Goldman Sachs sees the Chinese economy opening up to Western investors now the US has paved the way ...
Goldman Sachs sees the Chinese economy opening up to Western investors now the US has paved the way for China's accession to the World Trade Organisation (WTO) next year.
Although it is only a technical agreement regarding tariffs and other aspects of trade policy, the deal between the US and China is likely to have wide-spread ramifications as large sections of the Chinese economy will be open to market forces for the first time. According to the Goldman Sachs Economic Research Group, the lack of similar bilateral deals between China and the EU as well as other smaller countries, shouldn't be a problem.
The only stumbling block to China's WTO accession looks to be Congressional approval in the US.
Goldman Sachs believes the prospects for US approval appear good at this point, although election year politics may present some significant obstacles.
The main terms of the US and China accord include tarrif levels for imports for China being reduced from 22.1% to 17% and an end to China providing direct export subsidies for its products.
In addition banks would gain greater access to the Chinese market. Local currency business would be opened to foreign banks two years after China's WTO entry, and after five years foreign banks could enter the retail banking sector.
At the same time external investment in local telecommunications activity would be expanded. Up to 49% foreign ownership of Chinese firms would permitted immediately, increasing to 50% after two years. In addition, US companies would be allowed to invest in Chinese internet enterprises. While some analysts argue that China may not be able to cope with this revolutionary change, fearing opening the market will lead to recession, deflation and devaluation, eventually spelling the end of reform itself - Goldman disagreed with this.
It thinks China's policy makers have a strong track record in running the economy and should be able to cope with any change.
To promote 'long-term investment'
Switching 'hard and expensive'
Smaller funds still packing a punch
To drive progress