COMMENTARY
Commentary: New Progress in the New Year?
Christopher Bjorke November 29, 2007

A new year, some old complaints.

The U.S.-China Economic and Security Review Commission released its annual report this month and hit on the familiar disagreements between the countries: currency, state-controlled industry, copyright protection and other areas.

The bi-partisan body is appointed by Congress to study issues of concern and make recommendations. Its 2007 conclusions identified more problems than progress.

"China made progress toward economic reforms in 2007, but only with great hesitancy and, even then, only with the prodding of other nations and the World Trade Organization," according the report's executive summary. "China is unwilling to embrace market-oriented mechanisms, such as freely traded currency, because it maintains a preference for authoritarian controls over its economy."

Outlining the economic and trade issues, the commission pointed to several areas of concern:

• WTO compliance: Beijing has retooled its laws and regulations to comply with accession terms, "at least on paper." However, it is "notably weak" in intellectual property protection, currency value and export subsidies.

• Growth strategy: China has stuck with its export-heavy economy, even when it has meant ignoring WTO rules and the free market.

• Domestic consumption: Many economists would like China to invest its vast foreign exchange holdings in social programs, giving the average Chinese citizen to more money to spend on foreign imports and cooling off the export economy that is fueling record trade surpluses.

• Currency: Controls on the renminbi's value are "a subsidy for Chinese exporters and serves as a hindrance to Chinese importers and consumers."

  The report was also highly critical of the role of the central government in the economy, citing its control over several key industries, research and development and foreign exchange reserves.

  "China's economic policies violate the spirit and the letter of the World Trade Organization membership requirements," the report concluded.

  Changes ahead?

  To anyone who has followed U.S.-China relations over the past few years, none of these complaints are new. Nor is the commission's recommendation that Congress treat its currency policy as an illegal export subsidy.

  Will 2008 bring any progress on these issues? If the past is any indicator, the answer may be yes, but only in increments. China has followed a strategy of moving a step forward on certain issues to placate critics while sticking as close as it can to its plans for growth.

  On the eve of the latest session of the strategic economic dialogue initiated by Treasury Secretary Henry Paulson, China announced on Nov. 29 that it would end some policies that encourage exports and limit imports of steel, wood, information technology and manufactured products.

  A sign of progress, certainly, but chances are next November will find other familiar areas where more progress is wanting.

  Commentary on developing China issues appears in every edition of China Headlines. Comments can be sent to Christopher Bjorke at cbjorke@chinaforum.com.

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