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23rd Jan 2022

EU denies China market economy status

  • The news will come as a blow to Beijing (Photo: European Commission)

The European Commission today (28 June) announced that it would not grant "market economy status" to China, citing deficiencies in four main areas.

The news is likely to come as a severe blow to the Chinese government whose premier Wen Jiabao made the issue a central plank of his visit to Brussels last month.

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Brussels said that Chinese companies suffer from too much state interference, have weak corporate governance measures, do not ensure equal treatment of all companies in bankruptcy procedures and that its banking sector is not governed by market rules.

Prestige and dollars

Beijing wants the EU to grant it market economy status for two main reasons.

The first is a matter of prestige. By declaring that China does not have a market economy, the EU is effectively stating that China is not on an equal footing with the other major industrialised economies of the West.

In this context, Beijing argues that New Zealand, Singapore and Malaysia have already granted market economy status to China.

The second is about trade. Market economy status plays the decisive role in anti-dumping cases - when there is suspicion that goods are being exported below their fair price.

In these cases, if a country is deemed to have market economy status, the anti-dumping tariffs are calculated using the costs and prices in the country concerned.

But if a country is not deemed to have a market economy, the prices are calculated using a third-country.

Beijing argues that acquiring market economy status will improve the development of China's imports and exports.

No politics involved, says Brussels

However, the European Commission denies that there is a political dimension to the decision.

"This is not a political judgement, it is a technical issue", said Arancha Gonzalez, trade commission spokeswoman.

"This is not an overall judgement on the general economy of China, this is to be put in the context of anti-dumping procedures", she added.

And the Commission argues that only a very small part (0.05 percent) of Chinese exports to the EU are subject to anti-dumping measures and therefore affected by this decision today.

Chinese exports to the EU last year totalled 72 billion dollars, according to Chinese officials.

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