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WTO Membership Means Reforms for China

China is getting mediocre first-term grades on trade liberalization from the next head of the World Trade Organization. But Chinese officials promise improvement, and say reforms are "well under way."

Supachai Panitchpakdi says half a year after China joined the World Trade Organization, "things are moving along," but there have been "no landslide changes" in China's economic landscape. He spoke at a recent economic conference in Tianjin.

Mr. Supachai, who takes over as WTO chief in September, said China comes up short, especially in sharing economic and business information. He noted Beijing needs to do better, or face what he calls "a reaction" from its trading partners.

"I would rate it [China's WTO compliance] as pass, more than fiveā€¦ how far more than five? It depends on the provision of things I have just discussed, [including] the provision of information in Geneva," he said. "I would hope Chinese authorities would attach great importance to that, because it is crucial for the international community to learn of the progress that is being made in China."

Chinese Vice Premier Li Lanquing told the gathering China is hard at work to meet the country's WTO commitments.

Mr. Supachai stressed China must keep promises to reform its banks, which are heavily burdened with bad loans. Some economists worry the bad debt problem is threatening the solvency of China's banking sector.

Many of the loans that are not being repaid have gone to China's inefficient state-owned enterprises. WTO rules are forcing China to open up to much more efficient competitors from abroad, which leads to the closure of the state companies and mounting unemployment. According to Mr. Supachai, the process of weeding out bloated state companies will cost China about 10 million jobs a year, and the country will need a social security net to help the poor.

He suggested one way for Beijing to raise the money to pay for social security is to sell a stake in some of China's state enterprises. Economists at the forum said many of China's state companies cannot be salvaged, but there are companies that are financially sound and economically viable.

According to Mr. Supachai, the WTO itself must change the way it handles disputes between its members, such as those that arose from the decision by Washington to raise import tariffs on steel.

In a speech to the forum, former U.S. President George Bush joked that Mr. Supachai should get "combat pay" for dealing with such problems.

Mr. Bush, a former U.S. ambassador to China and father of the current president, tried to justify the decision of his son's administration to impose the steel levy. "Nobody is pure in the trade business, nobody is a total virgin out there," he said.

Touching on other issues, Mr. Bush told his audience China has serious problems with human rights violations and lack of political freedoms. But he expressed confidence that China will eventually work through these problems and become prosperous and more democratic.

Many of the businessmen at the forum echoed Mr. Bush's sentiment, saying China's membership in the WTO will lead to prosperity and make China an efficient competitor on the world's markets.