By Andrew Browne
BEIJING (Reuters) - A relieved China on Thursday hailed a "wise" U.S. House of Representatives vote granting it permanent normal trade relations (PNTR), but lashed out at human rights conditions attached by lawmakers.
The angry words on human rights dampened the celebratory mood over a bill whose proponents argued would set turbulent China-U.S. relations on a steadier course, and encourage Beijing to embrace free market democracy.
The legislation will lift two decades of uncertainty over Chinese exports to its biggest trading partner by eliminating an annual review by Congress of China's trade status.
Senate approval is seen as a formality.
Passage of the bitterly contested legislation that smooths China's entry to the World Trade Organization will offer a boost to reformist Premier Zhu Rongji and President Jiang Zemin, who have stake their reputations on better ties with the United States and more open markets.
U.S. business executives were cautiously optimistic about prospects for unprecedented access to a market of 1.3 billion consumers.
News the bill had passed by a vote of 237 to 197 lifted Chinese stocks, even though markets are dominated by state firms that stand to lose most from stiffer foreign competition. Among the biggest losers will be automakers and farmers.
Chinese banks and insurers will have to start scrambling to improve services and shore up their wobbly finances.
Indignation Over Rights Provisions
China's joy was mixed with indignation over legislative provisions setting up a commission empowered to monitor China's human rights record and recommend sanctions compatible with WTO membership.
The provisions were put in to appease Democrats and their supporters among organized labor who fought hard to derail the bill.
A Chinese Trade Ministry spokesman lauded what he called a "wise" decision by U.S. lawmakers to vote for PNTR.
Hu Cusheng said it would "help the healthy and stable development of bilateral trade and economic cooperation with China on the basis of equality and mutual benefit," Xinhua news agency reported.
But Hu attacked the human rights conditions as interference in China's internal affairs and said they were "unacceptable to the Chinese government."
"China pays close attention to and expresses strong dissatisfaction with this act and reserves the right to react on the issue in the future," he said.
"We urge the U.S. side to correct its wrongdoing, so as to ensure a healthy and smooth development of China-U.S. economic cooperation and trade," he said.
PNTR will guarantee Chinese goods get the same low-tariff access to U.S. markets as products from other nations.
China expects to join the WTO this year, having overcome its last major hurdle by signing a market-access deal with the European Union last week.
Short-Term Risks
Both Premier Zhu and President Jiang fought hard for WTO entry in the teeth of opposition from protectionist ministries.
They believe the risks of social turmoil, as foreign competition throws millions of state workers out of jobs, will be outweighed by the shock incentive to improve industrial efficiency and grow the service sector.
"The leadership has shown the willingness to look a bit longer and bear the social and political risks in the short-term," said Yukon Huang, head of the World Bank's China mission.
"Down deep it serves U.S. interests and it serves the world's interest," he said.
Foreign Ministry spokeswoman Zhang Qiyue said better China-U.S. ties would be good for Asia.
"As two big powerful countries in the Asia-Pacific region, good political and commercial relations are favorable for the region," she told reporters.
John Sullivan, vice-president of the American Chamber of Commerce in Beijing, said PNTR would "create a more stable, predictable and consistent environment within which the Chinese can make their reforms."
U.S. executives, however, also warned against overblown expectations.
"It obviously gives greater access to the China market for American businesses and will certainly improve the way our company can conduct its business," said Howard Dale, China manager for U.S.-based CNH Global NV, the world's largest maker of tractors and combine harvesters.
But he added: "Everything is not going to happen overnight, it's going to be a step-by-step process."
Amid the euphoria, however, many quietly expressed reservations over China's ability to honor its WTO commitments. Few expected bureaucratic red tape and murky rules that frustrate their business in China to disappear any time soon.
Taiwan Sees Wto Entry
Taiwan welcomed the vote, saying it brightened prospects for both sides of the Taiwan Strait to enter the WTO.
Beijing, which regards Taiwan as a breakaway province to eventually be brought under its rule, insists the island can join the WTO only as a non-sovereign customs territory like Hong Kong, and only after Beijing gains the sole sovereign China seat.
Business leaders in Hong Kong said the territory was well placed to cash in on China's WTO entry but would have to sharpen its competitive skills.
Some economists said sweetened China-U.S. relations could mean stiffer competition for exports by other Asian nations to the United States, particularly low-tech products.
WTO chief Mike Moore said PNTR was a vital step in bringing China into the global trade watchdog.
"I am delighted that the U.S. House of Representatives has approved Permanent Normal Trade Relations with China. This is a vital step in bringing China into the family of governments that make up the World Trade Organization," he said in a statement.
"By extending PNTR to China, the House has given a major vote of confidence to a rule-based trading system, a system which encourages openness and accountability," Moore said.:
