Analysts question China's trade, economic policies

As its economy grows rapidly, China should pay more attention to its internal copyright infringements and abolish unfair trade policies that undermine the ability of other developing countries to attract investment, analysts said yesterday.

"Even though the economies of some Chinese cities are highly developed, many of its trade policies are still in line with those of developing countries, creating unfair competition with other developing countries," Chen Po-chih (陳博志), chairman of Taiwan Thinktank (台灣智庫), said yesterday at a seminar organized by the Taiwan Institute of Economic Research (TIER, 台經院).

Chen said he saw nothing wrong with Taiwanese manufacturing investments in China but that high import tariffs in China added unnecessary costs for some Taiwanese multinationals, which tried to contribute to their home country by importing equipment and raw materials to their China-based production lines.

For example, Formosa Petrochemical Corp (台塑石化) would have to pay 16 percent tariffs if it chose to import petrochemical raw materials from Taiwan to its China-based factories, which not only forces Formosa Petrochemical to buy raw materials there, but also forces upstream businesses to move to China along with their clients, Chen said.

Chen, an economic adviser to the Presidential Office and former chairman of the Council for Economic Planning and Development, urged countries that suffer as a result of China's economic policies to join forces and pressure Beijing to end its unfair trade practices.

Richard Koo (辜朝明), a chief economist at Nomura Research Institute's economic research department, said that China is "no longer a small player, but a global problem."

"The whole world has to get together and think about what to do with China," Koo said at the seminar. Koo is also an economic adviser to the Japanese Cabinet.

Although China's entrance into world markets creates greater global competition, the country is a smart trade player whose markets are "too big to fail" should the rest of the world economy falter, Koo said.

As well as keeping high trade barriers, China maintains an under-valued yuan, Chen said. Beijing should allow the yuan to appreciate, which would also cause most Asian currencies to appreciate, creating a level playing field for Asian exporters, Chen said in his speech on the impact of globalization.

Chen also criticized the US for asking China to unpeg its currency from the greenback. Floating the yuan may not result in its appreciation, he said.

In a speech entitled "The world economy's fight against balance-sheet recession," Koo said Japan's decade-long economic recession was a result of the collapse of asset prices, which forced Japanese companies to move away from profit maximization to debt minimization.

As a solution, Japan embarked on numerous public construction projects instead of concentrating on monetary policies to stimulate its economy, Koo said, adding that Japan's money supply in the past 10 years was mostly the result of government borrowing.

Therefore Taiwan may experience a similar recession triggered by the collapse of asset prices, Koo said, adding that he supported the government's recent policy initiatives to launch major infrastructure projects.