US fears fair competition

There is no single model for a market economy. The government and the market play different roles in different economies.

The market economies of developed countries differ from one another and from that of the United States. Given the differences in the economies between China and the US, it makes no sense to make conclusions about China's market economy status by applying the US economy as the sole yardstick. Differences between two economies cannot be simply defined as industrial policy.

It's also irrational to misinterpret China's regular economic operations as adopting industrial policies without a clear definition of what an industrial policy is. And to claim the Chinese government is strategically ill-intentioned goes too far.

The US is a developed country with a more advanced market mode, while China is a developing country that has transitioned from a planned economy and whose market economy is maturing. The huge differences in the two countries' ways of running and managing their economies reflect their distinctive national conditions and social systems. It is unreasonable that the US sees its economy as the only standard by which to judge other economies, for it makes no sense that if an economy does not accord with that of the US, then it is irrational or conspiratorial or even revisionist. In fact, such differences have been there for decades.

But in the past, China's economic aggregate remained small. It was not until China emerged as the world's second-largest economy, to the level that the predominance of the US economy was threatened, that the US began to exaggerate such differences, blame them for causing unfair competition, and accuse China of being revisionist and practicing state capitalism.

China has transformed itself from a planned to a socialist market economy with the predominance of many State-owned enterprises. For years, the Chinese government has been pushing forward SOE reforms, by establishing a modern enterprise system, promoting market competition as the core driver, introducing mixed ownership and securing a fair competition between public and private companies including foreign enterprises. However, since very few SOEs exist in the US, some US commentators impose their own standards on China, and they view Chinese SOEs as an extension of the government's will and functions, which is not objective at all.

China and the US also have totally different land policies. All land in China is owned by the State or its agricultural collectives while in the US much of the land is privately owned. The land use rights in China can be secured either by market transfer or government allocation. Land use for public facilities may be allocated while that for commercial premises can be granted through auction and bidding on a land transfer market. Nevertheless, in the US, even though land transactions are mainly made through private deals, different uses of land are regulated by the government. For example, land for public use are allocated by the federal or state governments. Despite huge differences in land ownership, both countries share a lot of similarities in land use planning and land use right transactions. Therefore, such differences in land systems cannot be simply declared to be industrial policies.

For a long time, China and the US have occupied different yet complementary places in the industrial division of labor. In the global industrial chain, China mainly covers low-end processing and manufacturing links while the US undertakes both ends of the "smile curve", that is, areas with higher added value such as research and development as well as channel operation of brands. However, as Chinese industry upgrades and rises in the industrial chain, competition has begun to emerge and intensify between the two sides, especially in the high-tech sectors. Not only has China caught up with the US in aerospace, automobiles, large-scale computers, machinery and equipment, but even surpassed the later in rail transit, 5G, mobile payments, and quantum communications, sparking growing concerns in the US.

Talent flows freely in market economy. Countries and companies are vying for top talents as they are key factors of production. Many countries try to attract talents by offering favorable research environments and enticing reward packages. The US has attracted more overseas talents than any other country. Many of them were educated in their home countries with enormous input, but have made prominent scientific and technological innovation achievements for the US. While enjoying talent bonus at low cost with high returns, the US makes a fuss of other countries attracting their talents back.

Under the Wassenaar Agreement, the US imposed export controls on China's hightech products. These export controls are aimed at denying China's access to higher-end technology and equipment on the one hand and suppressing China's industrial upgrading on the other. These export controls are the major cause of the large US deficit with China.

China's market economy is not flawless. For instance, China's intellectual property protection can be further improved; excessive subsidies from local governments have caused overcapacity in the steel industry; and the service sector should be further opened up. But China is committed to facing up to the challenges and to deepening reform and opening-up. It will take steps to introduce more market access for foreign companies, shorten the negative lists, cut overall tariffs, import more goods and services, improve the business environment, streamline government approvals, promote SOE reforms, and strengthen intellectual property protection.

By improving its socialist market economy with reform and opening-up, China will boost its economic efficiency and gain more growth momentum.

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

The author contributed this article to China Watch exclusively. The views expressed do not necessarily reflect those of China Watch.

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