Foreign Trade in the People's Republic of China: Past Performance and Future Challenges

Abstract

The People’s Republic of China (PRC) mainly exports labor-intensive manufacturing products, especially textile and apparel, which face fierce international competition. The PRC’s trade is also unevenly distributed, which has led to trade frictions with the United States (US). Given this situation, four factors (challenges) are important for the future of the PRC’s trade: membership in the World Trade Organization (WTO); Sino-US trade relations, which will affect the PRC’s access to the US market and conditions for entering WTO; phasing-out of the Multi-Fibre Arrangement (MFA); and antidumping, a trade policy instrument that makes the PRC’s exports especially vulnerable because of the use of surrogate countries. In the near future the PRC should still be able to obtain reasonable market access because most countries except the US have already given the PRC unconditional most favored nation (MFN) status. A US withdrawal of the PRC’s MFN status will lead to trade wars and is unlikely to happen under normal circumstances. The PRC will not suffer much from the MFA phasing-out because benefits of the agreement are heavily back loaded and will not materialize until years later. Setting up the PRC’s own antidumping regulations is a good strategic move to deter possible abuse of antidumping by other countries.