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China’s WTO Accession—One Year Later

Commentators regard China’s WTO accession as the most significant sociopolitical milestone for modern China. This is because China actively wants to link up with the global economic order even at the political expense of substituting her long-treasured socialist-planned economy for a full-fledge capitalistic market economy. Some enthusiastic officials have praised WTO accession as a sign of China’s coming of age within the international community, while other sober-minded scholars have cautioned that WTO may usher in unprecedented social challenges not previously encountered. Some analysts have forecast that WTO accession would bring a new economic boom to China, while others have predicted the coming of economic doom.  Indeed, its consequences—like most issues in China—are contradictory, paradoxical, and controversial. This article will take a bird’s eye view of the country’s social, economic and religious situations on the first anniversary of China’s WTO accession with an emphasis on religion.

Chinese authorities have actively established specialized offices and training programs to prepare officials for WTO compliance. For example, the Ministry of Foreign Trade (MOFTEC) set up the Fair Trade Bureau to investigate cases of dumping in China by multinationals and to reinforce the anti-dumping regulations of WTO. Special training seminars are conducted throughout China to sharpen officials’ awareness, as well as that of corporate executives, on global market and WTO regulations. Many universities are offering specialized graduate programs on WTO with hundreds of students enrolling.

In compliance with the WTO agreement, during the past year Chinese authorities have lowered both tariffs and domestic market barriers as well as deregulated some sectors for easier access of foreign investors. More trade concessions are on the drawing board to prepare for full compliance by 2006. Besides fulfilling its obligations, China has also learned to claim its WTO rights. Recently, when the US Government decided to increase tariffs for steel imports to protect the US steel industry —a clear case of protectionism in violation of WTO protocol—China united with other nations to fight against this decision. China’s participation in the WTO game is increasing as more international trade between herself and other nations falls within the WTO arena.

Within China, one of the main obstacles to full WTO compliance is the stated-owned enterprises (SOEs), a legacy of the planned economy. During the past 12 months, the Chinese government has bankrupted thousands of these inefficient enterprises, sent millions into unemployment and established a whole range of social welfare systems hoping to sustain these unemployed workers. Besides bankruptcy, the government also restructured, merged or privatized many SOEs. There have been numerous alliances of SOEs in recent months—all for a more efficient economic system to face the imminent entry of foreign competition into China.  Most of the transformed SOEs take the form of a conglomerate (jituan), usually with semi-government ownerships and injection of capital raised through public listing.  Jituans bear strong regional favor with multisectorial economic interests, modeled somewhat like the Korean or Japanese conglomerates in their organizational structures. The emergence of these jituans, as well as their commercial behavior, will perhaps shape the future business environments in China as they replace the SOEs as the predominant commercial players in post WTO China.

As a result of WTO regulations, China has drawn in more direct foreign investment than in previous years—probably due to the enthusiasm regarding WTO market potential in China.  At the same time, China has increased both import and export volumes. Exports, although lower than expected, are still going strong mainly due to the demand for cheap, quality Chinese products as well as the development of new markets. The cost of general consumer items is down as many jituans are engaging in cutthroat price wars to capture a future market share. At the same time, in spite of low prices, consumer purchases are down. This is occurring because Chinese consumers, in general, are expecting even lower prices as China increasingly enters the global market, and cheaper imports will become available to stimulate further price wars. It is also significant to note that personal savings are up in China—a trillion (yes, trillion) US dollars— as Chinese, waiting for bigger bargains in the future, keep more cash in banks.

One of the areas of greatest concern is China’s banking industry. Can the four state-owned banks in China, all of which are technically already insolvent, reshape themselves to remain the dominant financial players? Will they be able to compete with the more efficient foreign and private banks that will soon flood into China? During the past year, the government has been working on major house cleaning and has jailed many senior banking officials for fraud and corruption. At the same time, many foreign financial institutions are eyeing China’s lucrative financial markets—from the huge volume of private depositors to untapped investment markets and emerging funds management (which will measure in the billions as the mandatory social security insurances on health, unemployment and retirement are already in full operation). This sector is becoming rather volatile and will be more so in the future.

The most talked about sector of doom is agriculture. With seventy percent of the Chinese population working on farms, and with the average price of grain fifteen to twenty percent higher than the international market rate, this sector seems to be headed for disaster when China eventually has to lift agricultural import restrictions and lower government subsidies for farm products. Currently there are more than 100 million idle farm laborers (some scholars estimate the number as high as 400 million under-employed farmers in China), and the numbers are on the rise as more farmers may leave the land as cheaper imports flood the market. Unless China can create a sufficient number of jobs fast enough— such as labor intensive low skill manufacturing posts—to absorb these soon-to-be-out-of-work peasants, the rural situation may shortly erupt into a major social disaster—a warning echoed by many Chinese scholars. The government is spending large amounts of money for huge construction projects, such as infrastructures for the “Go-West Campaign” that absorbs millions of surplus farming laborers. The government has also initiated a series of policies for agricultural development and has injected fresh capital into it. All these measures seem to be containing the farming sector in a manageable situation, at least for the time being. However, the government may need to employ more aggressive measures to alleviate the increasing economic burden of the peasants as China integrates further into the WTO global market.

The government has launched several new policies to cope with WTO accession.  One of the main features of these policies is to facilitate a greater movement of population by lifting the former restrictions on travel and residency. In the past, the residency registration system often prohibited a company from hiring a suitable candidate if such a person was from out of town; it could take much effort to transfer one’s residential registration from one place to another. Since the beginning of 2002, the government is slowly changing the residential registration system and testing it in various cities. Regional governments are also encouraged to simplify registration systems to speed up the flow of skilled labor. For example, the Shenzhen Municipal Government has de facto abolished the Special Zone Entry Permit previously required for those who wanted to live and work in Shenzhen. Since last year, the government has simplified the application for personal passports beginning with residents from major coastal cities. Some cities, such as Shanghai, have recently allowed its citizens to apply for a passport at the post office using just their personal ID card—a great leap forward from previous requirements of submitting documents such as reference letters from the local Public Security Bureau, bank reference letters, work unit references and so on. With a passport, Chinese citizens are free to travel overseas as long as they can obtain a visa from the respective country they plan to visit. This provides a great opportunity for Chinese business people to engage in international trade. How these policies will change the sociodynamic of China is uncertain, but the government remains very cautious about it.

Although it is estimated that WTO accession is creating two to three million new jobs per year, these new jobs cannot outpace the estimated three to four million unemployed per year from surplus labor cuts from SOEs over the past few years. There is a net increase in unemployment figures, compounded by millions of high school and university graduates entering the labor force each year. The unemployment situation causes alarm, especially in the cities, so the government has restructured the Ministry of Labor as the Ministry of Labor and Social Security in an attempt to oversee the issue of unemployment. As for those already unemployed, who constitute the new class of “urban poor” previously nonexistent under the old economic system, the central government has formulated policies to establish a poverty line and to urge local governments to set up social safety nets to help them. Whether these policies can ease the socioeconomic shocks of unemployment amplified by WTO accession is yet to be seen. However, the government seems to be well aware of the potential social crisis that may be triggered by WTO accession.

Religion had long been ignored as a minor social issue until last December when President Jiang Zemin called a Religious Work Conference attended by all Politburo members as well as top leaders from all branches of the Government, Party and military.[1] This Conference on Religious Work signified an adjustment in religious policy to face the predicted religious growth in the context of post WTO accession social adjustment in China. The policy can be summarized by four themes: recognition of religion, containment of religious activity, guidance of religious development, and suppression of non-sanctioned religions (so called “evil cults”).

At the conference, the government openly acknowledged that religion has existed and would continue to exist as part of human civilization. The Party takes a pragmatic stance on religion, somewhat similar to the Party’s position on economic matters, such as adopting a market economy by baptizing it as “socialism with Chinese characteristics.” It is a pragmatic approach to tolerate religion and make the best use of it. While the government should not encourage the development of religion, neither will it suppress it by force.  This conference stressed that there is a categorical difference between Party members and religious believers. It emphasized that no religious believer can be a Party member and vice versa.  While the Party may take in capitalists as members, no religious believer can join the Party because of the ideological incompatibility.

Religious activities will be contained in a defined area of operation. Only those religions defined by the government as normal religions will be allowed to exist legally in China and enjoy the freedom bounded by policy and regulations. Those groups that do not fall within the government’s definition of normal religion, such as Falungong, are considered “evil cults” to be prosecuted by law.  Furthermore, religious groups within the category of normal religion must register with the appropriate authority in order to claim their legal protection; otherwise they are still illegal and will be prosecuted by law. Currently, the government is drafting nationwide religious regulations as well as many local regulations. At the same time, the government is also expanding as well as upgrading the Religious Affairs Bureau to meet the increasing demand of government involvement anticipated by the growth of religion in China that is predicted as part of the WTO accession social phenomena.

In this conference, the government repeatedly emphasized the slogan “Religion Must Have Mutual Adaptation With Socialist Society.” In the Chinese reality, the government defines what adaptation is required by each religion, to the point that the religion has to change or modify its teachings and practices in order to suit the political objective of the Party. In other words, the Party provides guidance to religious groups, and these groups will comply with such leadership.[2]

One of the general guidelines for religious groups in China is to help the country in economic development such as introducing foreign investors to China and contributing to charity projects for relief and poverty alleviation. There are also specific guidelines for different religions. For example, the government’s political guidance to the Protestant Church in anticipating WTO accession is reflected in the opening address of Ye Xiaowen, Minister of the State Administration on Religious Affairs, at the Chinese Protestant Representatives’ Conference held in Beijing in May 2002.[3] He stressed that the Chinese Church must confront the challenges of WTO accession as many hostile religious group may take the opportunity to gain a foothold in China. Therefore, the Chinese Church must step up its anti-infiltration capacity to block this foreign advancement while at the same time cultivating positive relationships with friendly foreign religious bodies to promote the policies and achievements of China. This policy of political guidance reflects the mentality of the government that religion is one of the many social groups the Government uses for its political objectives. The government needs to tightly control religion so that religion can become a positive social force contributing to the stability of the regime and society in light of WTO induced social changes.  It also recognizes that WTO accession may trigger a new wave of foreign religious influence, and there is every effort and intention to resist such influence—directly opposite to the government’s policies in other sectors, such as economic and commercial, where there is every effort to take in foreign elements to have a smooth integration into the global market.[4]

The government is alarmed at the emergence and development of various new religious groups in China, some introduced by foreigners, such as the Ba’hai, while most others are indigenous groups such as Falungong and Eastern Lightning. These groups do not fall into the category of the narrowly defined “normal religions” of the government. Therefore, they are illegal and are targeted for suppression as “evil cults” under the Chinese Criminal Law Article 300. Despite their illegality, they seem to attract increasing numbers of followers as there is a huge pool of dissatisfied unemployed workers or poor peasants who cling to anything that gives them hope, regardless of how exotic the teaching may be. Further, these suppressed religions may echo antigovernment sentiments harbored by these disenfranchised Chinese who thought that the government gave them a raw deal, especially through WTO accession. As a result, these newly developed religious groups may become potentially destabilizing groups undermining the authority of the government—and even the legitimacy of the regime—through religious teaching of eschatological messages. Fully aware of such danger, the government spares no expense to suppress them on the basis of political and national security, rather than on the basis of religion.[5] The government has already established a special task force within the Public Security Bureau to target these so-called “evil cults.” It is expected that there will be more government campaigns to suppress these religious groups as an increasing number of Chinese, facing negative economic impact from WTO accession, strengthen them.

Overall, the first anniversary of China’s WTO accession has ended without any surprises. The government had long prepared for the event and continues to devise policies to smooth the transition. It is still too early to see the full impact of WTO accession, but there are signs that China will face more severe crises as more cheap imports enter China. Can China survive the onslaught of the powerful multinationals as they try to capture its markets? Or will China be transformed into a mighty economic giant—like the fire phoenix emerging from the ashes of the SOEs—to become the factory of the world?[6]  Perhaps China will have more surprises for us in the days to come. As one noted sinologist once said: “China?  Expect the unexpected.”


  1. ^ The full report of this conference as well as the speech made by Jiang is published in Renmin Ribao (People’s Daily) December 13, 2001. The subsequent commentary articles are published in the Party’s internal bulletin Tongxin (Communication) January, 2002, pp. 1 to 20.
  2. ^ In compliance with the government’s supervision of religious matters, some religious groups in China began to change their constitution to reflect this political reality. The China Christian Council altered its constitution in May, 2002, to include the wording: “This Council accepts the legal administrative authority of the State Administration of Religious Affairs,” Article Five of Chapter One of the revised CCC Constitution.
  3. ^ Ye Xiaowen, “Opening Speech at the Seventh Chinese Protestant Representatives Conference,” May 22, 2002, in Religion in China, No. 4, 2002, pp. 11-13.
  4. ^ The new president of the China Christian Council (CCC), Rev Cao Shengjie, made a strong remark about the “foreign infiltration” issue in the CCC/TSPM working report concerning the direction of the CCC in future relations with foreign religious groups.  See “Working Report of the Executive Committee of TSPM/CCC” May, 2002, Beijing, in Tienfeng No. 7, July, 2002, pp. 4-10. Similar remarks were also echoed at the national meeting, held in Shanghai in August, 2002, of all the provincial church leaders who are responsible for foreign affairs. The content of this meeting emphasized the anti-infiltration issue, namely to be careful of foreign Christian groups who are trying to get footholds in China by taking advantage of WTO accession openness.
  5. ^ See Notification on Certain Questions Regarding the Identification and Elimination of Evil Cults. Institutional secret mimeographed paper issued by the National Public Security Bureau, April 30, 2000, 22 pages. Available at www.religiousfreedomforchina.org.
  6. ^ The Chinese legend of the Fire Phoenix says that when the entire world is destroyed by fire, out of the ashes will rise a phoenix—indicating its indestructibility.

Image credit: Nanyang Commercial Bank (China) Jiabin Branch by 岳唯凌 via Flickr

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Kim-Kwong Chan

The Rev. Kim-Kwong Chan, PhD, DTh, is the Executive Secretary of the Hong Kong Christian Council.View Full Bio