SHANGHAI, May 25 (Reuters) - Following are the sectors most affected by China's impending entry to the WTO following passage of a bill by the U.S. House of Representatives to grant China permanent normal trade relations.
The bill has yet to be approved by the U.S. Senate but its passage there is widely expected.
The breakdown includes concessions made by China in an agreement reached with the United States last November and in a similar agreement reached with the European Union on May 19. Under WTO rules, benefits granted by China to one trading partner are extended to all.
___________________
SECTOR: Telecoms
THE DEAL: Upon accession, foreign operators will be permitted a 25 percent share in mobile telecoms firms, rising to 49 percent after three years, the EU said.
In the Internet and other value-added services, including paging, foreign firms from the outset will be allowed 30 percent stakes in Chinese companies in Beijing, Shanghai and Guangzhou, rising to 50 percent in two years when all geographical restrictions will disappear.
IMPACT: State-owned telecoms giants may be hit as competition between domestic telecom companies heats up, with foreign investment beefing up their infrastructure and services.
____________________
SECTOR: Automobiles
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.
IMPACT: The domestic auto industry is expected to be one of the hardest hit, with a shake-out looming upon WTO entry. Foreign auto joint ventures such as Shanghai General Motors and Shanghai Volkswagen, with better product quality and services, also could be hurt by cheaper imports. Domestic automakers also face competition from a sharp rise in car and auto parts imports, spurred by steep cuts in tariffs.
____________________
SECTOR: Banking
THE DEAL: Foreign banks will be allowed to conduct local currency business with Chinese enterprises 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 local yuan currency business in major cities, such as Shanghai and Beijing, but will not pose an immediate threat to the Big Four state banks which have a vast branch network and more than 70 percent market share. Domestic banks will lose more staff to foreign rivals. Smaller commercial banks may bear the brunt of heated competition. Beijing has pledged to support domestic banks by pushing them to go public and forming asset management companies to take over the bad debts.
____________________
SECTOR: Securities
THE DEAL: China will permit minority foreign-owned joint ventures to engage in fund management on the same terms as Chinese firms, under the U.S. deal. Three years after accession, foreign ownership of those joint ventures will be allowed to rise to 49 percent.
THE IMPACT: Fledgling domestic brokerages will seek 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 both domestic and overseas IPOs as well as in other investment banking services. Foreign securities houses may also tap China's domestic A share market by initially joining domestic mutual fund management. China has no listed securities firms, but many of them are in a scramble for stock listings to boost their financial clout.
____________________
SECTOR: Insurance
THE DEAL: China will allow "effective management control" in life insurance joint ventures, though it will limit foreign stakes to 50 percent, under the EU deal.
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, 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.
IMPACT: European insurers, who were offered seven new business licenses, are the big winners. China has granted licences to 14 foreign insurers, including five U.S. firms and five from Europe including Germany's Allianz and France's AXA . Some U.S. insurers such as American International Group hold more than one licence. Domestic insurers, which currently enjoy 99 percent market share, will face stiff competition from foreign firms.
____________________
SECTOR: Agriculture
THE DEAL: The U.S. accord says 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.
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.
IMPACT: China's producers will be major losers because tariff cuts and loosening of import quotas would mean domestic grains such as corn and soybeans will have to compete with often higher quality imports. Cheaper foreign meat imports will also threaten the local livestock industry.
____________________
SECTOR: Textiles
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 end 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 in foreign countries. Chinese textile firms that focus on exports will be best positioned to capitalise on the agreement.
____________________
SECTOR: Distribution
THE DEAL: China will phase out all restrictions on distribution services for most products within three years, under the U.S. deal.
China has agreed to lift the specific joint venture restriction applicable to large department stores, and for virtually all chain stores. It will also scrap space restriction for foreign-owned stores, under the EU deal.:
