Analysis: Trade, Planes and the Bamboo Curtain

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IF YOU cross Beijing's infamous Tiananmen Square, with the Great Hall of the People on your left and Mao's mausoleum behind you, and pass the giant picture of the iconic founder of the People's Republic of China, you can enter the Forbidden City, the ancient home of the emperors.

To help the thousands of foreign tourists - from Japan, Europe and, indeed, the US - there are notices explaining the significance of each building in the massive complex. In a corner of the sign for the Hall of Great Harmony it says: "Funded by the American Express Foundation." A few hundred yards further on, there is a branch of Starbucks, the coffee chain which is almost as ubiquitous in the Chinese capital as it is in its home city of Seattle. Just around the corner from the Forbidden City there is another symbol of Seattle, a big new office for the aircraft maker Boeing.

It was a Boeing 737 which was sent to pick up the 24 American airmen stranded on China's Hainan island after the mid-air crash that forced their spy plane into an emergency landing. Boeing is currently vying with Airbus and BAE Systems to sell civil aircraft to China's rapidly deregulating airline industry.

In Beijing, the locals eat McDonald's fast food, wear Nike, drink Johnny Walker and drive Audis. Business with the west is booming.

While all the attention in recent weeks has been the souring of US-Chinese relations because of the spy plane storm, something potentially more significant has been taking place behind the scenes. It seems that Chinese and American negotiators have agreed a deal that will allow China to join the World Trade Organisation, the international body that regulates how business is conducted between countries.

According to John Foarde, vice president of the US-China Business Council, a breakthrough was struck while Presidents George Bush and Jiang Zemin stared each other out over the downed plane. China's chief negotiator, Long Yongtu, popped over to Washington last month for talks with the US trade representative, Robert Zoellick. A compromise was struck on the crucial issue of farm subsidies - allowing China to subsidise domestic farm prices by between 7-8 per cent - and that deal has now gone to the European Union for ratification. If the EU reckons it can live with the concession, then China could be in the WTO within 12 months.

In the plush hotel bars and western watering holes that proliferate in Beijing and Shanghai, the spy plane scandal might have been the top talking point, but few doubt that WTO entry will consign it to being a historical sideshow - like the Yangtze River incident when a British warship was impounded by Communist troops in 1949.

Joining the WTO could be the crowning glory of the brief, reformist, rule of President Zemin - although winning the 2008 Olympics for Beijing might run it close. The Chinese premier is retiring next year and a successor has yet to emerge. "Getting into the WTO is one thing, managing the effects of being in the WTO is another," said a British business adviser based in Beijing. "And we don't know yet who'll be driving the juggernaut."

The fact is that with the US economy facing the cold winds of recession and the European economy feeling the chill, the opening up of China could be the ray of sunshine that many corporations crave. With a population of 1.4 billion, vast natural resources and an education system producing hundreds of thousands of skilled engineers every year, the potential of China is for all to see.

With GDP growth of 8 per cent last year, exports of $249bn, (pounds 179bn), imports of $225bn, and a stock market that more than doubled last year, the potential is starting to be realised, not least by British companies which have more than 2,600 investments in China worth some $16bn.

The WTO entry will break down many of the barriers that might have put some western companies off trading with China. …