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Author : A. Rogachev
Second secretary, Embassy of the Russian Federation in the People's Republic of China
AS OF LATE, the recognition of China as a market econ-
omy has unexpectedly become an acute political issue for
the European Union, emerging as a subject of controversial
and heated debate both within European institutions and
in the international arena as a whole.
In principle, this is rather a technical concept and is used
mainly in antidumping investigations. Thus, market econ-
omy status plays an important role in situations where it is
recognized that a producer reduces the price of exports to
foreign markets to such an extent that this provides conditions for unfair competition, which
affects local business. In this situation, market economy status is a signal for using a particular
mechanism to calculate an antidumping margin applied to a "dumping" exporter so as to balance
the market situation.
China became a member of the World Trade Organization (WTO) on December 11, 2001, as-
suming obligations - essential for the subsequent development of the entire system of interna-
tional trade - aimed at opening and liberalizing the national economy and accelerating its
integration into global economic architecture.
In substantiation of their position, China's Western partners are reiterating that the country's
economy, nevertheless, does not quite measure up to market criteria. Strict control that official
Beijing exercises over some key sectors of the national economy with the help of numerous
state-owned corporations, which, according to this view, are characterized by a lack of trans-
parency, bureaucratization and inefficiency, comes under sharp criticism. In addition, the West
is inclined to believe that the Chinese authorities continue to actively intervene in economic
processes, which should be regulated on a market basis. As a recent example they cite large-scale
interventions by Chinese government agencies into the country's stock exchange after the crash
of Shanghai Composite Index last year. The following conclusion is made: China is not a market
economy, while Beijing's policy in this sphere creates prerequisites for unfair competition between
Chinese and Western businesses.
According to forecasts, Beijing's current trade, economic and financial policy, including the de-
nomination of the yuan, as well as the considerable amount of time that the Chinese authorities
need to deal with the overproduction problem, can significantly intensify pressure on markets
in a number of European countries. This will eventually trigger wide-ranging and rather painful
restructuring of production in the European space with severe consequences for the labor mar-
ket. This prospect confronts Brussels with the need to maneuver skillfully between the risk of
demonstrating its inability to protect the fundamental economic interests of its member countries
and the danger of seriously impairing its relations with China, which are going through their
China and the EU: The Issue of Market Economy Status