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China's WTO entry a wake up call for Indian firms

China's entry into the World Trade Organisation should serve as a "wake up call" for Indian industry which can capitalise on new opportunities once its giant neighbour liberalises its policies, analysts said.

T K Bhaumik, a senior policy adviser to the Confederation of Indian Industry, said on Monday that WTO entry will make China's policies more transparent and should benefit countries like India.

"It's a wakeup call for India, the industry should engage in some kind of homework," Bhaumik said.

"China's entry into WTO is welcome in the current situation, overhauling of the domestic industry will be required," said Vijaya Katti of the Indian Institute of Foreign Trade.

China's imports are likely to surge to $600 billion from the current $240 billion with lower customs tariff agreed to with the WTO, Bhaumik said. "Even if we can tap one per cent of that, it means $6 billion and that should not be a difficult target."

The current trade between the two nations is worth around $3 billion annually.

China's entry was given the formal go-ahead by the 142 members of the WTO in Doha on November 11 and it will become a member automatically on Tuesday, exactly a month later.

WTO membership will open China's rapidly growing economy wider to foreign investors but will also expose its state firms and banks to foreign competition.

WTO-DISCIPLINED CHINA

Katti said it will help India to face competition from a WTO-disciplined China.

Bhaumik said China has agreed to bring down by 2005 the average tariff on farm product imports to 17.5 per cent from around 21 per cent now.

"There will be several items on which tariff will be below 17.5 per cent and many of them at seven to eight per cent, which is a very reasonable duty," he said.

China has also promised to allow foreign companies to set up facilities and start trading in agriculture commodities. "This opens up huge opportunity, we can not only export but start domestic trading in China and this will also help to cut our grain stocks," Bhaumik added.

India has been eyeing the global grain and sugar export markets to cut huge stocks. The country is sitting on a 60-million tonnes grains stockpile and 11.7 million tonnes of white sugar.

Bhaumik said China imports around 18 to 20 million tonnes of grains annually.

"China's population is likely to increase to 1.3 billion by 2025. At the same time, agriculture land is limited," he said.

"But we need to enhance the quality and reduce the cost of production so that we can compete against countries like Australia, Vietnam and Thailand."

Analysts said India would also face competition from Taiwan, Korea, the ASEAN countries and Bangladesh in selling its goods in China.

Bhaumik said China has also agreed to lower average import duties on industrial goods with the upper limit not exceeding 20 per cent.

This would open up opportunities in the automobile components and consumer goods segment, he said.

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