Long Guoqiang

As an international organization devoted to handling international trade relations, the World Trade Organization (WTO) is in essence designed to restrict the trade policies of its members by various kinds of agreements so as to guarantee liberalization of trade. If China wishes to achieve a true balance between its rights and obligations after entering the WTO, the paramount task now is to reform its foreign economic management system. On the basis of investigation, this paper has put forward some proposals on the reform of the foreign economic management systems to be implemented after China’s accession to the WTO.

I. Why need foreign economic management systems be reformed?

1. Reform of the foreign economic management system is an inherent need of the development of an open economy.

With the development of China’s economy from a closed one to an open one, the contents of economic activities have become richer and richer since the late 1970s, and more and more foreign economic activities have been brought under government management. This has led to the gradual development of a cumbersome foreign economic management system. Although China has set the development of a socialist market economic system as the ultimate goal of the reform, the pace of reform has been noticeably slower than that of the open-up drive due to influences from various kinds of subjective and objective factors. The reform of the system of government management, meanwhile, has lagged even farther behind the overall progress of economic restructuring. As a component of the economic management system the foreign economic management system is restricted in its reform by the progress of the reform of the economic management system. Each effort to expand market access and each measure to reduce red tape in management will be subject to restriction from the domestic planning system, the investment and fund-raising system, the financial system, and the division of work between government departments. In addition, the current foreign economic management system itself still carries a marked brand of the planned economy. Government departments are chasing after powers, government officials are haunted by red-tapism, the foreign economic management system is permeated with the management concept of "big government and small market", and there is the tendency of preferring administrative measures to legal means, examination and approval to management and services, and handling of specific matters to macro coordination in the foreign economic management system. The government restructuring in 1998 has produced marked results in simplification of the administrative structure and reduction of staff. So far as the foreign economic management system is concerned, however, the functions of government have remained as what they were, government powers have not been reduced, and problems such as production of piles of documents, overlapping of organizational establishments, and mutual impediment to the performance of functions still exist. These problems have in turn given rise to problems such as multiple links in management, complicated formalities, numerous loopholes, and big costs and poor efficiency. All these no longer suit the need of construction of a socialist market economic system and development of a open economy.

With the rapid advance of economic globalization, competition between countries has grown ever more fierce. The lower efficiency of the government management system of a given country will have a direct bearing upon the ability of competition of its enterprises at the international market, upon its investment climate, and finally upon its position in the global economy. Driven by the current of economic globalization, the scale of international trade and investment has grown constantly with new forms and contents. This has created a rare opportunity for countries to bring out their comparative advantages and posterior advantage. The slow reform of the existing foreign economic management system in China, however, has made it hardly possible for the country to seize the great opportunity created by the economic globalization. Transnational merger and acquisition (M&A), for instance, has become a major form of international direct investment. In China, however, there is not yet any law to govern this new kind of foreign activity, thus preventing China to step up utilization of foreign investment or speed up reform of state-owned enterprises through the form of transnational M&A. The revolution of new technologies, for another instance, has developed extremely rapidly, and a promising future lies ahead for the hi-tech industry. This is also, however, a field where international competition has grown extremely fierce. The hi-tech industry is characterized by small sums of individual contracts, big changes in price, and short time of delivery. Many hi-tech enterprises have adopted the operation of "zero stock". In China, however, customs and commodity inspection departments are still supervising and managing the hi-tech industry in such a way as they treat the traditional industries, and the low efficiency of the supervision and management system has often impeded enterprises in their timely import of input goods and export of commodities. As a result, some hi-tech enterprises have to transfer some of their high-profit business and research that call for quick delivery to foreign countries. This would have a serious negative impact upon the development of the hi-tech industry in China. This shows that failure to totally reform the existing foreign economic management system will seriously restrict the sharpening of the competitive edge of China’s economy at the international market and cause the country to let slip a golden opportunity during the process of economic globalization. For this reason, reform of China’s foreign economic management system is an inherent demand of China’s economic development and should be taken as a voluntary choice.

2. Reform of the foreign economic management system is an inevitable demand to safeguard the economic interests of China during its opening-up drive.

Liberalization of trade and investment is a double-edge sword. An foreign management system should not only provide a system guarantee for strengthening the ability of a country in international economic competition, but also supply a mechanism for fencing the economic interests of the country against infringement. In this sense, it has a direct bearing upon a country’s efforts to gain benefits and avoid losses during the process of economic globalization. No breakthrough progress has been achieved yet in China in the field of reform of the state-owned enterprises and construction of a huge unified domestic market. Neither have any ideal results been achieved yet in the adjustment of economic structures, nor has transformation of government functions achieved its goal. The social security system is also incomplete and imperfect, and the ability to meet the impacts of all-round opening of the market to foreign countries is still fairly weak. As the situation stands, it is necessary to create certain mechanism of protection to guarantee the security of China’s national and economic interests.

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