China's overcapacity leading to trade levies groundless

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The claim by a network of European businesses that trade protectionism measures imposed on China are a result of the country's industrial overcapacity is a "bad excuse", a Chinese expert said yesterday.

Because of a 4-trillion-yuan ($586 billion) stimulus package announced a year ago, China is producing more materials - such as steel, aluminium, cement, chemicals, refined oil and wind power equipment - than it needs, the European Chamber of Commerce in China said yesterday.

Oversupply has prompted Chinese businesses to export to the United States and the European Union (EU), which face mounting domestic pressure to protect jobs amid the financial crisis, it said.

"Imports into developed nations keep dropping (since the financial crisis) thanks to the rising savings rate in the US and Europe and the high unemployment rate increases pressure on their governments to take steps to defend jobs," said Joerg Wuttke, the chamber's president.

"Overcapacity is a driver of the current rise in anti-dumping cases between China and its trade partners," he said.

The remarks appeared to be an attempt to justify rising trade measures launched by the US and the EU this year, a Chinese trade expert said.

"The claim is purely to defend their own interests," said Zhou Shijian, senior analyst with the Sino-US Relations Research Center of Tsinghua University.

"These countries welcome Chinese exports when they cannot produce enough goods for their industrial and consumer needs during a good economy, but then these same countries limit Chinese exports amid an economic recession," he said. "It's a double standard."

From January to September, 19 economies launched 88 probes into Chinese products, involving more than $10 billion in exports, according to Chinese Ministry of Commerce.

That prompted Yao Jian, the ministry spokesman, to say earlier this month that China has become a major victim of trade protectionism.

In the largest trade dispute, the United States on Tuesday decided to slap anti-subsidy duties as high as nearly 16 percent on Chinese-made steel pipes for the oil industry.

Affecting $2.7 billion worth of goods, it is the largest trade levy imposed by the US on China.

But Wuttke believed more trade charges will be launched against China.

"This is only a starting point. I believe more cases against China will happen in 2010, especially starting from the second half," he said.

Zhou said foreign countries are abusing their rights to keep Chinese exports away.

As a compromise during the World Trade Organization talks, China agreed that WTO members could not recognize its market economy status until 2016. The concession allows trading partners to use a third country, usually India whose manufacturing costs are higher than China's, to evaluate Chinese goods' costs.

"When developed countries need to protect manufacturers at home, they simply launch anti-subsidy or anti-dumping charges and reject Chinese-provided prices," Zhou said.

Li Wei, analyst from Standard Chartered China, however, allayed Chinese exporters' worries and said the overcapacity will be solved when China's domestic demand goes up.

"The problem is just short term," he said. "It will disappear when the Chinese economy regains momentum."

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