Page 44 - 2022 White Paper on the Business Environment in China
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2 White Paper on the Business Environment in China
through the filters of posturing and partisanship: of subsidies, enforcement of regulations, and
“The stakes are high, on all sides. For businesses, approval of investments. This was the inception
workers and farmers across our country, it will of a new policy direction, variously dubbed “state
mean much lower trade barriers and enormous capitalism,” “techno-nationalism,” and “China
opportunities for U.S. exports. For the people Inc.” Although the private sector was vibrant and
of East Asia, it will affect their relations with the flourishing, intervention by the government and
region's major power. For the people of China, the Communist Party would become far more
it holds out the hope of more open contact with pervasive than before. Foreign firms that had
the world of freedom” (Bush). once been welcomed with open arms would
increasingly fall victim to a bewildering array
The United States and the People's Republic of of obstacles and industrial policies aimed at
China (China) opened trade relations in 1980, but promoting and protecting Chinese competitors
it took twenty more years for the US to formally favored by the party-state (Blustein).
extend China’s products nondiscriminatory
treatment on a permanent basis. China joined But China’s integration in the world economy
the World Trade Organization (WTO), a historic has created frictions, especially with the US, which
integration into the global economy of the world’s has long had massive trade deficits with China.
most populous nation, on December 11, 2001. To In 2019, US goods and services trade with China
gain entry to the Geneva-based trade body, China totaled an estimated US$635 billion. Exports were
had agreed after lengthy negotiations to open its US$163 billion; imports were us$472 billion. The
markets in ways that exceeded the requirements US goods and services trade deficit with China
imposed on other nations, and Beijing also was US$309 – a far cry from the forecast when
accepted that its trading partners could use China joined the WTO. Economists rightly argue
several unusual mechanisms that could restrict that bilateral trade balances reflect many factors
the inflow of Chinese products into their markets. other than trade policies and that the WTO is
The assumption of China’s trading partners was about establishing competitive opportunities for
that economic liberalization would put Beijing nations to exploit their comparative advantage,
on a gradual path toward true free enterprise— not about having bilateral balanced trade. But the
if not fully unbridled then at least in some form. politics of trade is different, especially in the US.
Then-WTO Director-General-designate Supachai We have, so far, painted a rather bleak picture. Is
Panitchpakdi enthused: “The agreement signaled there light at the end of the tunnel? Maybe, but
China’s willingness to play by international to get there the world trading community, the
trade rules and to bring its often opaque and US and China included, will have to behave like
cumbersome government apparatus into ‘responsible stakeholders (Mavoidis and Sapir).
harmony with a world order that demands clarity
and fairness.” But such optimism was rooted In 2021, the United States and China could
in a failure to anticipate how China’s economic have brought almost immediate change to their
policies would evolve. Starting around 2003, and strained relationship under the Donald Trump
continuing for a number of years thereafter, administration by having strong and intense
China kept the exchange rate of its currency cooperation on core issues during the window
pegged at artificially low levels, bestowing of opportunity of the new administration in
significant competitive advantages on Chinese Washington. There are certainly areas of mutual
exporters. That exacerbated a phenomenon interest that are global issues that can only be
that has come to be known as the “China shock,” successfully addressed with strong and intense
which refers to the decimation of manufacturing cooperation between Washington and Beijing.
companies in a number of U.S. blue-collar The core areas include climate change, the public
communities that were disproportionately health crisis, counterterrorism and anti-piracy
affected by Chinese imports. Also in 2003, Beijing issues, on which their cooperation should not be
established institutions giving it tighter and controversial. While they are very big and difficult
more efficient control over the management issues, they represent areas where there can be
of giant state-owned enterprises, allocation almost immediate change in the relationship that
44
through the filters of posturing and partisanship: of subsidies, enforcement of regulations, and
“The stakes are high, on all sides. For businesses, approval of investments. This was the inception
workers and farmers across our country, it will of a new policy direction, variously dubbed “state
mean much lower trade barriers and enormous capitalism,” “techno-nationalism,” and “China
opportunities for U.S. exports. For the people Inc.” Although the private sector was vibrant and
of East Asia, it will affect their relations with the flourishing, intervention by the government and
region's major power. For the people of China, the Communist Party would become far more
it holds out the hope of more open contact with pervasive than before. Foreign firms that had
the world of freedom” (Bush). once been welcomed with open arms would
increasingly fall victim to a bewildering array
The United States and the People's Republic of of obstacles and industrial policies aimed at
China (China) opened trade relations in 1980, but promoting and protecting Chinese competitors
it took twenty more years for the US to formally favored by the party-state (Blustein).
extend China’s products nondiscriminatory
treatment on a permanent basis. China joined But China’s integration in the world economy
the World Trade Organization (WTO), a historic has created frictions, especially with the US, which
integration into the global economy of the world’s has long had massive trade deficits with China.
most populous nation, on December 11, 2001. To In 2019, US goods and services trade with China
gain entry to the Geneva-based trade body, China totaled an estimated US$635 billion. Exports were
had agreed after lengthy negotiations to open its US$163 billion; imports were us$472 billion. The
markets in ways that exceeded the requirements US goods and services trade deficit with China
imposed on other nations, and Beijing also was US$309 – a far cry from the forecast when
accepted that its trading partners could use China joined the WTO. Economists rightly argue
several unusual mechanisms that could restrict that bilateral trade balances reflect many factors
the inflow of Chinese products into their markets. other than trade policies and that the WTO is
The assumption of China’s trading partners was about establishing competitive opportunities for
that economic liberalization would put Beijing nations to exploit their comparative advantage,
on a gradual path toward true free enterprise— not about having bilateral balanced trade. But the
if not fully unbridled then at least in some form. politics of trade is different, especially in the US.
Then-WTO Director-General-designate Supachai We have, so far, painted a rather bleak picture. Is
Panitchpakdi enthused: “The agreement signaled there light at the end of the tunnel? Maybe, but
China’s willingness to play by international to get there the world trading community, the
trade rules and to bring its often opaque and US and China included, will have to behave like
cumbersome government apparatus into ‘responsible stakeholders (Mavoidis and Sapir).
harmony with a world order that demands clarity
and fairness.” But such optimism was rooted In 2021, the United States and China could
in a failure to anticipate how China’s economic have brought almost immediate change to their
policies would evolve. Starting around 2003, and strained relationship under the Donald Trump
continuing for a number of years thereafter, administration by having strong and intense
China kept the exchange rate of its currency cooperation on core issues during the window
pegged at artificially low levels, bestowing of opportunity of the new administration in
significant competitive advantages on Chinese Washington. There are certainly areas of mutual
exporters. That exacerbated a phenomenon interest that are global issues that can only be
that has come to be known as the “China shock,” successfully addressed with strong and intense
which refers to the decimation of manufacturing cooperation between Washington and Beijing.
companies in a number of U.S. blue-collar The core areas include climate change, the public
communities that were disproportionately health crisis, counterterrorism and anti-piracy
affected by Chinese imports. Also in 2003, Beijing issues, on which their cooperation should not be
established institutions giving it tighter and controversial. While they are very big and difficult
more efficient control over the management issues, they represent areas where there can be
of giant state-owned enterprises, allocation almost immediate change in the relationship that
44
