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U.S. panel raps China's trade policy as harming American interests.

WASHINGTON, Nov. 16 Kyodo

A bipartisan panel of the U.S. Congress on Wednesday lashed out China's economic and trade policy, including its favorable treatment of state-owned firms and the controversial currency regime.

''The Chinese government's special treatment of state-owned enterprises (SOEs) is particular concern to U.S. businesses, as it can overcome comparative advantages of competitors, thereby harming American economic interests,'' the U.S.-China Economic and Security Review Commission said in an annual report.

The report noted the Chinese government promotes the state-owned sector with ''a wide range of direct and indirect subsidies, preferential access to capital, forced technology transfer from foreign firms, and domestic procurement requirements.''

All these measures are ''intended to favor SOEs over foreign competitors,'' it said, adding forced technology transfer is violation of international trade agreements.

The panel said that although Chinese leaders acknowledge the need to balance their economy by increasing domestic consumption, ''China continues to maintain an export-driven economy with policies that subsidize Chinese companies and undervalue the renminbi.'' Its currency, the renminbi, is also known as the yuan.

While the yuan has appreciated by 6 percent over the last 12 months, it remains ''substantially undervalued,'' the report said, adding the U.S. trade deficit with China accounts for more than a half of the total U.S. trade deficit with the world.

On the other hand, the panel suggested Beijing may improve its currency regime in the future, saying, ''There is increasing grassroots pressure in China to widen the trading band of the renminbi and increase the pace of appreciation.''

The report also said China's policy of limiting government procurement to domestic firms and a lack of enforcement of intellectual property rights are ''both problematic.''

In a development apparently related to its currency policy to keep the yuan undervalued to give Chinese exports advantages, China's foreign currency reserves are ''skyrocketing,'' exceeding $3 trillion, three times higher than the next largest holder of foreign currency reserves, Japan, according to the report.
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Comment:U.S. panel raps China's trade policy as harming American interests.
Publication:Asian Economic News
Geographic Code:9CHIN
Date:Nov 21, 2011
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