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Speech by MOFTEC Official on the Europe-China Anti-Dumping Forum(2002-10-14)
2004/03/09
The Fast Growth of the Chinese Market Economy

Ladies and Gentlemen,

It is a great pleasure for me to participate in the Europe-China Anti-Dumping Forum in Brussels. I would like to extend my sincere gratitude to the organizers of this forum--the Europe China Economic and Trade Review, the Belgian-Chinese Economic and Commercial Council and the Euro-China Business Chamber--for their warm invitation.

Anti-dumping is a legal means permitted by the WTO to preserve fair trade and to safeguard the domestic industry. But since the 1980s, because of the increase in trade protectionism, many countries have been using anti-dumping as a major means to protect trade and they are using it more and more. One of the major reasons is that the estimation of the degree of dumping has been artificially exaggerated. Socialist countries undergoing market reforms are very often the main victims of this, because most of these countries have been labelled “non-market economies ” and their degree of dumping is measured by that of the third-party countries in the anti-dumping case investigations. This has granted the countries investigating these cases considerable power and has had as a consequence that the rulings regarding dumping are often arbitrary and unfair. Judging by how China has responded to foreign anti-dumping accusations, the problem caused by this non-market economy status has been a major one, and Chinese government and companies have spared no effort to look for an early solution to it.

The theme of this forum is the European Union’s anti-dumping measures against China and China’s market economy reforms. I would like to take this opportunity to exchange with the delegates present here my views on EU-China anti-dumping issues and issues of China’s market economy reforms.

It is obvious that after more than 20 years of reforms and opening-up, China’s economic drive has made stunning progress: China’s economy has been transformed from  a planned economy to an open market economy. A lot of world-known European trans-national companies, such as Siemens, Alcatel, Nokia, and Philips, etc., have achieved great success on the Chinese market. China’s market economy reforms have provided them with the best guarantees to explore the Chinese market. They are the witnesses of the development of China’s market economy. Now I would like to say something about the achievements of China’s market economy reforms regarding the following aspects: the marketisation of China’s commodities, the marketisation of essential factors of production, the marketisation of state-owned enterprises, and the development of the non-public economy.

I. The course of China’s economy marketisation

From the establishment in 1949 of the New China to 1978, China had been carrying out centrally planned economy system. In 1978, the Chinese government started the essential reform of the planned economy system.

The marketisation of China’s economy can be roughly divided into three phases:




Phase I: 1978-1984, focusing on rural reform

China’s economy marketisation started with the reform of the farmland contract system in 1979. The rural marketisation reform has elicited great enthusiasm among the farmers, and the rural economy can boast significant accomplishments. It is precisely the success of the rural marketisation reform that in turn triggered the reform of cities and of state-owned enterprises.

Phase II: 1985-1992, focusing on the reform of the decision-making power of state-owned enterprises

In 1984, the Chinese government decided to conduct the economic system reform. Until the beginning of the 1990s, the main characteristic of China’s economy marketisation had been the relaxed control of the government on the tariffs, production, and management of the state-owned enterprises. The tariffs of the industrial consumer goods, agricultural goods, and means of production had basically been fixed by the market. The government even fixed the tariffs of a few monopolized products on the basis of the market’s supply and demand, and invited people from all walks of life to the debate about prices. In this phase, the state-owned enterprises had gained every decision-making power on production and management, and the management efficiency had also been significantly improved. In the meantime, the non-public economy, especially the individual economy and the private economy, also started growing rapidly.

Phase III: 1992-to the present, focusing on the reform of the market economy system

In October 1992, the Chinese government made the setting up of a socialist market economy system the clear objective of the reform. Then the objective was ratified by the National People’s Congress and was written into the Constitution of the People’s Republic of China. 10 years have passed and China’s reform of the economy has made a great breakthrough: the regulation mechanisms of the market economy are playing a greater and greater role in the allocation of resources, and the degree of readjustment is growing constantly, as can been seen from the following three aspects:

First, the enterprises are becoming the main part of market. The marketisation of the state-owned enterprises has been considerably improved. The enterprises enforce significant reform on their personnel, labour, and distribution systems: thus the spontaneous flow of the labour factor and the spontaneous adaptation of the salary rate are both promoted. Non-public enterprises completely operate on the basis of market principles and the private and individual economies have developed considerably. The Chinese government has taken measures to encourage direct foreign investment, and scores of  foreign-invested enterprises have started to play an important role. The import and export value of the FDI enterprises accounts for 50% of the total of the imports and exports.

Second, the streamlining of the government organs and the transformation of the government functions. The central and local governments streamline the government organs in real earnest, downsizing the administrative organs of different sectors, while preserving and strengthening the comprehensive macro-controlling and market monitoring organs. We also further transform the functions of government, shifting the management mode from direct administrative interference on the enterprises to indirect economic regulation of the enterprises. Thus the government gradually becomes the macro-manager and social manager.

Third, perfecting the market system. The development of the marketisation of the price of market factors is pacing up. The financial market has started from scratch and is being perfected with each passing day. The labour market is growing rapidly. The salaries are almost decided by the supply and demand in labour. The real estate market is developing steadily. A technology market and an information market have been gradually formed. The fostering and development of the intermediary agencies have been significantly accelerated. An intermediary system of multi-institute, multi-organisation, and multi-service agencies has been initially formed. The market management and monitoring are also being constantly improved and strengthened. A legal system adapted to a market economy is gradually being perfected. The law of the market economy has been implemented. China has already established the market economy system.

2. Marketisation of commodities

During the planned economy period, China categorized all commodities into three kinds according to their importance in the national economy. China planned them centrally and managed them by category, thus the level of commodities marketisation was very low. With the deepening of China’s reforms, Chinese commodities have now already realized marketisation, as demonstrated by the following aspects: the scale and operating policy of commodities production and management is regulated by the market; the prices of commodities are decided by the buyers and sellers on the basis of supply and demand; commodities have free access to the market and enjoy free selling and buying; the general fluctuation of market commodities prices is not controlled by anybody but is a reflection of the general supply and demand of the market. In 2000, market-fixed prices accounted for 95.8% of the retail aggregate of social commodities, for 92.5% of the total market of agricultural products and by-products, and for 87.4% of the total sales of the means of production.

3. The marketisation of the essential factors of production

The essential factors of production are the fundamentals on which the production and management survive and develop. They mainly include labour force, capital and land.

1) The marketisation of the labour force

The labour force is the mainstay of the essential factors of production. Before the reform and opening-up, the workers belonged to the state, the labour force of an enterprise was not a commodity and could not be manipulated by the workers themselves, nor could it be freely utilized by the enterprises. After several years of labour reform, the labourers can now choose their own professions as they wish and the price of the labour force is regulated by the supply and demand on the labour force market. The enterprises can choose and introduce freely talents from home and abroad according to the actual needs of their production and management, as well as decide the recruitment or dismissal of workers. The current labour system of Chinese enterprises has already integrated the international labour market.

2) The marketisation of capital

The reform of capital marketisation mainly focuses on investment and finance systems. Since the 1980s, China has carried out a series of reforms of its investment and finance system. By reforming the investment system and enforcing the marketisation of investment and establishing a financing market, the enterprises can freely conduct financing and financing marketisation and establish a stock market. The state-owned enterprises have implemented a shareholding system through the reform and realized the marketisation of enterprises investment. Judging by the direction of the investment system reform, the Chinese government is determined to influence the investing policy of Chinese enterprises with indirect economic means such as fiscal and financing measures. All Chinese enterprises, state-owned or collective, private or with foreign investments, can now freely invest and finance themselves in accordance with the capital market and the demands of investment efficiency.

The reform of the finance system presents itself mainly in the following three aspects:
First, the reform of the finance monitoring system. The finance monitoring system of China has developed from the unique People’s Bank of China to the current multiple monitoring system composed of the People’s Bank, China’s Securities Regulatory Commission, and China’s Insurance Regulatory Commission.

Second, the marketisation of the banking system. The state-owned specialized banks are transformed to commercial banks, small and medium-sized banks carry out reforms of their shareholding system. The banks are managed in property debt proportion, and the loans issued by banks to the enterprises are also regulated by the market and require investment efficiency of credit funds. In addition, according to our WTO commitments, China’s financial market will be fully open to the outside world within 5 years.

Third, the marketisation of interest and exchange rates. To meet the demand of the reform of the financial system, we have already freed the foreign interest rate, the Chibor, the interest rate of banks for the state treasure bond market, and the rural deposit and loan interest rate. As for the exchange rate, China is taking an active, steady, and gradual path of reform. In order to stabilize the currency and the national economy, China started to enforce the manageable floating exchange rate system based on the market supply and demand as of 1994, and as of 1996 the RMB exchange rate has been open to free exchange for recurrent projects. China’s exchange rate policy meets China’s national conditions. Practice has shown that China’s steady exchange rate policy has played an active role in developing the domestic economy, successfully resisting the 1998 Asian financial crisis, and maintaining the stability of the regional as well as of the world economy.

3). Marketisation of the land utilization

Before, all of China’s land was planned and managed by the state, the utilization right could not be randomly transferred, both the state-owned enterprises and collective enterprises used the land for free and the land resources were seriously wasted. After the 1990s, however, China has reformed the land utilisation management system and enforced the paid utilisation system of the land: thus the land resources entered the land market as commodities and the marketisation of land utilisation is being gradually realized. We are enforcing the system of paid utilisation of land for the enterprises and establishing the land transfer market. The price of land is regulated by the supply and demand of the market. We are establishing the real estate trading market, linking the land with the house property, promoting the increase of land’s value. The state commandeers the land from collective enterprises and pays to use it: thus the land is commercialized.


3 The marketisation of the state-owned enterprises

The marketisation of the state-owned enterprises means that the resources allocation of the state-owned enterprises has gone over from being controlled by the government administration to being decided mainly by the market.

In the second half of the 1980s, the state had carried out some major reforms on the management system of state-owned enterprises. The government functions have been separated from the enterprise management: gradually the decision-making power of the enterprises has been increased, the enterprises could participate in the market competition independently. Since the 1990s, the reform of the property rights relations of state-owned enterprises has made much headway. Through the system reform of the state-owned enterprises, non-public capital, including domestic private capital and foreign capital, started pouring steadily into the state-owned enterprises. The government’s way of dealing with the enterprises has changed essentially. The Chinese government is no longer a manager but an investor in enterprise operation, management, and decision making.

To meet the demand of the system reform of state-owned enterprises, the fiscal and accounting systems of enterprises have also been reformed accordingly. Since 1992, in addition to the existing “Accounting Law”, China has enacted “Regulations on corporate fiscal affairs”, “ Rules of corporate accounting,” and 10 other nationally unified sector accounting policies. We can say that the current Chinese corporate fiscal and accounting system has completely integrated the world system.

The current managing system of Chinese state-owned enterprises has been considerably improved compared with that before the reform. All production and managing activities of the state-owned enterprises have adapted themselves to the market: they adjust their production and managing scale and their development policy on the basis of the market’s supply and demand.

4. The development of the Non-public economy

The non-public economy includes the collective economy, the cooperative economy, the shareholding system economy, the foreign-investment economy, the individual economy, the private economy, etc. The non-public economy has already prevailed in every sector of our national economy and has been prominent in the figures of the gross industry input and output. Since the reform and opening-up, the contribution of the non-public economy in the total value of China’s national economy has greatly increased. In 2001, the contribution of the non-public economy to the GDP has reached 70%, the total industrial output value of the non-public economy accounted for 80% of the total. The employees in the non-public sectors accounted for 70% of the total number of employees of cities and towns. The contribution of the non-public economy to China’s financial income accounts for nearly 60%. The development of the non-public economy reflects the marketisation degree of China’s overall economic reform. China’s Legend Group, Hair Group and the lighters industry in Wenzhou are the best demonstrations of the development and expansion of China’s private enterprises. The development of the non-public economy in China shows that China’s economic marketisation is an open one.



5. The mechanism of the enterprises’ entry on and withdrawal from the market

Until 1999, China has passed and implemented the “Corporate Law”, the “Individual-investment corporate law”, and the “Cooperative corporate law”, explicitly defining the specific conditions of the creation of China’s enterprises of all kinds, thus providing the legal ground for the creation of China’s enterprises. The “Individual-investment corporate law” stipulates that the creation of an individual-investment enterprise should adopt a registration system. All individuals within the legal conditions can be approved to create an individual-investment company. At the core of the market access policy, the significance of the “Corporate Law” is that it has established the real legal person mechanism for the main part of market; it has set the equality principle between the main parts of the market and confirmed the concept of shareholding right, and thus it has provided conditions for the optimisation  of resources allocation on the basis of market mechanism. These three laws attest to the fact that, according to the demands of market economy, China has already built the main structure of a market economy, has basically formed the Chinese market access policy that fits the market economy system, and has laid out the important base for a unified and systematic market access system.

At present, there are the “Corporate Bankruptcy Law” issued in 1986 and some relevant laws and regulations to standardize corporate bankruptcy in China. If the legal person of a corporation is in serious deficit and cannot pay the debt due, the creditor can appeal to the People’s Court for the announcement of the debtor’s bankruptcy and to get his debt paid. On the other hand, the debtor can also appeal to the People’s Court for bankruptcy to pay the debt. These laws and regulations apply to enterprises of all kinds in China.

6. The WTO entry has pushed forward China’s market economy

Joining the WTO does not only meet the objective of China’s reforms and opening-up, but also accelerates the pace of China’s marketisation reform and opening-up.

First, the WTO entry will further promote China’s corporate marketisation, and all kinds of Chinese enterprises will take part more extensively in the international market competition and gain more initiative and more powerful competitiveness: thus the marketisation reform of Chinese corporations can go deeper and deeper.

Second, the WTO entry will facilitate China’s perfecting of its market mechanisms. After entering the WTO, the greater world of international competition will introduce the relatively mature international market mechanisms to China: thus the perfecting of China’s market mechanisms is actively promoted.

Third, the WTO entry will improve the government’s ability to adapt itself to the market. The WTO entry requires from China’s economic system that it approach and integrate itself into the international standards, that it accelerate the transformation of the government’s functions and management mode, and that it strengthen macro-management more within an economic and legal framework.

Concluding remarks

Compared with the developed countries, China still has a long way to go in its marketisation degree, but when compared with other economy-transforming countries, a lot of our indexes are on the up, and they continue to rise. According to the “Report on the Freedom Degree of World Economy “ carried out by the Fraser Institute in Canada, China ranked 101st among 107 listed countries in 1980, and 81st among the 123 listed countries in 1999, well above India, Brazil, and Russia.  

The rapid development of China’s economy has provided vast developing space for corporations from all over the world and in particular, corporation from Europe. China should take a more active and more responsible attitude in the international competition after the WTO entry. But in the field of anti-dumping, China’s non-market economy status has always been bothering Chinese enterprises, this unsolved problem has been seriously hindering the export of China’s commodities.

China and Europe have been long involved in exchanges on the anti-dumping issue. Their governments have done and are doing all efforts to communicate and exchange views with each other. In 2001, China and the European Union successfully held the Europe-China Anti-dumping Forum in Beijing which lead to fairly good results. Because of the achievements China has accomplished in its reform and opening-up drive and market economy building, the European Union lifted China from the list of non-market economy countries in April 1998 and considers China as a market economy transforming country. But till now the European Union has not yet granted China the market economy status in the real sense. The general trade policy of the European Union towards China is positive, and the European Union has always been speaking highly of China’s achievements in its reform and opening-up course. But when it comes to anti-dumping, despite the fact that the mature degree of China’s market economy is much higher than that of some recognized market economy countries, since the European Union is still using its anti-dumping policy towards China passed in 1998, not many Chinese enterprises can get the market economy status. So, our view is that the current EU anti-dumping policy and approaches towards China cannot completely and truly reflect China’s reality, and the Chinese government consequently urges the European Union to evaluate China’s current market economy environment with a more positive and objective attitude, and to adjust actively its anti-dumping policy towards China according to the overall situation of the development of EU-China bilateral trade. The complete resolution of China’s market economy status in the short term is not only in the interest of China, but also in the interest of the EU as well, as also of all the countries and entrepreneurs that want to develop a long-term and mutually beneficial economic and trade cooperation with China.

Thank you very much.

27 September, 2002

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