old networks in Britain with the Foreign Office's networks around the world. The strength of BTI is that interface between those who deal with businesses within Britain and those who promote British business abroad."[329] During our visit to Shanghai we detected some confusion among staff as to their reporting lines: were they responsible to the FCO or to BTI? We addressed some of these issues in our recent report on the Annual Reports of the FCO and BTI.[330] In response, we were told that Heads of Mission have a formal written assessment of their achievements made by Trade Partners UK annexed to their annual appraisal, while BTI staff "are accountable via their Head of Mission."[331] This is a matter to which we may return in our next examination of the Annual Reports of the FCO and BTI.


131. British diplomatic missions have an important role to perform in promoting commercial links with China. The principal work of the impressive Consulate General in Chongqing is directed towards the potential for British commerce in this rapidly growing area of high development away from the eastern seaboard. We note that this Consulate General cost £400,000 to establish, and that its annual running costs for 2000/01 are estimated to be £325,000.[332] It was often impressed upon us by witnesses, and by those whom we met in China, that Beijing is very remote, and not just physically, from many economically and politically important parts of the country. As the President of the British Association for Chinese Studies put it:[333]

    "China is still being treated as a distant country which can be understood as a whole, whereas it is a sub-continent of extremely varied economic conditions, with many languages and local cultures. Even though it is under a single government, local governments now have great autonomy and the implementation of policy is extremely varied in its local interpretation for local purposes. What policy means cannot be told from contacts with and study of central government."

If British diplomacy and trade promotion is to outreach in China, the FCO will need to remain alive to the possibility of establishing other mini-posts like Chongqing. There are great benefits in being the first in the field. We were delighted that the Foreign Secretary recognised the value of the Chongqing post and was alive to the possibility of establishing others like it.[334] We recommend that the FCO publish a cost-benefit analysis of the post in Chongqing, and consider the possibility of opening other similar commercial posts in cities of economic importance.


132. The CBBC is a non-departmental public body which is the BTI's Area Advisory Group for China. It is larger and has a wider role than most Area Advisory Groups, however, with 42 staff spread between seven offices in London, Glasgow, Beijing, Shanghai, Wuhan, Chengdu and Guangzhou. It is a business-led but non-profit membership organisation with "between 250 and 300 member companies, for which it provides a number of exclusive services. It also provides general advice on China business as well as a range of chargeable specialist China business services to all comers, whether members or not."[335] The CBBC receives around one-third of its budget from the BTI, with grant-in-aid of £650,000 in 1999-2000. This was cut for 2000-2001 to £611,800. According to CBBC, the cut combined with appreciation of Sterling against the Chinese currency will put CBBC's finances under considerable pressure. The CBBC is now attempting to agree a three year financing programme with the BTI so that it can plan ahead.

133. The CBBC was created as the China Britain Trade Group in the early 1990s from two separate bodies which existed during the Cold War: the 48 Group of broadly pro-Chinese businesses, and the Sino-British Trade Council, the official United Kingdom trade body. As was evident from the evidence provided to us by Stephen Perry—formerly associated with the 48 Group—loyalties to the old bodies remain. According to Hugh Davies, writing in 1998, the CBBC "has continued to suffer from post-natal problems, because of differing expectations among those still emotionally attached to one or other parent."[336]


134. The BCCC has a membership of 245, up from 42 in 1993. It was launched with the assistance of a DTI grant, but now relies upon membership fees. Current Chinese legislation recognises the establishment of Chambers of Commerce only in Beijing, but there are unofficial chambers in Guangzhou, Shanghai, Chengdu and Wuhan. We recommend that it should be a priority for the Government to lobby the Chinese government to allow the establishment of official Chambers of Commerce outside Beijing.

Which body is best placed to provide advice to businesses?

135. In general businesses which gave evidence to us were satisfied with the service they received from commercial sections and the CBBC. There were a few areas identified which could be improved: for example, the China-Britain Business Council notes that "concern has been expressed about the limited resources devoted by the Posts to the promotion of the financial services sector, particularly in Shanghai which is fast becoming a leading financial centre."[337] Tom Goldberg, the Managing Director of a construction company, told us that:

    "We are members of the China-Britain Business Council and we have visited the consuls and the embassies in the areas that we have operated. Generally speaking, we have had good logistical back-up and good general advice but not the kind of applied, specific expert advice that would be really directly useful. It is the sort of advice you can gain in a number of places and the people who are giving it have always been enthusiastic and very willing to put themselves out to try and give us that advice. For them to really tell us how the construction industry operates in China has been beyond their background and experience."[338]

As Mr Goldberg went on to acknowledge, it is too much to hope that there should be specialist advice in every sector in every market—this would be beyond the legitimate expectations of our business community. But nonetheless in pointing out that there are a number of sources of general advice available, he identifies a significant issue.

136. This raises more fundamental questions of whether the current allocation of resources between the various business promotion bodies is correct. The CBBC recommends in its evidence to us that it should be given additional resources to open further regional offices in the United Kingdom. It also recommends that it should take over all trade promotion work in China, leaving the diplomatic posts to "concentrate on trade policy, political and economic work which is supportive of business"[339] and suggests that there should be a merger between the CBBC and the Invest in Britain Bureau's work in China. In view of BTI's reduction in the CBBC's budget, BTI does not appear to share CBBC's view that its role should be expanded. The Foreign Secretary also did not welcome the suggestion that BTI should lose its trade promotion role in China.[340]

137. The question of the potential overlap between the various business promotion bodies may be addressed in a review of the long-term trade and investment strategy for China which is currently being undertaken by the BTI.[341] They were also addressed in "A review of China trade promotion" which was undertaken by Hugh Davies, then employed by the FCO, in April 1998.[342] The recommendations of this review which applied to the CBBC—that there should be new Supervisory Board, under which there should be a "hands-on committee of businessmen, broken down into sector working parties"[343]—were not implemented, although there was a relaunch of the CBBC which coincided with the Prime Minister's visit to China in October 1998. The review recorded mixed views of the CBBC's predecessor, the China Britain Trade Group, noting on the one hand that many companies saw it a providing a useful service to members, while others saw it as having high fees and poor management in a number of areas.[344] We have not conducted a systematic review of users' opinions to judge whether CBBC's relaunch has been successful. However, one of CBBC's Vice Presidents, Stephen Perry, informed us that "despite the relaunch of CBBC from the CBTG, and a series of other bureaucratic measures, we are still confronted by a confusing morass of fragmented initiatives and structures, spread over many of the same often ill-defined areas of responsibility and competence, with loose integration, no unified structure, and, in certain instances, inadequate or unsuitable leadership and direction."[345]

138. At the very least it would appear that, as the CBBC itself points out, that there is still some duplication in the services provided to businesses. This must be particularly the case in cities in China where there are both CBBC offices and diplomatic posts: Beijing, Shanghai, and Guangzhou. There are also official or unofficial British Chambers of Commerce in these cities, creating further potential duplication. The Chambers are not public bodies, and are not therefore subject to the Government's control, although it is to be hoped that it is possible to co-ordinate on the ground in practice. Stephen Perry recommends merging the CBBC offices into the Chambers of Commerce where they are both represented, with a leading role given to the Chambers.[346] We are not in a position to evaluate these proposals, but can see a certain logic to them. The Foreign Secretary told us that "at the present time the DTI and the FCO are reviewing our investment strategy on trade in China and I hope that will produce some streamlining of the present arrangement. Both bodies [BTI and the CBBC] have a role to play, both bodies have a contribution to make."[347] We recommend that the BTI's long term trade and investment strategy for China take account of the potential overlaps between the CBBC, the diplomatic posts' commercial work, and the Chambers of Commerce in China, and should aim to eliminate duplication.

WTO membership

139. China's negotiations to join the GATT (application made in 1986) and then the WTO (application made in 1992) have been long and hard. This is not because the negotiations have been subject to political conditions—the Foreign Secretary told us that "it is an accepted and very deeply embedded convention that one does not import political judgments into WTO decisions"[348]—but the idea of submitting large areas of China's economy to multilateral regulation has required a shift in the Chinese official mind-set, as well as substantive reforms in a number of areas. The bilateral deals with the main trading groups have been concluded,[349] but the negotiations with the WTO itself remain deadlocked, and it now appears likely that China will not join the WTO this year, as had previously been expected. Fears within China of the economic impact of membership have brought about a cooling of enthusiasm for membership. These fears are not baseless: for example, the world price of wheat is less than $100 a tonne, while the Government set price in China is over $175.[350] However, there have been signs of recent progress. Following agreement on procedures for judicial recourse for foreign companies and rules on administering import tariff quotas, China's senior negotiator was quoted on 10 November as saying that "Given the kind of atmosphere and momentum we have generated, it's very likely [that a deal would be concluded in December]."[351]

140. A number of areas remain to be agreed.[352] Tony Sprake, Head of China and Hong Kong Department told us that in the negotiations in the WTO "all the concessions which are granted to one country are then extended across the board...There are now problems essentially of definition. To take one example, there is the question of retailing and distribution within China and how this is defined."[353] The situation is characteristic both of China's tough negotiating tactics, and of the USA and EU's willingness to overlook China's shortcomings in order to achieve political successes. The difficult negotiations are therefore being left to the multilateral forum which for most applicants are something of a formality.

141. When the negotiations are concluded, the WTO is likely to offer substantial benefits to China, and to China's trading partners such as the United Kingdom. The Foreign Secretary told us that "the strategic foreign policy issue for us here is we want to see China a member of the WTO but not at any price. We want to see it a member of the WTO partly because in order to achieve that membership it will have to face up to some of these issues of financial and commercial transparency, it will have to open up some of its markets, as it is now committed to doing on the insurance market, and it will facilitate the kind of increase in access to the outside economy through communication technology."[354] The most significant economic changes will be evident in areas where China is furthest from the norms of market economies, such as in the financial system. As the British Chamber of Commerce in China notes, the WTO will be "important not just for its terms of access for foreign goods but for its anticipated positive effect on levels of consumer confidence."[355] Hugh Davies told us that "the application of commercial laws and transparency of those laws will definitely have to improve" with entry into the WTO: there will also be "a monitoring system set up by the WTO—the Americans have already said that they will be doing that and I imagine the EU will also be wanting to do it—to ensure that the laws that are on the statute book are fairly and transparently applied."[356] It is likely that this monitoring system will become the focus of much conflict. We recommend that the British Government support a tough EU line on monitoring and enforcing Chinese compliance with WTO obligations.

291   See para. 3. Back

292   Q309. Back

293   See para. 147. Back

294   Ev. 221, Appendix 29. Back

295   Ev. p. 221, Appendix 29. Back

296   Ev. p. 57. Back

297   Ev. p. 41. Back

298   Ev. p. 227, Appendix 31. Back

299   Foreign Affairs, September/October 1999. Back

300   Ev. p. 216, Appendix 28. Back

301   Ev. p. 220, Appendix 28. Back

302   Q74. Back

303   See para. 118. Back

304   Hu Angang, Employment and development: China's employment problem and employment strategy, in World Economy and China, 1999. Back

305   The Economist, 8 April 2000. Back

306   World Development Report 2000/2001, p. 276. Available on Back

307   Ev. p. 220, Appendix 29. Back

308   Ev. p. 172, Appendix 15. Back

309   Q87. Back

310   Ev. p. 11. Back

311   Q168. Back

312   Q173. Back

313   Ev. pp. 128-130. Back

314   See para.106. Back

315   Q89. Back

316   Ev. p. 11. Back

317   Q174. Back

318   Q35. Back

319   Ev. p. 101. Back

320   The Economist, September 30, 2000. Back

321   Ev. p. 11. Back

322   Q129. Back

323   See paras. 139ff. Back

324   Q87. Back

325   Q101. Back

326   Q154. Back

327   Ev. p. 76. Back

328   Ev. pp. 221-222, Appendix 29. Back

329   Q284. Back

330   Fifth Report, Session 1999-2000, Annual Reports of Foreign and Commonwealth Office and British Trade International 2000, HC 507. Back

331   Cm 4894, para. 25. Back

332   Ev. p. 132. Back

333   Ev. p. 200, Appendix 24.  Back

334   Q286. Back

335   Ev. p. 38. Back

336   A review of China Trade Promotion, by Hugh Li Davies, FCO, April 1998, p. 33, para 77. Available in the House of Commons Library. Hereafter "Review." Back

337   Ev. p. 40. Back

338   Q139. Back

339   Ev. p. 41. Back

340   Q284. Back

341   Ev. p. 222, Appendix 29. Back

342   Review. Back

343   Review, para. 87. Back

344   Review, para. 76. Back

345   Ev. p. 67. Back

346   Ev. p. 67. Back

347   Q283. Back

348   Q287. Back

349   Although Mexico has yet to conclude a bilateral deal. The Economist, 9 November 2000. Back

350   Washington Post Foreign Service, 24 September, 2000. Back

351   Financial Times, 10 November 2000. Back

352   At the time of writing: trade-related intellectual property rights, industrial subsidies, agriculture, trading rights and commercial services generally, use of anti-dumping/counterveiling duties, technical barriers to trade and safeguard measures. Financial Times, 10 November 2000. Back

353   Q287. Back

354   Q278. Back

355   Ev. p. 176, Appendix 15. Back

356   Q40. Back

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