Reluctance to recognize China as a market economy has long been an obstacle to China-E.U. relations, and this issue has recently returned to the spotlight. A spokesperson for China's Ministry of Commerce said at a routine press conference on Sept. 20 that after 30 years of reform and opening up, China has completed the transformation from a planned economy into a market economy. China is disappointed that the European Union has not recognized its market economy status.

Hindering China's export growth

In order to join the World Trade Organization, China was forced to accept a number of restrictive policies 10 years ago, including a non-market economy status under which the country can easily fall victim to anti-dumping investigations. Since then, China has been making great efforts to gain market economy status.

"It has been 10 years. China deserves fair treatment and should be granted market economy status," said Xu Hongcai, deputy director of the information department at the China Center for International Economic Exchanges.

He added that China has become a market economy after reforming and listing its state-owned enterprises, improving corporate governance, diversifying the ownership of state-owned enterprises and carrying out many other reforms. The European Union should abandon its outdated view of China.

Xu noted that the European Union refuses to recognize China's market economy status for the sake of its own interests. Listing China as a non-market economy, it can easily impose high anti-dumping duties on Chinese products, thereby hindering the development of China's exports and protecting E.U. industries. This practice of discrimination against China is a kind of disguised protectionism.

EU uses market economy status to call for bailouts from China

Since the economy remains weak due to the escalating debt crisis in Europe, many European countries are expecting China to buy their sovereign bonds to help them get through the difficulties. Chinese Premier Wen Jiabao stressed at the recent fifth Summer Davos Forum that China hopes that the leaders of the European Union and the major European countries have the courage to view China's complete market economy status from the strategic perspective. Meanwhile, he said that China is willing to aid Europe by increasing its investments there amid the increasingly intensified European debt crisis.

Jiang Xianling, associate dean of the International Economics and Trade Institute of the University of International Business and Economics, said that the European Union's refusal to admit China's complete market economy status during the serious European debt crisis can leave it more room to call for bailouts from China. It is a political game.

Shen Danyang, spokesman for the Ministry of Commerce, has clearly responded, "After the European debt crisis erupted, China has been drawing particular attention to the crisis and has offered aid as much as it could. However, admitting China's complete market economy status and helping Europe cope with the debt crisis are two different issues. I do not think that the two issues must be linked to each other. China usually does not set any precondition when giving aid to others. China just hopes that Europe can sincerely treat and respect China."

Experts believe that China will likely continue to invest in Europe. First, as the European Union is China's largest trade partner, the deterioration of the debt crisis in the euro zone will impact China. Second, China is trying to promote the diversification of its foreign exchange reserves.

Whoever hurts others will get hurt

Actually, recognizing China's complete market economy status is good for the economic and trade development between China and Europe. Otherwise, trade frictions between the two sides will be intensified. At the news conference, Shen said, "China believes that [recognition as a] complete market economy status is a political not technical issue. It neither reflects China's current situation in terms of market economy construction nor does it meet the long-term economic and trade development interests of China and the European Union that the European Union does not recognize China's complete market economy status."

"If the European Union does not recognize China's complete market economy status, China's exports and investment to Europe will decrease and China's imports from Europe will drop too. That will ultimately go against the overall economic development of Europe," Xu said.

He also said that if the European Union recognizes China's full market economy status, the Chinese enterprises will have a fair environment, and China's export and investment to Europe will both increase. China's high-quality and inexpensive products will help improve the quality of life of common European people and improve the competitiveness of European enterprises.

China's investment could also increase Europe's employment. Meanwhile, China's imports from Europe will increase. Only a win-win situation can realize common development.