Less criticism, more cooperation

  • 时间:2019-08-05
By Mei Guanqun | chinawatch.cn | Updated: 2019-07-26 10:58
As a developed country, the United States has a rather sophisticated market economy, whereas China, a developing nation, is still in transition from a command-and-control model. It is therefore only natural that its policy orientation should differ somewhat given the vast differences in development model as well as economic structure and governance. These institutional differences did not attract much attention back in the day when China had a relatively small economy. But things changed as China became the second-largest economy and began catching up with the US, with the latter accusing China of practicing state capitalism.

There is no universal definition of a market economy. In fact, developed countries, such as France, Germany, Japan, the Nordic countries, the Republic of Korea and the United Kingdom, all have their own approaches to a market economy, and it is only natural that there are differences between China's socialist market economy and the market economy of the US. Therefore, it makes no sense for it to hold up the US model as the only valid reference for a market economy and label China's routine economic management as industrial policies without clearly defining the latter or speculating about the strategic ambitions behind the policies.

Take State-owned enterprises as an example. One telling characteristic of the roots of China's socialist market economy is the large number of SOEs that remain after the transition. Thanks to government efforts to reform SOEs over many years, SOEs are now modern enterprises that are purely business entities without political functions. The Chinese economy is competitive, follows market rules, and the business entities therein have many forms of ownership. By contrast, SOEs are by and large absent in the US economy, which has probably led it to conclude that China's SOE reform has failed based on the faulty, self-righteous assumptions that the goal of said reform was privatization and that SOEs are nothing but extensions of government functions and instruments of the government's will. Such conclusions are a clear example of a fallacy resulting from ignorance of the differences in the two countries' national circumstances.

Few of the US criticisms of China's industrial policies are objective or based on facts and numbers. For example, the US claims that China is "stealing" its intellectual property, and cross references to this alleged behavior abound in research reports produced by public institutions and think tanks in the US. Nevertheless, the US has yet to come up with a concrete example of which Chinese company stole what technology from its US peer. It is highly irresponsible to cross-reference unsubstantiated conclusions to fuel a public perception of IP theft and even going so far as to claim that the Chinese government is organizing these tech heists.

US criticism of China's industrial policies is also replete with double standards. Industrial policies are a valid way to manage the economy all over the world, and countries have adopted all sorts of industrial policies, such as Japan's Priority Production System, Germany's Industrie 4.0, Britain's Manufacturing 2050, and South Korea's Manufacturing Industry Innovation 3.0. The US is no exception, with its myriad industrial policies. In fact, the US is among the earliest proponents of such practices.

In his 1791 Report on the Subject of Manufactures to Congress (the founding document of US industries), Alexander Hamilton proposed tariffs, trade restrictions, favorable tax policies, industrial subsidies and a ban on the export of key inputs to make US enterprises more competitive.

The US is no stranger to industrial policies itself: the massive government procurement of high-tech products by the Department of Defense, significant agricultural subsidies, the National Science Foundation's trillion-dollar investments in basic research, and the export controls on high-tech goods, each is, in essence, an example of industrial policy. With such double standards, the US criticism of China for doing the same thing rings hollow.

Having said that, although the US criticisms of China's industrial policies are unreasonable that does not mean that China's market economy is in perfect shape. In fact, China is constantly striving to improve its socialist market economy through deepening reforms, expanding market access for foreign companies, shrinking negative lists, reducing overall tariffs, increasing imports of goods and services, enhancing the business environment, streamlining the government approval process, stepping up SOE reform and enhancing the protection of intellectual property rights, to name a few.

China does not accept accusations that are unreasonable, groundless and based on double standards. It is however, determined to deepen its reforms. It is to be hoped that the US will meet China half way: doubt less, trust more; blame less, cooperate more; talk less and act more.

The author is deputy director and associate research fellow at the China Center for International Economic Exchanges.