China's accession to the WTO: The services dimension

China's GATS commitments represent the most radical services reform program negotiated in the WTO. China has promised to eliminate over the next few years most restrictions on foreign entry and ownership, as well as most forms of discrimination against foreign firms. In general, these commitments promote good policy. But the persistence of restrictions on foreign ownership (temporary in most sectors but more durable in telecommunications and life insurance) may dampen the incentives for foreign investors to improve firm performance. And initial restrictions. on the geographical scope of services liberalization could encourage the further agglomeration of economic activity in certain regions - to an extent that is unlikely to be reversed completely by subsequent country-wide liberalization. Finally, realizing the gains from, and perhaps even the sustainability of, liberalization will require significant improvements in the regulatory framework, and the appropriate sequencing of reforms.