ABSTRACT
Since formally lodging its application to rejoin the GATT in 1986, China has made serious efforts to accelerate its reform process to make its economic system compatible with GATT requirements. One such requirement is foreign access to China's domestic market. China has long pursued a policy of protecting its national industries against foreign domination. In the pre-reform era, this protection was secured by a centrally planned and state-owned economic system. Foreign trading transactions were then dominated by a dozen large state foreign trading corporations. Trade between domestic firms and foreign companies had to be conducted through these state trading corporations. Domestic firms were completely insulated from the outside world. This system provided a secure environment for domestic industries. But the cost was a loss of productivity due to lack of competition and technology transfer, and resource misallocation due to price distortions. Since adoption of economic reform and opendoor policies two decades ago, central plans have been largely replaced by the market.
