WTO report: China discriminates against foreign companies to support specific industries

The WTO's review report on China's trade policy shows that in order to support specific key domestic industries, the Chinese government not only formulates opaque regulations but also discriminates against foreign companies.

A report on China's trade policy conducted by the World Trade Organization on Wednesday showed that although China has become increasingly integrated into the international supply chain system and has become the center of global manufacturing in recent decades, including manufacturing accounting for nearly 30% (26%-28%) of China's GDP and industrial manufactured products accounting for more than 95% of its exports, such achievements are related to the financial support provided by the Chinese government.

The WTO is investigating China's subsidies to domestic industries, but China refuses to submit relevant information to the WTO, including the WTO's attempt to understand the "government guidance fund" established by the Chinese government to encourage entrepreneurship through equity or debt, but ultimately failed to know the specific size. Currently, academic and private equity firms estimate that the fund is between RMB 1.89 and 6.51 trillion. The WTO believes that these financial subsidies and support are the cause of China's current overcapacity in some industries, such as electric vehicles, shipbuilding, aluminum and steel.

Trade officials in Geneva told the media that " many member states want China to be more proactive and frank... and our report also points out that China does not have a clear competitive neutrality framework to ensure that China's state-owned enterprises operate under so-called market access conditions." 

WTO member states: China should be more forthright about its industry support

Taking into account the damage caused by Beijing's overcapacity, Europe, the United States and other countries have begun to raise tariffs on certain Chinese imports in recent years on the grounds of damaging other countries' companies.

Not only subsidies , the WTO report also mentioned that although China continues to strengthen judicial and property rights mechanisms to protect foreign companies, the new "Foreign Investment Law" further removes access restrictions, encourages foreign investment in key industries such as semiconductors and clean energy, and pilots a "more open service trade system" in many cities, state-owned enterprises still have a considerable market share and occupy a major part of the industry's total assets and profits.

In his closing remarks on Friday, Ambassador Abdulhamid, Chairman of the WTO's Trade Policy Review Body, said that member states commended China's 14th Five-Year Plan to promote trade and investment liberalization, but "they also expressed concerns about the opaque application of certain regulations and discriminatory treatment of foreign companies, which they believe undermines the benefits of China's liberalization measures."

EU calls on China to give up its "developing country" status; US: China's non-market actions are tantamount to "plunder"

The European Union and the United States called on China on Wednesday to face up to the urgency of changing the status quo.

The EU statement said that China has been a member of the WTO for more than 20 years, and its per capita GDP has approached the 14,000 US dollars of high-income countries. Therefore, it is recommended that China should not continue to regard itself as a developing country in order to enjoy special and differential treatment. If China continues to implement "distorted industrial policies" and does not promote reforms to promote consumption or reduce the excessively high domestic savings rate (45%), other countries will have to adopt suboptimal trade protection measures.

David Bisbee, deputy U.S. trade representative, also issued a statement pointing out that after China joined the WTO in 2001, it not only failed to implement an open market trade policy as expected, but also doubled down on state-led non-market economic policies, harming workers and businesses in the United States and emerging developing economies. Such "predatory" actions and even "economic coercion" mean that foreign companies not only have to compete with Chinese companies, but also with the Chinese government.

Wendy Cutler, former acting U.S. trade representative and current vice president of the Asia Society Policy Institute, also told this station that many of China's actions have undermined the benefits of its pursuit of an open market.

Since the founding of the Communist Party of China, it has repeatedly emphasized the development of a socialist system with Chinese characteristics, which is a mixed ownership system with cross-holdings and mutual integration of state-owned capital, collective capital, and non-public capital. Since China's reform and opening up, it has gradually transitioned from a planned economy to a market economy. However, analysts generally believe that after Xi Jinping became the President of China, China's continued opening up has not been as fast as expected.

The communiqué adopted at the Third Plenary Session of the 20th Central Committee of the Communist Party of China in 2024 shows that in addition to the goal of building a "high-level socialist market economic system" by 2035, China has also changed the original concept of allowing the market to play a decisive role to use the market to achieve "optimization of resource allocation efficiency and maximization of benefits", and emphasized that the government must both "let go" and "control".

In response to questions about China's trade policy, the Chinese authorities stressed in their submission to the WTO that China is willing to negotiate on industrial subsidies and development promotion, but that these negotiations should be specific and clear to avoid general references to China's intervention or industrial policy. According to Bloomberg, Beijing believes that "industrial subsidies are an important policy tool for developing countries to achieve economic modernization and improve living standards," and alluded to the United States and other countries that "some countries advocate decoupling from other countries, attempt to politicize and weaponize economic and trade issues, or excessively abuse the concept of security."