China accused of distorting world trade in WTO row

Beijing’s state-led policy is ‘leading to systemic problems’ as Chinese exports continue to surge

Pressure is mounting on China to curb its predatory trading practices.

Last month, a policy review by members of the World Trade Organization was scathing about how Beijing continues to flout WTO rules. The chorus of condemnation was spearheaded by the United States and its allies such as the European Union.

“When China acceded to the WTO 20 years ago, members expected that the terms set forth in China’s Protocol of Accession would permanently dismantle existing Chinese policies and practices that were incompatible with an international trading system,” David Bisbee, the chargé d’affaires ad interim of the US Mission to the WTO in Geneva, said.

“But those expectations have not been realized, and it appears that China has no inclination to change. Instead, China has used membership to become the WTO’s largest trader, while doubling down on its state-led, non-market approach to trade, to the detriment of workers and businesses in the US and other countries,” he pointed out in a statement.

Critics have argued that Beijing’s tactics have lined the country’s coffers and tilted the global balance of trade.

Billionaire club:

  • Data released at the weekend showed that China posted a trade surplus of US$84.54 billion in October.
  • That was a 27.1% jump compared to the same period in 2020.
  • China’s trade surplus with the US was also a whopping $40.75 billion.
  • For the first ten months of the year, it ballooned to $320.67 billion.
  • The General Administration of Customs reported that machinery equipment and electrical goods made up 60% of China’s exports.

What was said: “[Beijing] can afford to wait until the year-end to loosen monetary and fiscal policies, now that exports provide a buffer to smooth the economic slowdown,” Zhiwei Zhang, the chief economist at Pinpoint Asset Management, said as reported by Reuters.

Reaction to the news: “If the WH [White House] is truly intent on cutting #China #tariffs, headlines like this won’t make it easy,” China Beige Book, the research group, tweeted on Monday, referring to US Trade Representative Katherine Tai’s commitment to exclude some Chinese imports from tariffs.

Delve deeper: China’s latest figures will reinforce the view that Beijing is driving a juggernaut through the WTO rule book. Trading partners are concerned that Beijing is slamming on the brakes when it comes to reforms and opening up key sectors.  

Systemic problems: “The degree to which China has reformed and opened today is not commensurate with its weight in the global economy, or comparable to the access which China has to the markets of other WTO members. Moreover, the influence exerted by the state on China’s economic environment generates competitive distortions worldwide,” Joao Aguiar Machado, the EU’s ambassador to the WTO, said in a statement.

Alternative view: “China has been reinforcing intellectual property protection by legislative, administrative and judicial means, and fulfilling its obligations on transparency,” Commerce Minister Wang Wentao said.

China Factor comment: Despite the negative WTO review, it is unlikely that President Xi Jinping’s ruling Communist Party government will bow to pressure from major global democracies. Only the threat of targeted action will force Beijing to change course.