21 April 2004 10:57
Market economy status on agenda
Author: Some 25 years after it launched market-oriented reforms, China has become the world's largest
anti-dumping target -- largely because it has been labelled a "non-market economy." That is why China has put
the market economy status (MES) issue high on the agenda at the Sino-US Joint Commission of Commerce and Trade, which is
set to open today in Washington. New Zealand officially recognized China's MES status last week, while Australia
and the European Union (EU) have agreed to grant China's MES requests. And it is important for the United States,
China's major trading partner, to give a response on the matter as soon as possible, analysts say. A positive reply
will create more motivation for China to complete its market economy system, which has been generally established. Li
Xiaoxi, an economics professor at Beijing Normal University, said about 70 per cent of China's economy is
market-based, above the recognized minimum level of 60 per cent for a market economy. He was commissioned by the
Ministry of Commerce to assess China's market economy. About two-thirds of China's gross domestic product
growth is created by the non-State sector. In State-owned companies, more than 89 per cent make decisions free of
government influence and have introduced a modern corporate system, Li said. The government's direct intervention
in the economy has been substantially reduced and the market plays a dominant role in financing, land use and labour
services, he added. An ever-improving market environment and legal system have also made China a lucrative destination
for foreign investors. China's Constitution, in an amendment made a decade ago, stipulates the country should
adhere to a market economy system. "It is funny to say China is a non-market economy, as it is the fastest-growing
market economy and attracts tremendous goods and investment from around the world," Li said. It is fair to say that
China's non-market economy status is the result of compromise, but by no means an objective assessment, according
to Li Yushi, deputy director of the Chinese Academy of International Trade and Economic Co-operation. To enter the World
Trade Organization (WTO), China agreed with other members that it would be recognized as a non-market economy within 15
years of its entry. have long refused to recognize the nation's domestic costs of production. Instead, they use
costs of production in a surrogate country to calculate the so-called "normal value" of Chinese exports. The
use of a surrogate, usually an emerging economy such as India, Turkey or Mexico where material and labour costs are much
higher than in China, often means local exports are deemed to be selling below normal value, which is more commonly
referred to as "dumping."taking advantage of China's concession, these countries have turned anti-dumping
into a means of trade protectionism, which is designed to prevent competition, Professor Li said. The professor said it
is understandable that some countries, out of self-interest, do not want China to have full market status. "But
with the constant development of China's market system and enhanced understanding between China and other WTO
members, China's market status should be a negotiable issue." Li noted that the EU and the United States have
granted market status to Russia and some Eastern European countries because their markets have opened wider to the West
although these former Soviet member states started market reforms much later than China. Their definition between
"market" and "non-market" economies is not based on universal norms but their political and economic
interests, he claimed. If trade authorities eliminate prejudice as well as domestic political and economic interests, it
is not difficult to acknowledge that China has a market economy, fully deserving the same status as every other WTO
member, Li said. The discriminatory use of the market economy criteria has distorted many trade activities and become an
obstacle to free trade.joining the WTO, China wanted to free its domestic market and establish wider trade
links with international partners under recognized and reciprocal rules, said Li.
[Business Daily Update] |
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