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Es geht los.
Tuesday September 19, 12:45 am Eastern Time
FACTBOX-Impact on China sectors after WTO entry
SHANGHAI, Sept 19 (Reuters) - Following are the sectors most affected by China`s impending WTO entry if a U.S. Senate bill granting China permanent normal trade relations is passed, as expected, later on Tuesday.
The table is based on concessions made by China in agreements reached with the United States last November and with the European Union in May. Under WTO rules, benefits granted by China to one trading partner are extended to all.
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THE DEAL: Upon accession, foreign operators will be permitted to take a 25 percent share in mobile telecoms firms, rising to 49 percent after three years, the EU said.
In Internet, paging and other value-added services, foreign firms immediately will be allowed to take 30 percent stakes in Chinese companies in Beijing, Shanghai and Guangzhou, rising to 50 percent in two years, when geographical constraints are lifted.
Tariffs on many high-tech products like telecoms equipment will be phased out and eliminated by 2005, according to the U.S. deal.
THE IMPACT: State-owned telecoms giants may be hit as competition between domestic operators heats up, with foreign investment beefing up their infrastructure and services.
An increase in the number of network operators could bring more business opportunities to domestic equipment manufacturers. Lower tariffs on telecom equipment could have a limited impact as domestic makers do not count on protection from high tariffs.
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THE DEAL: China will cut import tariffs on automobiles to 25 percent by mid-2006 from the present 80-100 percent, under the U.S. agreement.
The EU deal requires China to lift all restrictions on category, type and model of vehicles produced in Sino-EU joint-ventures within two years.
THE IMPACT: China plans to cut import tariffs to 60-80 percent in the next two years as the first step in duty cuts.
The domestic auto industry is expected to be one of the hardest hit, with a shake-out looming upon WTO entry.
Cheaper imports could also hurt foreign auto joint ventures with better product quality and services, such as Shanghai General Motors (NYSE:GM - news) and Shanghai Volkswagen (quote from Yahoo! UK & Ireland: VOWG.F). Domestic automakers also face competition from a sharp rise in car and auto parts imports, spurred by steep cuts in tariffs.
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THE DEAL: Foreign banks will be allowed to conduct domestic yuan currency business with Chinese firms two years after WTO accession and with Chinese individuals five years after accession, the U.S. deal says. Geographic restrictions will be lifted after five years.
THE IMPACT: Foreign banks will make inroads in yuan business in major cities like Shanghai and Beijing, but will not pose an immediate threat to the Big Four state banks, which have vast branch networks and a market share of more than 70 percent. Domestic banks will lose staff to foreign rivals. Smaller commercial banks may bear the brunt of competition.
China has pushed its creaky banking sector into a scramble to expand services, forge cooperative pacts, list stocks, shed bad debts and merge to cope with the threat of foreign competition.
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THE DEAL: China will permit minority foreign-owned joint ventures to engage in fund management on the same terms as Chinese firms. Three years after accession, foreign firms will be allowed 49 percent stakes in joint ventures.
THE IMPACT: Fledgling domestic brokerages are seeking partnerships with foreign securities houses to tap their expertise and capital strength. China International Capital Corp, a joint venture investment bank of China Construction Bank and Morgan Stanley Dean Witter, is expected to fare well in underwriting domestic and overseas IPOs and other investment banking services.
Already, foreign fund managers are tying up with domestic firms, providing foreign know-how for running open-ended mutual funds, a first step towards setting up joint venture fund management companies in China.
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THE DEAL: China will allow ``effective management control`` in life insurance joint ventures, although it will limit foreign stakes to 50 percent. The EU has said the insurance market would be opened two years earlier than outlined in the U.S. agreement.
The U.S. deal calls for Beijing to phase out geographical restrictions in three years, to allow foreign insurers into group, health and pensions over five years, and permit wholly owned non-life subsidiaries in two years. Foreign insurers are now largely restricted to Shanghai and Guangzhou.
THE IMPACT: European insurers, offered seven new business licences, are the big winners. Two of the licences have been issued since the EU deal.
Domestic insurers, now enjoying a 99 percent market share, will face stiff competition from foreign firms.
China has granted licences to 16 foreign insurers, including five U.S. firms and seven from Europe. New approvals include Assicurazioni Generali of Italy and ING Insurance of Netherlands. Some U.S. insurers, such as American International Group (NYSE:AIG - news), hold more than one licence.
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THE DEAL: China`s duties for agricultural products will fall from 22 percent to 17.5 percent; and for U.S. priority products from an average 31 percent to 14 percent by January 2004, the U.S. deal said.
Under the EU agreement, China will cut import tariffs on products such as rape oil, butter, mandarins and wine to a range of nine to 18 percent from the present 25 to 85 percent.
THE IMPACT: In April, China accepted the first shipments of U.S. pork and beef as part of moves to implement the U.S. deal.
China`s producers will be major losers because tariff cuts and freer import quotas will mean domestic grains like corn and soybeans must compete with higher quality imports. Cheaper meat imports will threaten the local livestock industry.
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THE DEAL: Quotas on Chinese textile imports will formally end in 2005 as mandated under a WTO-wide accord, although a special import ``safeguard`` system will be in place until the end of 2008.
THE IMPACT: China`s textile and apparel sector is one of the few that should see a clear benefit from WTO entry with the lifting of import quotas abroad. Chinese textile firms focused on exports will be best positioned to capitalise on the agreement.
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THE DEAL: China has agreed to open the crude and processed oil sectors to private traders through gradual liberalisation. In the EU deal, China agreed to trim its state monopoly on oil trading by giving up four million tonnes of oil products and 10 percent of crude imports to the private sector.
China will also open retail oil distribution three years after accession and allow foreign firms 30 petrol stations each. China will open its wholesale market five years after accession.
A senior government researcher said in June that China will allow oil product imports of 16.58 million tonnes upon entry, expanding 15 percent annually until 2005, when the quota will be scrapped.
THE IMPACT: China will give up its virtual monopoly in the oil sector, allowing private traders to import oil products and foreign firms to set up petrol kiosks. But analysts said Chinese oil giants like Sinopec need not worry about their retail market share because by 2003 they would have all the best sites.
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THE DEAL: China will phase out restrictions on distribution services for most products within three years, the U.S. deal said. China has agreed to lift joint venture restrictions on large department stores and for virtually all chain stores.
It will also scrap space restrictions for foreign-owned stores under the EU deal.
THE IMPACT: China said this month it would allow foreign firms a controlling stake of up to 65 percent in retail stores.
Foreign firms must now distribute products made in China through domestic companies. With the agreement, foreign firms can cut intermediate steps in distribution and have the choice to set up their own networks, reducing time-to-market of their products.