Tech Industry

Commentary: The hidden revolution

Gartner says China winning membership in the World Trade Organization may influence the IT industry more decisively than any other event in the first decade of the 21st century.

By French Caldwell, Gartner Analyst

China winning membership in the World Trade Organization may influence the IT industry more decisively than any other event in the first decade of the 21st century. The effects just won't be dramatically obvious.

If, as the WTO expects, China receives membership formally at its general meeting in November, the event will have varied and complex effects, few of which will become clear immediately. China's leaders have long committed not just to integrating China into the global economy but also to making it a fierce competitor. WTO membership will accelerate the process.

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High-tech readies for China, Taiwan in WTO
But it could thereby widen internal political rifts caused by a quarter-century of economic reforms, such as tensions between richer cities and the poorer countryside and between the weaker but still powerful central government and the regions growing in power and wealth. The faster economic change wrought by WTO membership could also exacerbate political tensions between China and the West as great-power rivalries emerge--or China could develop as close a relationship with the West as Japan and the United States enjoy today. Business leaders should give some thought to the larger political uncertainties before they develop a strategy for making IT investments in China.

Although WTO membership should yield more opportunities for Western businesses in China, it will not bring a quick, dramatic change. As a condition for membership, China will pledge to open certain industries (such as telecommunications) to foreign investments. However, the gates will take a few years to open fully, and China has already started preparing for global competition. For example, it has created competitors to former incumbent carrier China Telecom so that the domestic market gets used to competition before global giants such as AT&T and Vodafone arrive.

The Chinese government will also improve the business climate generally, taking steps such as strengthening the enforcement of intellectual property rights. Again, China has already been moving in this direction for some years--the success of domestic software developers depends on it--so WTO membership will not bring an immediate revolution.

(For a related commentary on political risks associated with IT investments in China, see Gartner.com.)

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