China's Great Step Forward

2 Pages 540 Words

Bill Powell explains in his article China’s Great Step Forward, found in the September 17, 2001 issue of FORTUNE, about the many positive and negative aspects of China as a World Trade Organization member.

Being the biggest and most populated country in the world, China is also one of the fastest growing economies in the planet. China is growing at 8 % a year, on the back of vibrant exports and strong domestic demand. With a cheap and abundant working force, they are a very appealing country for foreign investment, which is already one the forces moving China is this fast step growing.

Joining the WTO will make radical changes in industries in China, but at the same time will provide “more protection” for them. Most of the smaller companies will end up allying with global companies.

Also, the Banking system will endure radical changes. Banks are now dominated by a handful of huge state owned institutions whose basic job aver the years has been to shovel money to lousy state owned manufacturers. No wonder those banks suffer from Japanese levels pf bad debt. Instead, with the changes brought by the WTO, it’s believed that with personal income growing rapidly for millions of Chinese, an all out flog of credit cards and home mortgages makes eminent sense.

But one of the most important changes will be he distribution of the products. Right now in China, industries can’t create or set up their own distribution chains, service centers or dealer networks. This means that they need to rely on local partners, which can bring in a lot of trouble. Imagine that the local partner a company has is the same one for their main competitor. But the WTO is supposed to change all of that.

Although China is prospering on their own, an isolation policy like the one they are using will not last for long. The fact that they are one of the last remaining socialist countries in the planet, make most of their leaders fearful of cha...