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China's High-tech Exports Suffer Rising Trade Friction

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An exceptional growth rate, a large trade surplus and low-cost goods have made China the major target of rising trade protectionism in recent years. Nowadays, a new trend has emerged: in addition to low-end products, China's high-tech exports are encountering increasing trade friction.

"Major economies have all shifted their focus to emerging industries such as new energy businesses since the beginning of the financial crisis in a bid to cement their leading role in the global economy," said Zhang Yuyan, an analyst with the Institute of World Economics and Politics under the Chinese Academy of Social Sciences, China's top think tank.

With intensified global competition for leadership in emerging industries, China is very likely to suffer rising trade friction in high-tech exports, Zhang said.

On September 16, the European Union (EU) launched an investigation on data cards imported from China. The investigation involved 4.1 billion U.S. dollars worth of products. It was the first time for the EU to begin anti-dumping and safeguard investigations simultaneously against Chinese-made products.

Further, in October, the U.S. government decided to investigate a complaint filed by the United Steel workers, one of the nation's largest unions. The complaint asserted that China had provided subsidies to its clean energy industries, which violated WTO rules and caused a loss of American jobs.

"China's speeding up of industrial upgrading and restructuring means a greater possibility of trade disputes with foreign countries in high-end industries," Zhang said.

Suntech Power Holdings Co. (Suntech), China's leading solarphotovoltaic manufacturing company with an annual production capacity of one gigawatt in 2009, was targeted in the U.S. anti-subsidy investigation.

"Our success is derived from a technology innovation, mass production and cost control. We have never received any subsidies from the government," Suntech Investor Relations Manager Zhang Jianmin told Xinhua.

Even U.S. Secretary of Energy Steven Chu said in a speech last Monday in Washington that Suntech is not succeeding "because of cheap labor." Rather, its success stems from producing a lower-cost, higher-efficiency module.

Green technology is a vitally important sector and U.S. President Barack Obama has said, on many occasions, that renewable energy and clean technology will be an engine driving the creation of jobs in the future.

"As countries like the United States strive to carve out leadership in the clean technology sector, they will be likely to create barriers to China's high-tech exports," said Zhang Junsheng, a professor at the University of International Business and Economics (UIBE).

The launching of anti-dumping and anti-subsidy investigations against China by foreign countries also has political considerations, said Zhang Yong, director of the Fair Trading Office of the Commerce Department of Zhejiang Province.

Take the United States as an example. As its economy remains mired in a sluggish recovery and unable to create large numbers of jobs, the country's unemployment rate has hovered near 10 percent for more than a year.

"Under such circumstances, it would be easier to blame China for a loss of American jobs than rethink its own economic policy. And launching anti-subsidy probes of China's clean technology policies ahead of midterm elections might help the Obama administration win more seats," Zhang Yong said.

As trade friction between China and Western countries over everything from textiles to chemicals increased, although the financial crisis abated, experts suggest Chinese enterprises relocate to other nations, such as Vietnam and India, to reduce trade disputes.

"The relocation to some ASEAN countries will reduce labor costs and, more importantly, help avoid protectionist measures," Zhang Junsheng of the UIBE said.

However, the best way for China to avoid trade friction, experts say, is economic rebalancing and a shift from an export-oriented economy to a domestic consumption-driven economic model.

"More than 90 percent of our products are for overseas markets. If domestic consumption of solar photovoltaic panels and modules increases, the risks of trade friction may reduce sharply," Suntech's Zhang Jianmin said.

The country vowed to expand domestic demand and seek a new phase of economic growth boosted by consumption, investment and exports, according to the proposal for formulating the 12th Five-Year Program (2011-2015) on China's economic and social development.

A long-term mechanism will be built to boost consumption demand. Consumption will then be highlighted in expanding domestic demand to release urban and rural consumption potential and allow China to ascend to the top-ranking markets in the world, the document said.

"Our products will be a hit in areas like the Tibet Autonomous Region, which boasts significant amounts of sunshine. With people's rising awareness about environmental protection, more and more consumers will choose greener products," Zhang Jianmin said.

In addition, the government should formulate long-term and scientific plans for the development of emerging industries and raise the threshold for entry into these industries to avoid overcapacity, Zhang Junsheng said.

"Even some emerging industries have shown signs of overcapacity. And this is a problem we must address, especially when the domestic market has not been fully tapped. Otherwise, it will give rise to increasing trade disputes," he said.

(Xinhua News Agency December 12, 2010)


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