Issue 01, 2007 (01 January)

Key to Economy and Trade Shenzhen Five Years After WTO

China became the 143rd member of the WTO at the Doha Ministerial Conference on 11 December five years ago. The five years since China's entry to the WTO are an important period of economic and social transformation for Shenzhen. As the five-year WTO entry transition period draws to an end, China will fully open its market in accordance with its WTO commitments and Shenzhen will be facing a new situation and new tasks. In light of this, the city has just held the Seminar on the International Competitiveness of China's Industry and the 2006 Annual Meeting of the Shenzhen WTO Affairs Centre to brace itself for the new challenge. At these two meetings, experts and scholars gathered together and exchanged views on the international competitiveness of China's industry and the WTO Affairs Centre. 1. Seminar on the International Competitiveness of China's Industry On 4 December 2006, the Seminar on the International Competitiveness of China's Industry organised by the Ministry of Commerce (MOFCOM) was held in Shenzhen after meeting in Xiamen twice. Xu Zongheng, mayor of Shenzhen, Ambassador Sun Zhenyu, China's permanent representative to the WTO, and Wang Chao, assistant minister of commerce, attended the meeting. Arancha Gonzalez Laya, director of the Office of the WTO Director General, and other Chinese and foreign experts and scholars delivered keynote speeches. The theme of the seminar was "Five Years After WTO: Multilateral Rules, Multinational Operation and Independent Innovation", under which discussions were held on ways to actively cope with international competition and challenges brought by globalisation and postWTO transition, promote the change in the mode of economic growth and the optimisation of industrial structure, further strengthen the competitiveness of China's industries, and on how China and Shenzhen's industries could actively make use of the rules of the WTO and other multilateral organisations to enhance their competitiveness in an all-round way under the globalisation trend. Shenzhen's efforts in honouring its WTO commitments are obvious to all. It has built up a working system in compliance with WTO practices, drawn up WTO compliance guidelines, and revised existing laws and regulations in line with WTO regulations. Over the past five years, it has amended or annulled 24 laws and regulations that fail to comply with China's WTO commitments, thus hastening China's WTO compliance. Experts also put forth their suggestions for China in the post-transition period. First, China must bring about a change in the mode of foreign trade growth and effectively deal with problems of trade friction. Second, it must prepare itself for yet another round of industrial transformation -- the outsourcing of services -- in the wake of globalisation. This is particularly important for Shenzhen and crucial measures must be taken by Shenzhen to adapt itself to globalisation and optimise its industrial structure. As the vanguard of reform and opening up,

Shenzhen must accelerate its pace of independent innovation and promote the transformation and upgrading of processing trade. Shenzhen enjoys an obvious advantage in the development of trade in services. It should make full use of the China High-Tech Fair, China Cultural Industry Fair and other platforms to boost trade in services. It is hoped that the WTO Affairs Centre would make greater efforts to study WTO rules, especially their actual application in local administrative work. Meanwhile, steps should be taken to set up a warning system for industry injury, to integrate resources in a bid to render assistance to enterprises in trade friction, and to strengthen training of WTO affairs personnel. 2. 2006 Annual Meeting of the Shenzhen WTO Affairs Centre At the 2006 Annual Meeting of the Shenzhen WTO Affairs Centre held on 5 December, Chinese permanent ambassador to the WTO Sun Zhenyu, director of MOFCOM's department of trade in services Hu Jingyan, director of MOFCOM's department of electromechanical and high-tech Industries Wang Qinhua, and officials of the Guangdong provincial foreign economic and trade cooperation department delivered keynote speeches. The meeting discussed the implementation of the scientific development concept and the 11th Five-Year Programme, the idea of "putting industry first" and "attaching importance to enterprises" put forward by Shenzhen, and the development strategies of "going out" and "building a harmonious and efficient Shenzhen" in the light of the characteristics of industrial restructuring and upgrading in Shenzhen and the Pan-PRD region in order to promote Shenzhen's internationalisation process. Shenzhen will find new opportunities in the latest round of international industrial restructuring and transfer, and the strategy of "putting industries first" will give Shenzhen enterprises a boost in seizing international market opportunities. 3. Some Figures About Shenzhen Shenzhen has done extremely well in trade in goods and services, IPR protection, investment and financing and has embarked on a new track of development in economic and social undertakings these past five years. Shenzhen ranks third among China's top 100 cities in terms of overall strength according to figures published by the State Statistical Bureau at the end of 2005. Its GDP reached Rmb495.091 billion in 2005 after successively breaking the Rmb300 billion and Rmb400 billion marks. The 2005 figure was double the 2001 figure of Rmb248.249 billion when China joined the WTO. Per-capita GDP was 1.75 times that in 2001. The WTO effect has been obvious in the past five years and Shenzhen's economic and social undertakings have been developing on a healthy and stable track. Where foreign trade is concerned, in 2001 Shenzhen's total imports and exports reached US$68.611 billion, of which exports were worth US$37.480 billion and imports US$31.131 billion. In 2005, its total imports and exports increased to US$182.817 billion, up 24.1% yearon-year and 2.7 times the figure in the year of WTO accession. Its total exports amounted to US$101.518 billion, up 30.4% and accounting for 13.3% of the national total. It is the first mainland city to break the US$100 billion mark in exports and has been China's top exporter for 13 years running.

In terms of foreign direct investment (FDI), Shenzhen has maintained a high rate of growth in the absorption of FDI in the last five years, with an accumulated total of US$14.7 billion. Today, 135 of the Fortune 500 companies have 214 investment projects in Shenzhen. In 2005, increases in contracted foreign investment and utilised foreign capital both exceeded 25% on the high bases achieved in 2004. Contracted foreign investment during the year reached US$5.251 billion, up 27.4%, while utilised FDI amounted to US$2.969 billion, up 26.3%. In the same year, Shenzhen approved 61 new projects with investment of over US$30 million and 10 key projects with investment of over US$100 million. In the same year, the value of contracts on increased capital amounted to US$2.598 billion, up 63.6%. In the development of "going out", Shenzhen enterprises have made a great breakthrough since China's WTO accession five years ago. Among the 43 enterprises that made offshore investment in 2005, 47% were private enterprises and 35% were recognised high-tech enterprises. Among them, offshore investment by SMEs accounted for more than 50% of new investments. In 2005, approval was granted to 64 foreign enterprises and institutions with a total agreed investment of US$309.28 billion, up 22.4%. New contracts for foreign construction projects and labour cooperation worth US$2.985 billion were signed, up 109.5% year-on-year. The completed business amount reached US$2.14 billion, up 64.1% year-onyear. For the output value of high-tech products, during the five years since China's WTO accession, Shenzhen has broken the US$100 billion mark four consecutive times. In 2005, the value-added of its high-tech products amounted to Rmb140 billion, or 28.4% of the city's total output value. The output value of products with proprietary intellectual property rights amounted to 58% of the total output value of high-tech products. In 2005, Shenzhen applied for over 20,000 patents, ranking third in the country. It rose to the second place in 2006 and applications for 700 PCT international patents were made, ranking first among China's large and medium-sized cities. Today, Shenzhen has over 50,000 own brands and is hailed as China's "brand name capital". In the national assessment of Chinese brand-name products, 58 of its products have won the title of "Famous Chinese Brands", ranking first in the country. In trade in services, Shenzhen's total imports and exports, total exports and total imports of services registered annual growths of 37.0%, 43.5% and 29.7% respectively between 2001 and 2004, with increases in service exports exceeding imports. In 2001, the total imports and exports in trade in services was US$1.91 billion. In 2004, it rose to US$6.05 billion, representing an annual growth rate of 36% and more than three times the 2001 figure. As a result of the rapid growth of service exports since WTO accession, Shenzhen's service trade balance ended its long history of deficit and began showing a surplus in 2002. The surplus continued its increase in the following two years to reach US$1.13 billion in 2004. Overall, Shenzhen's trade in services is still in its nascent stage of development, and there is great potential for the import of services from Hong Kong and other countries and regions to the city.

The private sector in Shenzhen also witnessed rapid growth in the last five years. Private enterprises in the city applied for 2,020 national patents in 2005, accounting for 98% of the total number of national patent applications in China. Their offshore investment also experienced fast growth. Private and shareholding enterprises contributed to 70% of Shenzhen's offshore investment, overtaking the long-time predominance of state-owned enterprises. Capitalising on CEPA, Shenzhen has taken a positive part in regional economic integration at the three levels of Shenzhen-Hong Kong cooperation, Greater PRD cooperation and Pan-PRD cooperation since WTO accession, thereby establishing an important channel for opening the domestic market and linking it with Southeast Asia. It has also become an important passage to the sea for the Pan-PRD economic circle as well as a window for economic ties with foreign countries.