Western countries reprimand China for abusing its economic clout

A number of its closest allies, including the United Kingdom and the European Union, took to the floor to criticise the world’s largest trading economy for market distorting practices.  But while many paid credit to Beijing’s constructive role in other trade policy areas, the US issued the most direct rebuke.

“Beijing operates its non-market economy in a ‘predatory’ manner,” David Bisbee, deputy permanent representative of the US to the WTO said.

“That is, because of the size of its economy and the volume of its trade, the PRC (People’s Republic of China) is uniquely positioned to be able to use its state-directed approach to the economy to eliminate foreign competition and amass market power.”

Bisbee said state-led industrial plans targeting key industries, like Made in China 2025 which has sought to boost its dominance in high-tech manufacturing using incentives such as subsidies, were a threat to global trade.

“It means that foreign companies are not competing against individual PRC companies; they are competing against the PRC state and PRC companies acting in concert,” he added.

The comments come amid heightened trade tensions between the two countries after the US introduced steep tariff increases on Chinese imports including electric vehicles and their batteries, and computer chips in May. The Biden administration was also reported on Tuesday to be considering even tougher measures to curb chip-making exports to China.

A statement by the UK echoed US concerns, pointing out that Chinese state-owned enterprises and their legal affiliates accounted for an estimated four per cent of global GDP.

“Despite China having implemented some corporate governance reforms, we note that some state-owned enterprises have been tasked to make advances in strategically important sectors and that political oversight has been strengthened through party committees,” the UK’s ambassador Simon Manley said.

“We continue to hear of foreign businesses facing difficulties in accessing procurement opportunities in sectors dominated by state owned enterprises.”

China’s defence

China became a member of the WTO in 2001 and since then, criticism of China’s failure to move towards more open, market-orientated policies in line with its other global trading partners have become a mainstay of its triennial reviews, in particular in 2021, which marked 20 years since its accession.

But Beijing has maintained that its policies comply with WTO rules.  In a report submitted to the WTO as part of the periodic review, it said that it “firmly pursues a win-win approach of opening up, promotes the building of an open world economy, [and] continues to provide new opportunities for the world with China's new development”.

At a side event organised by China on Tuesday attended by trade officials and academics from Chinese universities, one of the speakers said the government was “committed to fostering a fair competition environment for enterprises” while another professor noted that the number of items on its so-called negative list for foreign investment, which forbids certain activities, had been reduced.

Li Fei, China’s vice minister for commerce, who flew to Geneva for the review process accompanied by a 40-strong delegation, made a thinly-veiled swipe at its western economic rivals in his statement to WTO members on Wednesday.

He said China’s modernisation plans would benefit all countries but “to make that possible, we need to uphold economic globalisation and multilateralism, and have sincere communication and cooperation, not unilateralism, protectionism, decoupling or unjustified bashing”.

Lack of transparency

Nearly 70 countries took to the floor on the first day of the two-day periodic review that all 166 WTO members routinely undergo every few years to check whether they are playing by the rules.

Some like Russia offered more praiseworthy assessments, using its seven-minute slot to highlight its centuries-old relationship with China “rooted in mutual respect” and to note its strengthening ties.

The European Union, which has also recently upped the stakes in its trade battle with China, said its economy “had grown exponentially” in the two decades since it had joined the WTO and called on Beijing “to refrain from claiming WTO developing country status in the future” so that “real developing countries” could benefit.

This marked a departure for the bloc, which had previously only called for China to relinquish its use of its status rather than the status itself.

Australia joined in calls for the country to abandon its use of special and differential treatment and also called more transparency in its reporting and on the activities of state-owned companies.

In the WTO Secretariat’s 173-page assessment of the country’s economic activities over the last three years, it noted that China remained an important driving force for global economic growth and that its economy had recovered well from pandemic-related shocks, with exports and imports continuing to increase.

However, it also said that it had not received enough information to get a clear picture from China on the financial support it provides to key sectors such as aluminium, electric vehicles, semiconductors, or steel.

“The overall lack of transparency on China's government support may also contribute to debates on what is perceived by some as overcapacity in certain sectors,” it said.

The review process continues on 19 July, when China will respond to member states that took to the floor.