Backin1992,whenChinaannouncedthatitwouldbuildasocialistmarketeconomy,aquestionwasposedtoaChinesedelegate:Whatisasocialistmarketeconomy?IclearlyrememberthisdelegatereplyingthatthesocialistmarketeconomyisamarketeconomyundertheleadershipoftheCommunistPartyofChina(CPC).Twentysixyearshavepassedsincethenandwehaveneverchangedourposition.AsforthosewhospeculatedthatChinawouldchangeandmoveontoadifferentpathuponitsaccessiontotheWTO,thatwasjusttheirwishfulthinking.Thereismorethanonemarketeconomymodelinthisworld.Chinahasbeenvigorouslyexploringamarketeconomypathwhichsuitsitsownnationalsituationandcircumstances,andwehavemaderemarkableprogressinthisendeavor.Whateverothersmaysay,wewillmarchalongthisroadunswervingly.
Inhisremarks,AmbassadorSheamentionedtheterm“non-marketnatureofChina’seconomy.”However,wecan’tfindthedefinitionof“marketeconomy”anywhereintheWTOrulebook.Thereisnoone-size-fits-allmarketeconomystandardintheworld.WTOrulesneverauthorizeanymembertouseitsowneconomicmodelasthetemplateforamarketeconomyortoaccuseanyothermemberthatdoesnotcopyitofbeinganon-marketeconomy.
Ifthereisanyrelevancetothetopicofanon-marketeconomy,itremindsusonceagainthattherearecertainmembers—includingtheUnitedStates—who,disregardingWTOrulesandtheirowncommitments,arestillusingthenotorious“surrogatecountry”methodologyinantidumpinginvestigationsaccordingtothemarketeconomystandardsoftheirowndomesticlaws.Iwouldliketotakethisopportunitytourgethesemembersonceagain,“pactasuntservanda.”Pleasehonoryourcommitmentsfrom17yearsago.
Strikingabalance
Paragraph1.5oftheU.S.paperpartiallyquotedanexpressionfromthecommuniquéoftheThirdPlenarySessionofthe18thCentralCommitteeoftheCPC:“Thegovernmentplaysitsrolebetter.”TheU.S.paperintentionallyomittedtherestofthesentence,whichstatedthatthemarketshouldplayadecisiveroleinallocatingresources.Inthisregard,itiscriticallyimportanttorecognizethedecisiverolethatthemarketplaysinallocatingresources,asthisispreciselytheeconomicandinstitutionalbasisuponwhichChinapromotesitseconomicandtraderelationswithotherWTOmembers.
Pleaseallowmetogiveyouthefullquoteoftheentireparagraphinthecommuniqué.“Economicstructuralreformisthefocusofdeepeningthereformcomprehensively.Theunderlyingissueishowtostrikeabalancebetweentheroleofthegovernmentandthatofthemarket,lettingthemarketplaythedecisiveroleinallocatingresourcesandthegovernmentplayitsrolebetter.Itisageneralruleofthemarketeconomythatthemarketdecidestheallocationofresources.Wehavetofollowthisrulewhenweimprovethesocialistmarketeconomy.Weshouldworkhardtoaddresstheproblemsofimperfectionsinthemarketsystem,toomuchgovernmentinterferenceandpooroversight.”
Similarly,thepreambleoftheU.S.paperpartiallyquotedtheMarrakeshDeclarationof1994,whereitstatedthatthemultilateraltradingsystemshouldbe“baseduponopen,market-orientedpolicies.”However,thepaperintentionallyomittedtherestofthesentence,whichsaid,“andthecommitmentssetoutintheUruguayRoundAgreementsandDecisions.”Thissecondhalfofthesentenceisextremelyimportant,aseachmemberhasitsowndomesticpolicyobjectives,showingthattheresultsofmultilateralnegotiationsareabalancebetweenmembers’domesticpoliciesandtheprocessofglobaltradeliberalization.
Suchbalanceisreflectedinmembers’traderules,tariffschedulesandservicesschedules,whichcontaindescriptionsofmembers’legitimateregulatorypoliciesandmeasures.Toputitsimply,theWTOAgreementisasetofcontractsachievedthroughnegotiations.Withinthescopeofthesecontracts,membersabidebytheconditionssetforthinthecontracts.Beyondthescopeofthesecontracts,membershavetheirownpolicyspace.
Controllingenterprises?
Article16ofChina’sConstitutionclearlystatesthatstate-ownedenterpriseshavedecision-makingpowerovertheiroperationsandmanagement.TheU.S.paperspentmanyparagraphstryingtoarguethattheChineseGovernment“controls”enterprises.Butthepaperfailedtoprovideevidencetoprovethatthegovernmentintervenesinthenormaloperationsoftheenterprises.
IoncehadadebatewithaU.S.seniorofficialoverthisissue.Helaterconcededthathewasunabletoprovideevidence.Attheendofourdebate,hesaidthatcontrolisnotascience,itisanart.Withsuchwords,thedebatewasadjourned.Butforme,IwouldnotagreewiththenotionthatthousandsofenterprisesinChinaarecontrolledbyagroupofartists.
ItisknowntomanycolleaguespresenttodaythattherealpurposeoftheU.S.intentisnotonlytotrytoprovethatChineseenterprisesarecontrolledbythegovernment,butalsototrytoestablishakindoflogic.Thatis,solongasenterprisesarecontrolledbythegovernment,theythereforeassumeandperformpartofgovernmentfunctionsandthereforeshouldbedeemedas“publicbodies”inthecontextoftheWTOandshouldundertakeobligationsunderWTOagreementssuchastheSubsidiesandCountervailingAgreement.
Unfortunately,suchlogicwasoverturnedbytheWTO’sAppellateBody.IntheU.S.ChinaAnti-DumpingandCountervailingDutiescase,theAppellateBodystatedthat“themereownershiporcontroloveranentitybyagovernment,withoutmore,isnotsufficienttoestablishthattheentityisapublicbody.”IwastoldthatourAmericancolleagueshavebeenquiteunhappywithlosingthiscase,buttherulingoftheAppellateBodycannotbechallenged.
Letmegiveyouanotherexample.InParagraph1.14ofthepaper,theUnitedStatesquestionedChinaforusinga“socialcreditsystem”asa“newtooltomonitor,rateandconditiontheconductofallenterprisesinChina.”Butthefactisthatsuchasystemismeanttocreateafairandcrediblebusinessenvironmentandpreventfraudandmisbehavior.AndChina’ssocialcreditsystemisbasedontheexperiencesofover60countriesthathaveestablishedasimilarpubliccreditsystem,includingFranceandGermany.IsitsimplybecauseofitsdifferenceswiththatoftheUnitedStatesthatsuchasystembecomesatooltomonitorandcontrolenterprises?
TheShenyangareaoftheChina(Liaoning)PilotFreeTradeZoneoffersaccessibleservicestobusinessesXINHUAIndustrialpolicies
Developedcountriesaretheinventorsandmajorusersofindustrialpoliciesandsubsidies.ItwasactuallyAlexanderHamiltonwhopioneeredtheconceptofindustrialpoliciesinhis1790ReportontheSubjectofManufactures.Today,theU.S.AdvancedManufacturingPartnershipandtheU.S.NationalInformationInfrastructure,tonameafew,arekeyindustrialpoliciesintheUnitedStates.AccordingtoGoodJobsFirst,aU.S.nationalpolicyresourcecenterthattrackssubsidies,theU.S.FederalGovernmentallocatedatotalof$68billionintheformofgovernmentgrantsandtaxcreditsfrom2000to2015.
Likeothercountries,Chinaalsohasdevelopedsomeindustrialpoliciesforstrategicandplanningpurposes.ThesepolicieshaveplayedacertainroleinChina’ssocialandeconomicdevelopment.ButintheU.S.paper,thesepoliciesaredescribedasrocketengines,whichisplainlyexaggerating.Ifthatwerethecase,therewouldbenoneedforanycountrytoworkhardandenhanceitsproductivecapacity,sinceallcountriescouldjustsimplyrushtodrawupfancyindustrialpolicies.
Inthisregard,Icansharesomepersonalexperiences.Severalyearsago,IservedasdirectorgeneralofthePolicyResearchDepartmentoftheMinistryofCommerceandwasinvolvedindevelopingsomeplans.Aformercolleaguefromthatdepartmentrecentlyvisitedme,sayingwithabitofsurpriseandconfusion,“IusedtofeelfrustratedquiteoftenwiththeactualeffectoftheplansthatIhadjoinedindeveloping,buthappilynowsomepeoplearesayingtheseplanshavechangedChinaandshockedtheworld.IneverrealizedthatImyselfandmyplancouldbesopowerful.”Isaidtohim,“Wakeup,youshouldknowbetterwhatthoseplanscando.”
LetusgetbacktotheU.S.paper.Paragraph2.9arguedthatChina’splannedeconomy“hasbecomemore,notlesssalientoverthepast20years.”Theevidenceusedtosupportthisargumentisthatthousandsofagenciesparticipateinplanningindustrialpolicies.Tome,thesefactsonlyprovethatthemechanismforsettingindustrialpolicieshasbecomemoreopenandtransparent,thatgovernmentagenciesmakingpoliciesincreasinglyrelyonextensiveconsultationswithstakeholders.
StudentsattheHarbinInstituteofTechnologyconductrobottestingatacompanytheyco-foundedinHarbin,northeastChina’sHeilongjiangProvince,onJuly17XINHUALogicalinconsistencies
InSection4oftheU.S.paper,titledBenefitstoChinaofItsEconomicModel,theUnitedStatespointedtoseveralfacts,suchas“ChinahasseizedonthebenefitsofitsWTOmembershiptorapidlydevelopitseconomy,”andthelowercostofChina’smanufacturingisowedto“economiesofscaleandmoreadvancedsupply-chaindevelopment.”Butfromthesefacts,thissectionjumpstoquestioningChina’sstatusasadevelopingcountryandcriticizingChinaforexemptingitselffromcontributingtotheliberalizationofglobaltraderules,withoutprovidinganycauseandeffectanalysis.ItishardtoseehowChina’sdevelopmenthasbenefitedfromitsdevelopingcountrystatus.AllcountriesandregionsjointheWTOwithaviewtodevelopingtheireconomies,aprinciplestatedinthepreambleoftheWTOAgreement.ThereasonwhyChinahasbeenabletomakecontributionstoglobaldevelopmentispreciselybecausewehaveachievedgrowththroughdevelopingourowneconomyandmoreimportantly,sharingopportunitiesandbenefitswiththerestoftheworld.
IhavereadverycarefullytheU.S.paper,notonlyitsmainpart,butalsothe88footnotes.Forsomefootnotes,Icouldnotfindthesourcesasreferred.Weallknowthedevilisinthedetails.Ifapaperhasflawsinitsfootnotes,thenitsevidencemaybecalledintoquestionanditsargumentscouldbeputintodoubt.Letmeshareafew.
Paragraph1.3ofthepapersaidthatChinalimitsthepowerofthemarketandcitedinitsfootnoteChina’sPropertyLawasasource.ButthefactisthatthePropertyLawclearlystatesthatChina“encourages,supportsandguidesthedevelopmentofthenon-publiceconomy.”IwonderwhyintheeyesofourU.S.colleagues,theverywords“encourage,supportandguide”couldbemisreadas“suppress,limitandintervene.”
Section3AofthepaperistitledTheNonReciprocalandProtectedMarketofChina.Butoneparticularityofthissectionisthatithasnotasinglefootnote.Ipresumeitisdifficulttofindevidencethatcansupportthisargument.However,ifwereversetheargument,wecanfindplentyofevidence.Letmejustoffersome.In2017,China’scontributiontothegrowthoftheworldeconomywas34percent.Chinaisthelargesttradingpartnerofover120countriesandregions.ThereisplentymoresuchevidenceinthewhitepaperonChinaandtheWTOthatChinarecentlysubmittedtotheGeneralCouncil.
The2013ReporttoCongressoftheU.S.-ChinaEconomicandSecurityReviewCommissionco-signedbyAmbassadorSheastatedthat“growingdemandfromChinahassupportedAmericanexportsincertainsectorsoftheU.S.economy,suchasaerospace,theautoindustryandagriculturalproducts.”IfChinahadbeena“non-reciprocalandprotectedmarket,”howdidthoseU.S.productsentertheChinesemarket?
IwouldalsoliketocontributeafootnotetoParagraph3.5onexcesscapacity.OnMay3,ProfessorSimonEvenettattheUniversityofSt.Gallen,Switzerland,publishedanarticletitledDon’tGoSpareOverExcessCapacityinManufactures,whichsaidthat86percentofChina’sexportstotheGroupof20countrieswerenotcomingfromtheso-calledsectorswithexcesscapacity.TheGlobalTradeAlert,whichEvenettruns,hasexaminedthefinancialreportsfrom16Chineseand31non-Chineselistedsteelcompanies.Thefiguresshowthatsubsidiesonlyaccountedforlessthan0.4percentofsalesrevenueoftheChinesesteelcompanies,whileformanynon-Chinesesteelcompanies,thesharewasmuchhigher.
Aconstructiveattitude
WehaveneverdeniedthatthereareproblemsinChina’seconomicsystem,andChina’sreformisenteringintothedeepwaterzone.Wefacemanychallengesandthereismuchmoretobedone.Wereadilywelcomeconstructivecriticismandsuggestions,whichwearemorethanhappytoconsider.
IntheTradePolicyReview(TPR)ofChinaearlierinJuly,manyWTOmembersprovidedconstructivecommentsandsuggestions.WehaveallheardthecommentsbyAmbassadorDidierChamboveyofSwitzerlandasdiscussantinChina’sTPR.Icommendhimonhisstatementasitisbasedonin-depthinsightandobjectiveanalysis.Forme,themostimpressivesentencesfromhisconcludingremarkswere:“MembershipattheWTOismultifaceted.Weallhavedifferenttypesofeconomicmodels,differingframeworksfortradeandinvestment.Yetatthecenterofthisdiverseuniverseisamoreorlesscommonbeliefinthevirtuesofmarketforces.”
AmbassadorChamboveyrightlypointedoutthatinthetransitionfromhugequantitytohighqualityandinproperlyhandlingtherelationshipbetweenthegovernmentandthemarket,Chinastillhasmanychallengestoovercome.AndthisisexactlythepriorityforChina’sfuturereform.Withregardtosuchgoodfaithandobjectiveopinions,weacceptthemwholeheartedly.Andtothosewhokindlygiveusgoodfaithandjustcomments,wewillregardasourteachersandconstantlylearnfromthem.
Aforeignbusinessmanshopsfortextilesatthe123rdChinaImportandExportFair(CantonFair)inGuangzhou,southChina’sGuangdongProvince,onMay1XINHUACopyeditedbyRebecaToledoCommentsto