China's market economy status is good for all

Updated: 2011-12-08 16:04


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BEIJING - To steer the global economy out of the doldrums, the US and EU need to take a more active and longer-term approach to rebalance their economies. An inspiring signal of their resolution to follow such an approach could come from their recognition of China's full market economy status.

According to China's World Trade Organization (WTO) Accession Protocol signed in Doha a decade ago, a 15-year transitional period has been imposed on China's market economy status. This article allows any importing WTO member that does not grant China market economy status to seek and apply surrogate prices of the same input in a market economy that is supposedly at a similar level of development as China to determine whether dumping is taking place.

This provision will no doubt give countries that refuse to accept China as a market economy more discretion and flexibility to find dumping, and thus allow them to secure local jobs and economic growth by providing domestic manufacturers a shelter against low-cost Chinese manufacturing.

I am sure the Chinese government has not been blind to the potentially baleful consequences that the provision might incur on Chinese companies. Official endorsement has exemplified China's resolution to push forward reform and opening-up policies, and its aspiration to reach out to the outside world and to elevate its capacity through more intense global competition.

Statistics from the Ministry of Commerce shows that China's average tariffs have dropped from 15.3 percent to 9.8 percent in the last decade. The country's annual imports have been averaging at $750 billion over the same period, generating a total of 18 million jobs outside China. Moreover, China has opened 100 service trade sectors under the framework of the WTO and accumulatively used foreign investments worth more than $700 billion. About 347,000 foreign companies have come to invest in China.

As multinational companies plow through the sluggish economy, China's market revenues have comfortingly shored up their overall performance.

Imagine if China had drifted away from the WTO a decade ago due to the lack of political wisdom and strategic foresight. The world would be unable to share in the benefits of China's development, and multinationals would be in even greater trouble than they are now.

China's WTO Accession Protocol provides that transitional provisions will terminate in 15 years. Against the backdrop of a gloomy global economy, the damage done to China through further procrastination by the EU and US would be trivial compared to the problems that could be posed for the rebalancing of the global economy.

Rising domestic costs from labor, environment, resources and social security have encouraged Chinese enterprises to sharpen their comparative edges through improved productivity and innovation. Although "made in China" is often used to describe low-cost goods, the description is increasingly off the mark.

Many foreign-invested companies have made their profits in China not through cheaper production, but significant market demand. For the US and EU, relying upon the non-market-economy status of China could give domestic industries an easier life for a while. The flipside, however, is the suppression of competition and the suffocation of innovation.

Engagement rather than containment should prevail in the era of global economy. Denying China's market-economy status fuels the abuse of anti-dumping and countervailing measures against Chinese exporters, which jeopardizes trans-national industrial cooperation and worsens business environment.

The main sticking point of the global development dilemma is economic imbalance. The EU, US and China should wait no longer to rebalance themselves for the common good.

China has mapped out development plans to drastically boost its domestic demand in the next five years, seek more energy- and resource-efficient economic growth and continue to open itself up. For the EU and US, measures such as lifting restrictions on high-tech exports to China, ironing out domestic prejudices against Chinese enterprises and easing market access for Chinese investment could bring long-term benefits.

After being a member of the WTO for ten years, China has been working hard to familiarize itself with and to live up to international practices, although it has had a difficult time doing so. In 2006, the US Department of Commerce initiated a countervailing duty investigation -- to which a non-market economy had been always thought immune -- against China, although it refused to recognize China as a market economy.

Trade disputes are detrimental to Chinese exporters. In the past decade, China has encountered nearly 700 anti-dumping, countervailing and product-specific investigations involving exports worth $4 billion. About 100 investigations were initiated by the US, while more than 70 were started by the EU. But compared to the size of China's total trade volume, this represents only a small fraction.

China is not desperate to seek market economy status recognition from those who prefer to wield the issue as a political card. But for the healthy future of the global economy, we Chinese feel obliged to call for the world's major economic powers to ditch their "containment mentality" and work with China to open the global economy and work for a brighter future.