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WTO report says China should ‘rebalance growth and increase transparency’

Out-Law News | 08 Jul 2014 | 3:40 pm | 2 min. read

China has become “the major global merchandise trader” and has an “indisputable role” to play in maintaining a rules-based trading system for all trading nations, the World Trade Organization (WTO) has said.

In its fifth 'Trade Policy Review' of China, covering 2012-2014 (200-page / 1.37 MB PDF), the WTO noted the country’s role in “contributing to world economic recovery” in the aftermath of the financial crisis, but said there is now a need for “rebalancing growth which had traditionally been nurtured by investment and had heavily relied on directed credit availability”.

The WTO said China should also address “concerns” about domestic support policies, including the use of export restraints and export taxes, restrictions on services market access and “the retaliatory use of trade remedies and restrictions to foreign investors in certain areas”.

The WTO said although China had committed to publish “in a single official journal” all laws, regulations and other measures related to or affecting trade in goods, services, intellectual property rights or foreign exchange, and to make them available in one of the WTO’s three official languages of English, French and Spanish, “this had not been effectively accomplished”.

According to the WTO, this “shortcoming” should be addressed by making information regarding trade-related measures available, which “would be beneficial to all as it would lead to increased trade and investment”.

The WTO said the Chinese state’s “active role” in the country’s economic development, in addition to policies supporting domestic industries including state-owned enterprises had, “on occasions, led to overcapacity and excessive credit expansion”. Given China's size and importance, government intervention has affected the allocation of resources and competitive conditions of companies in and outside China, the WTO said.

China maintains a large number of support programmes to achieve a variety of goals “but they are intertwined... and the application of these programmes is not always transparent”, the WTO said. The organisation urged China to “abide by WTO commitments including transparency... which in turn would allow China to continue reaping the benefits of economic liberalisation in a rules-based multilateral framework”.

China's economy has experienced stable growth over the past two years with real gross domestic product (GDP) expanding by 7.7% annually, in both 2012 and 2013, and forecast at 7.5% for 2014, the WTO said. “The driving force behind growth was strong domestic demand, mainly private consumption, triggered by a policy of fiscal expansion, by rising incomes, and by credit availability.”

China's strong domestic demand, including for imports, continued to contribute to global economic growth, the WTO said. “Consumer price inflation, which had reached 5.4% in 2011, slowed down in 2012 and 2013, due to lower commodity prices, wage increase moderation and more contained domestic food and energy prices hikes.”

Private participation in the economy is still promoted in China and the number of private enterprises and individual industrial and commercial households has been increasing, the WTO said. However, state participation in the economy “remains relatively high, as the public sector controls some 40% of fixed-asset investment and accounts for some two-thirds of total exports”.

In 2013, the main destinations for China's merchandise exports remained the EU, the UK, Hong Kong, Japan, South Korea as well as member states of the Association of Southeast Asian Nations (ASEAN). The main sources of China’s imports were the EU, South Korea, Japan, Chinese Taipei, the US, Australia and ASEAN states, the WTO said.

China also continued to be a large recipient of foreign direct investment (FDI), which reached $117.6 billion in 2013. The WTO said the main sectors attracting FDI were manufacturing, real estate, and wholesale and retail trade.

China became a WTO member on 11 December 2001, is an observer to the organisation’s ‘Plurilateral Agreement on Government Procurement’ (GPA) and is in the process of negotiating its accession to that agreement. The aim of the GPA is to mutually open government procurement markets among signatories to the agreement.