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China is a market economy

Comments on Gary Clyde Hufbauer and Cathleen Cimino-Isaacs "Is China a market economy?" 29/07/2015

While it was understandable that at the time when China joint the WTO, it was not unreasonable to regard some parts of the Chinese economy were not market economy, it is no longer reasonable to use that as a trade barrier or as a tool for anti dumping purpose. Fifteen years have past since then and China has changed a lot. Yes, there are some sectors where there may be monopolies, duopolies or oligopolies still operate, but they are not too different from some western and industrialised countries. For example, some utility industries in Australia operate as monopolies or oligopolies.

The following paragraph from the author is telling that it is not a legal issue as opposed to a policy one. It is a form of imperialism in action:

"Whether the United States takes a hard-line mix-and-match approach, rather than grant China market economy status across the board, could well turn on policy considerations rather than legal parsing. Among these considerations will be the general atmosphere of commercial relations with China in 2015 and 2016, including the evolution of the renminbi exchange rate (devaluation would inspire a hard-line approach) and the outcome of the US–China Bilateral Investment Treaty negotiations (success would have the opposite effect)."

The authors' recommendations are not particularly unreasonable in that any firms whether they are state owned or not, should publish any information as an ordinary firm would. However, there is a danger that those recommendations could be abused and used for more than what are recommended for.

Further the accusations of China manipulates its currency does not have merits at all. One cannot use trade surplus or deficit with a country alone as a test of whether a currency is fair valued or not. China can have surplus with some countries and deficits with some other countries as well as about balanced trade with the rest. The US have run trade deficits with many countries for very long time and those countries include free exchange countries. If surplus or deficit is the sole measure, then why the free exchange rate countries have not had their currencies moved in the direction to balance their trade with the US?

PS: I have had a look at the Eastasiaforum website and could not find my comments there even by 9.23 am, 30 July 2015. Maybe the use of the phrase imperialism caused the editors some headaches. I only meant economic imperialism, in the sense similar to past imperialists which, when they were losing their former powers, tried to create difficulties for either new comers of new power or left some difficulties to their former colonies. In Chinese, the phrase "垂死挣扎“ adequately describes such behaviours.

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