SHANGHAI -- When China's ruling mandarins complete the biggest transfer of power in a decade at the National People's Congress this month, China's World Trade Organization commitments will figure prominently on the national agenda.

Led by President Hu Jintao and Premier Wen Jiabao, China's autocratic body politic are expected to have their work cut out as China's faces its second year of growing pains as a WTO member.

As part of its WTO commitment, China agreed to gradually reduce tariffs, eliminate restrictions on foreign investment and open up its market to foreign companies by 2007.

In exchange, Chinese goods are supposed to gain wider access to the global market place.

"Its decision to join the WTO represents the leadership's decision to face globalization and become part of the world economy," said City University of Hong Kong analyst Joseph Cheng.

As a result, China's WTO commitments will heavily dominate its policy agenda.

Most members of the 144-strong global trade club have largely applauded China's compliance during its first year of membership.

Even the United States, which had previously voiced serious concerns about China's ability to live up to its obligations admitted that the mainland's performance had been better than expected since it joined in December 2001.

For the 143rd member of the Geneva-based Group, the easier part of its promises to the trade group will be the basic dismantling of tariffs on a wide range of goods, such as cars, clothes, paper, foods.

Non-tariff measures like import licensing arrangements and import quotas, will also be abolished in phases by 2007.

But China has to move quickly in the coming year as a great portion of its commitments will be due by the end of 2004, analysts said.

To comply with the overarching pledge of fair competition in an unfettered market place, China must continue to bring industries, including its telecommunications, finance, insurance and professional service sectors, under the deregulatory sledge-hammer.

"The situation could become tougher in agriculture, telecom, banking, retailing and many other sectors," said Salomon Smith Barney analyst Yiping Huang.

"In retailing, restrictions on locations, numbers of shops and foreign interests in joint ventures will be removed in 2003," he said.

The entry of foreign banks poses a particularly heavy risk to China's bloated state banks, which are saddled with more than $200 billion of non-performing assets, according to conservative economists' estimates.

"Competition in the banking sector will intensify, as more cities open up and foreign banks are allowed to make transactions in Chinese yuan," Huang said.

The dismantling of the mainland's arcane trade barriers also throws up a particularly complex set of social problems for Beijing's new leaders.

For one, the government itself must learn its new role, said a Shanghai government WTO official, who requested anonymity.

"One problem is how the government is to transform its role and structure, how should it plays its role in terms of service instead of interfering in the market place," he said.

China is also still digging out from under the lingering effects of more than 40 years worth of a command economy.

Then, the state was the provider of a cradle-to-grave social system for each of its 1.3 billion citizens, known as the "Iron Rice Bowl". (AFP)