Trade-policy reform is an essential feature of China’s economic transition to a market economy. On the one hand, the liberalisation and decentralisation of export activities has boosted exports. On the other hand, the reform of China’s import regime has been progressing much more slowly. This has two negative consequences. The persisting combination of high nominal protection rates and numerous tariff exemptions creates a dual regime: export-oriented firms enjoy free access to imports, while the domestic sector remains highly protected from international competition, which allows for continuing misallocation of resources. This incompleteness of trade reforms currently prevents China from joining the WTO, which might eventually hamper its further integration into the world economy ...