China abandons ambition to be acknowledged as market economy

08:00 by Hubert Fromlet, Kalmar

International recognition has been given high priority in the past few decades by China’s political leaders. Being welcomed by the WTO as a new member in 2001 was celebrated as a brilliant success in Beijing and the whole country. I could see it with my own eyes during a simultaneous visit in Beijing. An enormous new potential was opened for Chinese exporters but also for globally oriented foreign companies in this largely promising country. Without doubt, one may conclude that China turned to be the winner of globalization in the past twenty years, meaning also quite some opening up during this time.

But what about this spirit of opening up in the future? First signals of giving domestic objectives even more priority are obvious. Interventions in Hong Kong, increasing surveillance, declining transparency (covid-19), less calming diplomacy vis-à-vis the United States and relatively easily accepted abolition of the market-economy objective point indeed at stronger prioritization of domestic issues and (somewhat) lesser international harmony considerations. However, it should be kept in mind that China still maintains a neutral and even collaborative voice in its contacts with the EU.

No chance to be recognized as a market economy

Five years ago, there was a lot of pressure on the EU to finally give China the status of a market economy. Such an improved classification would have meant for China a milder treatment by the WTO with dumping conflicts. However, the EU never wanted to give such a mandate to the WTO. China has now canceled these ambitions and has therefore to accept possible anti-dumping accusations also in the future. Obviously, this formerly important international goal had become less relevant after many years of waiting and not really worth-while to go on fighting for.

Also when analyzing more deeply the whole question, it was impossible to find neutral arguments for a Chinese upgrading to market economy (see also my comments on this from 2016, China still has by far too much government in the economy and by far too weak institutions. No doubt about this!

However, all this has not necessarily to lead to negative consequences for global trade. I do not rule out completely that China will try to keep down future dumping charges as much as possible. Time will tell us.

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board


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