China has transformed its economy during the five years it has been a member of the World Trade Organization, Francisco Garces, a Chilean central banker and financial adviser said in a Xinhua interview Friday.

Garces described China's efforts to meet the goals set by the WTO when China joined in December 2001 as "gigantic," saying that China has complied with most of the first round of goals set by the WTO.

"They have completed five years and in this time China has experienced sustained growth," Garces told Xinhua.

China is now one of the most important trading nations, representing 10 percent of world trade, and is contributing to global growth and international price stability, he said.

Garces added that China's banks had become more autonomous thanks to opening of financial markets to allow foreign capital to be invested. He highlighted Citibank's purchase of a Guangzhou bank and other similar deals by Singapore-based firms.

Garces identified two key challenges for the future -- local financial regulation, especially relating to the influence of the central bank, and the development of local capital markets.

"This is not something that can be changed from one day to the next. It needs time and technical knowledge. That involves training staff both inside and outside China, and the hiring of outside experts," he said.

Garces emphasized China's decision to allow foreign investment in China's banks, a key WTO demand, was a powerful signal China wishes to meet WTO goals and develop the financial sector.

"China is developing trust and credibility in the world's banking sector and this attitude will help it to attract more external investment. This in turn will allow it to speed the development of its financial sector, key in the future development of its economy."

China's vast capacity for saving requires a vehicle that to capitalize on this enormous resource, he said. Savings that were not invested were "not helping anyone (stored) under the mattress", he said.

CHINA-CHILE FREE TRADE

China and Chile are also set to hold a second round of free trade talks in January, when they aim to liberalize service and investment and extend the existing free trade agreement between the two nations.

"We are very interested in this round of negotiations, something we see as very positive," Garces said. "Both China and Chile have taken the trade liberalization process very seriously. That is good for the image of both nations internationally."

The existing treaty is broad and meets all WTO guidelines which is rare for existing trade agreements.

"This is a very broad deal, covering both goods and services. Not everything is perfect, however, that is why there must be more rounds after this one to liberalize what has been left out," he said.

China's negotiation skills, honed during this process, will serve the nation well in possible future talks with the United States or Europe, Garces said.

"The results we have seen with the Chile-China trade agreement are spectacular. We certainly cannot complain on this side. We are hoping that the new agreement will give existing trade a new and major push," he said.

In 2005, Chile and China traded goods worth 7 billion U.S. dollars. This year, this figure is expected to reach 8 billion.

Source: Xinhua