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Print Edition> World
UPDATED: May 28, 2010 NO. 22 JUNE 3, 2010
A Meeting of Minds
China and the United States push forward engagement amid agreements and differences
By YAN WEI
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STRIDING FORWARD: John Rice, Vice Chairman of General Electric Co. (GE) and President and CEO of GE Technology Infrastructure, attends the opening ceremony of the GE Northeast China Headquarters in Shenyang, Liaoning Province, on May 25 (LI GANG) 

Jin from Renmin University of China noted that progress in these educational exchanges was also a tangible success in the S&ED talks that, until recently, has been devoted mainly to political, economic and military affairs.

Problems

But despite many advances, one of several "disappointments," according to Wang Yizhou, Associate Dean of the School of International Studies at Peking University, included a refusal by Washington to recognize China as a market economy. This policy would impose strenuous barriers on China's trade relations with the United States, he said.

Despite repeated pledges by the United States to recognize China's market economy status as soon as possible, the international studies expert said he does not expect this to be resolved very soon.

A critical factor in deciding whether a country is a market economy is whether the market determines the distribution of resources, said Chinese Commerce Minister Chen Deming, adding that market economies may take various forms.

Some Western market economies, for instance, have adopted "nationalization" measures to rescue ailing companies during the global financial crisis, such as extending government-guaranteed bank loans to them. This offers a way to judge how market economies are changing, Chen said.

When China entered the World Trade Organization (WTO) in 2001, all WTO members agreed to recognize China's market economy status by 2016, according to Chen. To date, nearly two thirds of the 153 WTO members have already done so.

The U.S. investment policies are also high on China's list of concerns. Since the U.S. Foreign Investment and National Security Act defines "foreign government-controlled transactions" in vague terms, U.S. authorities could accuse any Chinese companies or individuals investing in the United States of being government controlled and, thus, subject them to security scrutiny, Chen said.

China has created a positive climate for foreign investors as it strengthens its protection of intellectual property rights, the commerce minister said.

Last year when global foreign direct investment fell by more than 30 percent, he added, paid-in foreign investment to China was down only 2.6 percent. From January to April this year, moreover, foreign investment to China increased 11 percent over the same period last year.

China's indigenous innovation strategy is meant to promote technological research and development, and is not linked to the country's trade policy, Chen said, addressing concerns that this strategy may give preferences to companies using technologies developed in China.

While encouraging companies, including foreign-funded ones, to carry out technological innovation, the Chinese Government treats all kinds of business equally when it comes to government procurement, he said. This includes state-owned enterprises, private companies and foreign-funded companies.

Wang of Peking University went further, saying U.S. fears of China's innovation capacity are exaggerated, because China lags far behind the United States in this respect.

Rather, he said, the United States might be warning American companies of emerging competition from their Chinese counterparts by playing up these concerns.

In the near future, said Wang, China will be unable to develop sophisticated technologies, such as nuclear energy technologies, all by itself, nor will the United States stop importing consumer goods from China.

The two nations' trade structures, coupled with their different consumption habits—with the Chinese keen on saving and Americans inclined toward spending—will make U.S. trade deficit with China a longstanding point of contention, Wang said.

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