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I) Positive Effects
1. The provision of PSSMs helps to drive China to reform its trade regime and adjust its trade policies. Chinese foreign trade experienced a rapid development after the implementation of reform and open policy and is playing a very important role in China’s economic development. Market economy has been adopted as China’s economic system. But on the other hand, the dependency ratio of economy on foreign trade has reached 60.3% and is becoming a controversial issue. (Liu Guangxi, 2004) This has fostered huge risks as any fluctuation of the world economy may undermine the driving force and the base of China’s economic growth. In the past years, China has implemented an export-oriented economic policy, laying too much emphasis on the pulling force of export on economic growth and the increase of foreign reserve, which has in fact driven some enterprises to export products at lower prices rather than improve the quality of products for the refund of taxes on exports so that benefits from exports have been very small. The existence and application of PSSMs have constituted a precaution to the policy. At the end of 2004, China adjusted the rates of tax refund for some export products, which is a strong signal of readjustment of its trade policy, while the new Law on Foreign Trade marks the beginning of reform on China’s trade regime.
2. The provision of PSSMs is an important force propelling China’s industrial structural adjustment. China’s economy is at the stage of structural adjustment, when the external demand of upgrading of industry and the internal impulsion for short-term profits from foreign trade conflict and constitute strong contradiction. In fact, the structural contradictions and conflicts of interests incarnated in the process of reform and opening to the outside world has reduced the driving force of further reform. China’s accession to the WTO has rendered an external propelling force for the resolution of the problem. So far as structural adjustment is concerned, the high possibility of the application of PSSMs against Chinese products exerts great pressure upon the Chinese government and enterprises, which is beneficial in propelling the process of industrial adjustment.
3. The provision of PSSMs is driving Chinese enterprises to speed up their technological innovation and increase the technical content of export products. China has depended on its advantageous labor cost in product export, which has made its exported products feature low added value and low technology thus less competitive in the international market. Therefore, not surprisingly, price competition has become an optional tactic, which resulted in a large number of anti-dumping investigations and measures from other WTO members. The quota for textiles expired on January 1, 2005, which makes some Chinese scholars so optimistic as to neglect the fact many interest groups in some countries, especially in the United States, one of the largest importers of Chinese textile products, are urging or pressuring their governments to resume or maintain quota or limitation to Chinese textiles or textile products In this sense, the existence and application may constantly warn the Chinese government and enterprises of the potential risks. Chinese enterprise should make full use of the opportunity to renovate their technologies, increase added values and technical content of their products in order to increase profits.
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