China stirs economy

Risking the ire of the trading partners, the Chinese government has quietly started adopting policies aimed at encouraging exports while curbing imports, even though China, as one of the world’s largest exporters, has aggressively criticized protectionism in other countries. The government has sharply expanded three programs to help exporters, giving them larger tax rebates, more generous loans from state-owned banks to finance trade, and more government-paid travel to promote themselves at trade shows around the world.

At the same time, Beijing has banned all local, provincial and national government agencies from buying imported goods except in cases where no local substitute exists. And in an effort to strengthen its own exporters, it is limiting how much of certain key raw materials can leave the country.

The United States and the European Union had filed a complaint with the World Trade Organization accusing China of limiting exports like bauxite and zinc, of which China is one of the world’s largest producers, to give an unfair advantage to Chinese manufacturers that use the materials.

In other moves, Beijing has halted the rise of the renminbi against the dollar by intervening heavily in currency markets.

Provincial governments also appear to have cut back on their enforcement of counterfeiting laws and other intellectual property protections. Chinese consumers have less need to buy imported goods when they can buy much less expensive copies manufactured locally.

In March, Prime Minister Wen Jiabao announced that his country would rely on domestic consumption to keep the economy growing as exports shrank in the global downturn.

Source: NCTO materials, July 2009

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