NCPA - National Center for Policy Analysis

Businesses Eye 1.2 Billion New Customers

June 1, 2000

If the Senate follows the House in granting China permanent normal trade relations, and if China joins the World Trade Organization (WTO), tariffs will fall -- and U.S. exports to China's 1.2 billion consumers should increase by $13 billion annually, analysts say.

The average Chinese tariff is expected to drop to 9 percent from 24 percent by 2005 -- with a host of rules against foreign ownership falling.

  • Restrictions on telecommunications services will be phased out, and the share of mobile telecom firms owned by foreign companies will increase.
  • Foreign companies will -- for the first time -- be able to invest in Chinese Internet service providers.
  • China's 6 percent to 10 percent tariffs on semiconductors will be eliminated -- along with its 9 percent tariffs on personal computers.
  • Five years after China's admission to the WTO, foreign banks will essentially be allowed to operate as local banks do.

Firms in a multitude of other industries will be tempted to join the burgeoning China trade.

  • Property and casualty insurance firms will be permitted to operate nationwide, while those offering group, health and pension policies will be welcomed after five years and wholly-owned nonlife insurance subsidiaries could be established in two years.
  • Import tariffs on autos would fall from 80 percent to 100 percent levels currently, to 25 percent by 2006 -- while duties on auto parts would sink from 23.4 percent to 10 percent.
  • Duties on farm products will drop as low as 14.5 percent from 22 percent currently.
  • In the securities business, China will permit joint ventures that are 33 percent foreign owned to manage funds just as Chinese companies do.

Source: Joseph Guinto, "Businesses Look for Big-Time Gains After China Trade Bill Becomes Law," Investor's Business Daily, June 1, 2000.


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