First of all, according to the conditions stipulated in a series of bilateral agreements, China promised to carry out substantive trade reform. The average tariff rate will be reduced from the current 17% to below 10%. Information technology products (including computers and telecommunications equipment), as the fastest growing products imported from China, will enjoy zero tariff by 2005.
The reduction of trade restrictions and the expansion of trade volume will greatly increase the complexity of implementing existing foreign exchange and capital controls and further weaken the effectiveness of these controls. On 1996 12 1, China officially accepted the eighth article of the International Monetary Fund, and realized the convertibility of RMB under the current account. The reason is that the open current account makes it difficult for capital controls to be fully effective.
Considering the actual experience of capital control in China, it is certain that the rapid expansion of foreign trade scale after China's entry into the WTO will further weaken the effectiveness of these controls. An obvious dilemma is that as long as the current account is convertible, it is difficult to fully implement capital account control. The more open the trading system, the more channels for capital leakage and flight.
Secondly, as one of the conditions for China's entry into the WTO, China will greatly open its financial service trade in the next five years. Two years after China's entry into the WTO, foreign banks will be allowed to operate RMB business of China enterprises, and five years later, they will be allowed to operate retail business of China residents. Foreign asset management companies will be allowed to form joint ventures with fund management companies in China (foreign equity shall not exceed 33%).
Changes of China after its entry into WTO;
China's accession to the WTO will greatly promote the liberalization of China's foreign trade in goods and services, promote the flow of trade and capital, and accelerate its integration with the world economy. In view of this, China's entry into WTO will exert great pressure on China's current capital control system and obviously threaten the effectiveness of these controls. The convertibility of capital account will highlight the contradiction between the improvement of trade openness and the continuous restriction of capital flow.
At the same time, the accelerated privatization of state-owned enterprises, the reform of pension system, the development of information technology industry and the development of the western region will expand the demand for foreign direct investment and securities investment, thus effectively promoting the substantial liberalization of capital controls. Capital liberalization will be a natural extension of China's domestic reform process.
China's good balance of payments, the progress made in the reform of domestic financial system and the transition to a more flexible exchange rate system will also promote the process of capital account liberalization. Therefore, this paper predicts that China may realize capital account convertibility within five years, instead of 10 years or longer.
Extended data
Balance of payments adjustment policy:
1, the foreign exchange buffer policy refers to a country's use of changes in official reserves or temporary external financing to solve the excess demand and supply of foreign exchange.
2. Exchange rate policy refers to eliminating the balance of payments deficit by adjusting the exchange rate.
3, fiscal policy, refers to the government through its expenditure tax and other means to influence the balance of payments policy effect.
4. Monetary policy refers to the policy effect achieved by the monetary authorities by changing the money supply and adjusting the interest rate level, thus affecting the changes in the balance of payments.
5, direct control, the government is unwilling or unable to use exchange rate, fiscal, monetary and other policies to eliminate the imbalance of international payments, the mandatory management means adopted. It includes monetary control, financial control and trade control.
Baidu Encyclopedia-Specific Policies for Balance of Payments Adjustment