West can no longer hold back Chinese strength

By Xiong Yu and Xia Senmao Source:Global Times Published: 2017/6/19 19:58:39

Illustration: Peter C. Espina/GT


German Chancellor Angela Merkel's recent remarks about the EU obligations under Article 15 indicated her willingness to back China's bid for market economy status. Prior to this, the UK had also expressed such support, but there is still a long way to go before China is recognized by the EU as a market economy.

Given the recent rise of global trade protectionism, whether China can obtain market economy status has become one of the major events that may give clues as to changes in the world pattern and global power balance. On the surface, China seems to be at a disadvantage, but outside pressure will actually force China to further open up, which will allow it to develop China-proposed rules and form its own unique trade organization platform.

In fact, the whole issue of whether to grant China market economy status has become a tool for some Western countries to keep China in check. For a long time, some Western countries appeared uncomfortable about the rise of China. They wanted to raise the entry threshold for Chinese companies to restrict the expansion of China's influence. However, with China's growing economic and military strength and power over global public opinion, Western countries have had less and less tools to contain China. China's growing global political and economic influence is making inroads into the Western sphere, and major countries will gradually stand on the Chinese side. The international support won by the Asian Infrastructure Investment Bank, the Belt and Road (B&R) initiative and other Chinese projects is the best proof that China has not only become a participant in the international political and economic arena but has also become an advocate for and maker of global rules.

Objectively speaking, denying China market economy status won't bring much harm to China. Instead it might backfire on some Western countries. International trade theory emphasizes that countries should develop different industries based on their comparative advantages in resources, eliminate uncompetitive industries and focus on their strength, which will help foster unique competitive advantages for each country, promoting optimized allocation of global resources. But amid the rise of anti-globalization and trade protectionism, some Western governments pin their hopes on setting up trade barriers to protect their own industries, which will seriously curb "supply-side reform" in the West, hindering industrial upgrading and the cultivation of emerging sectors. With the growing dependence of the global economy on China, which accounts for 30 percent of world economic growth, it is a shame that Western countries still fail to admit the objective facts to recognize China's market economy status.

On the other hand, being denied market economy status will be conducive for supply-side reform in China and the global expansion of Chinese companies. Western markets set a "high threshold" for Chinese products, forcing Chinese companies at the low-end of the global value chain to upgrade themselves and shift from low labor costs toward higher quality and brand-building, which will be very beneficial for China's long-term development. Western denial of China's market economy status will also push Chinese companies to speed up cooperation with countries along the B&R route. The in-depth participation of B&R countries in China's economic development will promote more countries to adopt Chinese standards and rules, which will then evolve into global standards and rules.

Whether the West recognizes China as a market economy is not as important to China as it was 15 years ago. Granting the status seems to be an opportunity for Western countries to share the benefits of China's development rather than giving China an opportunity. China is currently upgrading its industries in the domestic market, while overseas it is actively engaged in the economic integration of B&R countries, helping Chinese companies expand their business and set up supportive new global rules. Over time, China may have the opportunity to decide whether some Western countries are qualified for "market economy status."

Xiong Yu is a member of the academic committee of the Pangoal Institution and a professor with Newcastle Business school at Northumbria University. Xia Senmao is a special senior research fellow of the Pangoal Institution and a doctoral advisor at Coventry University. bizopinion@globaltimes.com.cn


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