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After its accession to the World Trade Organization in 2001, China has taken steps towards opening up its domestic market. As a condition for joining the WTO, Chinacommitted itself to a schedule of trade liberalization, including the reduction of tariffs on cars and agricultural products. These tariffs reductions are both modest and gradual and there is much room for China to proceed at a faster pace.
    A dismantling of non-tariff barriers and a more rapid and profound reduction of import tariffs would raise the standard of living of those Chinese consumers who would have access to imported products at lower prices. Second, a higher volume of imports into China would take away much upward pressure on the Renminbi and provide a true and lasting contribution to solving current global trade imbalances.  Indeed, even a modest acceleration in the opening-up process would go a long way towards solving the problem.
    The opening up of China’s markets to international competition should be accompanied by deep reforms. Banks should be recapitalized, bad loans provisioned fully and state-owned companies’ runaway indebtedness curbed. Only when real progress in these areas is made should China begin to consider a reform to its exchange rate regime. Doing it any earlier would be highly counterproductive.