China needs to rethink its trade policy

By Zhang Lijuan
0 Comment(s)Print E-mail China.org.cn, April 26, 2011
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In thirty years of maintaining its open-door policy and ten years since entry into the WTO, China has prospered by simultaneously promoting international trade and maintaining steady economic growth. China's economic growth has created a huge consumer market for the rest of the world and contributed significantly to the world's economic recovery in recent years. However, to maintain its global competiveness and adapt to changing economic conditions, China must rethink its trade policies.

To date, encouraging exports and foreign direct investment (FDI) have been at the top of the government's trade policy agenda. These two factors have served as key official indicators as to how well the Chinese economy performed, and local officials have become accustomed to FDI inflows even at significant costs to the environment and public health.

Global markets have changed dramatically since the global financial crisis; as such, the "Made-in-China" label is facing many more challenges than before. The massive influence of the "China Price" has spurred worldwide concern as well as countermeasures. Trade partners such as the U.S. have brought increased scrutiny to safety risks of Chinese products. Labor standards and environmental concerns have been put on trade negotiation agendas. The coming years will likely feature more international trade protection, if not outright protectionism.

How should China respond to this? First, China should more definitively position its manufacturing industry to compete in the world economy. For years, Chinese trade policy has ignored strategic considerations. Disorderly competition among Chinese exporters has led to profit losses and has fostered foreign antidumping proceedings. Chinese exporters need to be backed by strong, affirmative trade policies that will give them more confidence to face international competition.

Meanwhile, Chinese enterprises have paid a high price for globalization and access to overseas markets. There have only been a few successful cases of international mergers or acquisitions conducted by Chinese firms in past thirty years. A lack of institutional advantage has made Chinese businesses less competitive in the global market. China hasn't yet provided a strong trade regime for its businesses and interest groups. A new trade strategy should focus on building national competitiveness and contain corporate strategies for the global business environment.

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