The Foreign Service Journal, January 2003

reducing their capital requirements. China has already revised its foreign investment laws to remove local con- tent, export performance, technology transfer and for- eign exchange balancing requirements. And the Ministry of Foreign Trade and Economic Cooperation is current- ly drafting a trading rights law that will completely liber- alize the system by 2005. In the services sector, China has issued new regula- tions governing foreign-invested financial institutions, including banks, insurance firms, and securities and fund management companies. A growing number of foreign banks (including Citibank) have obtained permission to do domestic individual and enterprise foreign exchange business while several have also been issued licenses to do local currency business in the newly-opened cities of Tianjin and Dalian. In May 2002, the China Insurance Regulatory Commission issued a license to permit American insurer AIG to open up the first foreign-invest- ed life insurance operation in Beijing, one-and-a-half years before China had committed to do so. The CIRC has also issued several new insurance operating licenses to foreign insurers, including CIGNA and Liberty Mutual. Shortly before China’s accession, AT&T became the first foreign telecommunications company to receive approval of its joint venture to provide value-added ser- vices in Pudong (Shanghai). In January 2002, American Express announced the first joint venture business travel service company in China. More generally, China’s National Administration of Tourism has approved over a dozen joint venture travel agencies since accession. In June 2002, ExxonMobil reported that it had obtained permission to open 500 filling stations in Fujian province, while BP and Shell also received approval to open an additional 500 filling stations in China’s southeast. In July 2002, the Ministry of Foreign Trade and Economic Cooperation issued a notice announcing a pilot program that would allow foreign-funded logistics joint ventures in a number of coastal provinces and cities. China has now opened up all five Special Economic Zones and eight major cities to limited foreign joint venture retailers, a small but significant step in liberalizing the distribution sector. China amended its copyright, trademark and patent laws just prior to its WTO accession and has subsequent- ly issued companion implementing regulations. It pro- mulgated new regulations on the protection of computer software and integrated circuit layout designs. It has kept up enforcement measures by increasing the number of raids and recently established a national anti-piracy com- mittee under the National Copyright Administration. The State Administration of Industry and Commerce, Ministry for Public Security and State Intellectual Property Office have also set up a formal mechanism to share information and coordinate enforcement efforts on intellectual property rights infringement. In July, SIPO issued regulations that would allow administrative review of patent office decisions. In August, the Tianjin Intermediate Court issued the first preliminary injunc- tion in an IPR dispute over registered design patents. Problems in Implementation The above-noted progress notwithstanding, China’s implementation of its WTO commitments has fallen short in a number of areas with important consequences for U.S. economic interests. Not surprisingly, many local protectionist forces have surfaced in China to criticize the “concessions” made by the Chinese negotiators in Geneva. They point out that other countries, including the United States, have recently adopted certain protec- tionist measures, thus justifying new protectionist mea- sures by China. They emphasize the need to ensure sta- bility and urge caution in implementing market open- ing.measures. Some of these critics in government min- istries and agencies have thus sought to protect certain domestic industries by enacting rules that clearly, or often not so clearly, impose new restrictions on foreign exports and on foreign companies seeking to enter the China market. China’s WTO implementation has been particularly problematic in the areas of agriculture and financial ser- vices. Prior to its accession in December 2001, China issued new biotech regulations that threatened to block the annual import of $1 billion worth of U.S.-produced transgenic soybeans into China. The U.S. considered such regulations to be contrary to WTO principles of sound science and transparency. Although Chinese lead- ers assured President Bush that China would not use the regulations as trade barriers, an extraordinary amount of time and resources, including interventions by the presi- dent and Cabinet-level officials, was required to ensure imports would continue. Nevertheless, the regulations blocked imports for several months; as a result, Chinese imports of U.S. soybeans for the 2001/2002 market year F O C U S 58 F O R E I G N S E R V I C E J O U R N A L / J A N U A R Y 2 0 0 3