THREE years of membership in the World Trade Organization (WTO) have initially prepared China for intense foreign competition, although there are still tougher challenges ahead.

China joined the global trade body at the end of 2001 amid worries over the potential impact on some domestic sectors.

But vast and far-reaching changes in the home market over the past three years have surprised the nation more than expected.

The doubling of the country's trade volume in just three years might best illustrate the magnitude of changes its WTO membership has brought about.

Clearly, wider access to overseas markets as well as the country's unremitting efforts to slash tariffs in line with its WTO commitments have substantially boosted its imports and exports.

As the most populous developing country, China enjoys decisive advantages in labor-intensive industries. Further integration into the world economy has allowed it to tap its strength as an emerging world manufacturing powerhouse.

Eyeing the country's huge manufacturing prowess, foreign investors have also rushed in for a share in the expanding Chinese market.

But apart from the generally rosy picture of the Chinese economy, dramatic changes in specific sectors are thought-provoking in other ways.

Agriculture has long topped the Chinese Government's list of priorities.

Three years ago, it was agricultural concerns that sparked widespread suspicion if WTO membership came at the expense of domestic farmers' interests.

Falling domestic grain prices and uncertainties about imports of foreign agricultural produce justified that sort of skepticism at the time.

But as domestic grain prices bottomed out more than a year ago, these fears have gradually subsided. Agricultural imports have largely increased domestic consumers' choice of purchase but not undermined the dominance of domestic agricultural produce.

Agriculture is often heavily subsidized in developed countries. But with a rural population of 768 million, it is impossible for China to aid its agricultural sector as they do.

One important lesson over the past three years is that, above all, the government should allow the market to assume its role in directing agricultural production.

Reducing agricultural taxes can help encourage production by removing unfair financial burdens on farmers. But the main driving force behind farmers' renewed enthusiasm in agricultural production is the soaring prices that signal the market supply-demand situation.

Another result of the country's WTO entry is the sweeping price cuts in the home automobile market.

As one of the most heavily-protected sectors, the fate of this domestic industry was once a worrying issue.

But domestic auto makers have been able to capitalize on foreign auto giants' eagerness to secure a foothold in the Chinese market and have instead enjoyed an unprecedented pent-up car consumption by Chinese individuals.

Nevertheless, the toughest challenges yet to come are in the financial sector.

At the end of this year, foreign banks will be allowed to provide local currency services to foreign clients and Chinese enterprises in 16 cities including Beijing as one of the first three.

Under the terms of the WTO, China promised to remove all client and geographical limitations on all banking services by foreign banks by the end of 2006.

The timetable is very tight given that none of the country's four major State-owned banks has really finished its transformation into commercial banks yet.

But such a tight schedule is needed, for any delay in banking reforms will come at the cost of overall efficiency in the national economy.

Editor: Wing