BEIJING (Reuters) – China‘s top trade and investment officials are railing against what they call a rising tide of global protectionism that blocks its major companies from expanding overseas and further integrating into the global economy.
The officials, speaking on the sidelines of a week-long Communist Party Congress, said protectionism was emerging across the world, not just in the West. It damaged global growth, frayed relations and could see China focus its investments in neighboring Asian nations, the officials said.
“We are against it,” Industry Minister Miao Wei told reporters on Wednesday when asked what he thought about protectionism as he left the Great Hall of the People after the closing session of the congress.
Commerce Minister Chen Deming had set the tone earlier last week, deriding the “Cold War mentality” of Washington lawmakers who urged U.S. firms in a landmark report last month not to do business with two top Chinese telecom equipment makers because of risks to national security.
He was followed by Lou Jiwei, chairman and CEO of China Investment Corporation, who told Reuters a rise in protectionism was forcing a rethink at the country’s $ 482 billion sovereign wealth fund, which would not spend money in countries “that do not welcome us”.
“There are other places to invest,” Lou said.
Asia is a particularly favored option for CIC, thanks to some of the fastest rates of growth and development in the world – which are themselves levered to China’s own economic dynamism.
Li Ruogu, president of the Export-Import Bank of China, which is a main source of loans for Chinese firms investing abroad, complained of “added layers of protectionism” being stacked up against China’s increasingly outward-looking companies.
Comments in between from bosses of some of the biggest state-owned enterprises – all of which have a Communist Party secretary at the top of their management structure – have reinforced views in some quarters that Beijing is becoming increasingly sensitive to protectionism.
Fu Chengyu, chairman of China’s oil giant Sinopec Group, said in London on Tuesday that politics made deals in the West increasingly difficult.
Sinopec’s rival, CNOOC Ltd, is struggling to win regulatory backing from Canada’s government for a $ 15.1 billion bid for Nexen Inc. A decision has been repeatedly delayed even though it has been approved by shareholders.
Even before the congress started, officials from government-run think-tanks that directly feed into policymaking had spoken to Reuters about a perceived rising tide of protectionism and how China might best try to turn it.
RISING RHETORIC
China’s trading partners, in turn, complain that state-backed companies they compete with globally get unfair support from Beijing – either through subsidies, tax breaks, cheap bank loans, or a deliberately undervalued currency.
Since joining the WTO in 2001, China has had 29 complaints of unfair trade practices brought against it. Around two thirds have been launched by the United States and the European Union, with others coming from a mix of developing and developed economies.
Foreign analysts though see recent rising rhetoric driven by political transition in both Washington and Beijing, a rash of troubled cross-border takeovers and the toughest conditions in three years for the country’s export-focused factory sector.
“This is playing to a domestic audience in the sense that a lot of manufacturers, a lot of exporters, aren’t doing too well and they are putting pressure on the Ministry of Commerce to do something,” Alistair Chan, an economist at Moody’s Analytics, told Reuters.
“There isn’t a lot that the government can do to help global demand, but one thing they can do is advocate for less protectionism. In terms of an actual trade war, I think that risk is quite minimal.”
China’s economy depends heavily on trade and investment flows. Exports were worth about 31 percent of GDP in 2011, according to World Bank data, while an estimated 200 million Chinese jobs are in the export sector or supported directly by foreign investment.
China’s rapid rise to become the world’s biggest exporter and its second biggest economy in the space of barely three decades since landmark economic reforms began in the late 1970s have sparked concerns among the developed economies it is eclipsing and the emerging markets which it dwarfs.
The U.S. election campaign was notable for China-bashing. Defeated candidate Mitt Romney had promised to label Beijing a currency manipulator if he won and while President Barack Obama was less confrontational, he cited his credentials as bringing more trade cases against China than his predecessor.
JOBS FEARS
There is a widespread view in the United States that trading with China has caused American firms to slash jobs.
The Economic Policy Institute, a think-tank focused on the needs of low- and middle-income workers, reckons that 2.7 million jobs were lost in the United States between 2001 and 2011 as a result of increased trade with China – 2.1 million of them in manufacturing industry.
Meanwhile research from consultancy Rhodium Group in September analyzed 600 Chinese direct investment transactions in the United States between 2000 and 2012, concluding that U.S. units of Chinese majority-owned firms directly supported 27,000 jobs.
Assuming a steady investment trend, Rhodium reckons that number would jump to 200,000-400,000 by 2020.
Beijing is targeting outbound direct investments of $ 560 billion between 2011 and 2015.
Analysts estimate China could spend $ 2 trillion globally on FDI in the next 10 years, a salivating proposition for many of the world’s top economies struggling for growth and employment opportunities – but a risk for politicians who see government-backed entities on the hunt for strategic assets, investors say.
Andrew Morris, managing director of UK fund firm Signature, reacted to news earlier this month that CIC had taken a 10 percent stake in Heathrow Airport by lambasting the British government for not doing more to preserve “our nation’s prized assets… being hoovered up by ‘foreign powers’.”
(Additional reporting by Beijing Bureau; Editing by Raju Gopalakrishnan)
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