China’s Xi promises unspecified trade reforms

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Almost 40 years ago Deng Xiaoping unleashed the Chinese economy under the mantra “Socialism with Chinese characteristics”. What that proved to mean was socialist central control while China surged in a few decades to become the world’s top trading nation and its second biggest economy.

There is hardly a piece of modern technology that has not been made or at least contains components manufactured in China. To Beijing’s dominance in electronics is being added major engineering, solar power, automotive and aircraft production. The explosion of this nation’s productivity in such a relatively short space of time has been truly remarkable.

Even allowing for China’s proven unreliability with official statistics on economic growth and output, the stunning results are there for all to see. But they have been achieved thanks to carefully-protected domestic markets. China became a member of the World Trade Organization in 2001, which in principle establishes a level-playing field for imports and exports. Yet it took all of 16 years for Beijing to negotiate WTO accession, the longest period ever in the trade organization’s history. That tells an important story about the degree to which the Chinese sought exemptions and special conditions in order to protect what they argued was still a developing economy. And in terms of personal wealth, this country of 1.42 billion still ranks only 78th in the world on a per capita basis, far behind the developed world, which nevertheless it has come to dominate in terms of trade.

Though America’s European allies may loathe President Donald Trump and, particularly in the case of Germany, have sought special commercial relationships with Beijing, it is very likely that they have a secret sympathy for Trump’s confrontation with his Chinese counterpart Xi Jinping over what he deems unfair trading practices. Despite wringing their hands, claiming that it is a threat to the globalized economy, the Europeans undoubtedly see that if China continues to bend the rules in its favor, their vision of a single world market is in trouble.

President Xi has just used a speech at a Shanghai export exhibition to promise further easing of his country’s restrictive import tariffs and barriers to the entry of foreign companies. But at the same time, he denounced attacks on the global free trade system. Though not naming Trump, this was an obvious reference to the 25 percent tariffs placed by the president on $250 billion of Chinese exports to the United States. Xi has retaliated by slapping similar tariffs on $60 billion of US goods. The problem with Xi’s announcement was that he gave no specifics, not least on timing. Nor did he address the other important issue of China’s alleged theft of intellectual property, not simply from the US but from all industrialized nations.

Trump’s key protest is that China is cheating. Therefore even if Xi’s promised trade reforms are in the least bit radical, which is not frankly expected, the issue of the way it has supposedly been vacuuming up corporate as well defense secrets from other countries will still have to be addressed. Industrial espionage is not, of course, confined to China. But what irks Beijing’s international competitors is that it seems to be every bit as good at acquiring commercial secrets as it has been in attaining its world trade dominance.


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