China Reacts to US Trade Decision
CHINA'S battle to avert a major shock to its economy will not end with President Bush's recommendation to Congress that Beijing retain most-favored-nation (MFN) trade status. The White House go-ahead, expected yesterday, would be in keeping with Mr. Bush's policy of maintaining ties with China's hard-line regime while softly criticizing its human rights abuses.Skip to next paragraph
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But as Congress debates the renewal of MFN status, opposition remains strong. Congressional critics say Bush's lenient China policy has failed to soften the iron-fisted rule imposed after the Tiananmen Square crackdown last June 3 and 4.
The defiant tone of China's official propaganda suggests that despite high economic stakes, Communist Party leaders are unprepared to significantly ease their repressive control to meet congressional demands.
While refraining from harsh threats, Beijing has warned that Sino-American relations will face a ``major setback'' if Washington revokes MFN treatment. Retaliation, Chinese officials say, is certain.
``The Chinese government ... will take compensating measures'' against US companies doing business with China, says Zheng Hongye, chairman of the China Council for the Promotion of International Trade.
``The Chinese people are not a lump of bean curd,'' Mr. Zheng added.
Some Western analysts say that revoking MFN status could undermine Chinese advocates of market-oriented economic reform and democratization. Moreover, it could enhance the power of party conservatives who gained influence after crushing last spring's democracy movement, they say.
``The revocation of MFN would not be an asset to people who support a more liberal policy,'' says Nicholas Lardy, an expert on the Chinese economy at the University of Washington.
Party conservatives could use the cancellation of MFN status as further ammunition against reformers, led by Zhao Ziyang, former party chief, who have pioneered the export-led growth strategy in China's coastal regions since the mid-1980s.
Conservatives, who have revived Maoist calls for economic self-reliance, may point to the loss of MFN tariffs as an example of the dangers of opening China's door too widely to foreign trade and investment.
Without access to the lowest available tariffs the US offers most trading partners, the average tax on Chinese imports would rise to 50.5 percent from the current 9 percent, according to the US-China Business Council.
As a result, China could lose $6 billion to $10 billion a year in sales to the US, or up to a fifth of China's total exports last year of $52.5 billion.
Dynamic, export-oriented coastal companies would be hardest hit by the lifting of the preferential US tariffs, Chinese officials say. Many of the companies are small, private, or collectively run rural enterprises, which produced a fifth of China's exports last year.
``In the coastal areas, particularly in the southeast, many enterprises that are export-oriented will suffer quite a lot,'' says Mr. Zheng, who represents 7,800 Chinese companies and trading companies.