China's economy will replace Germany as the world's third-largest by the end of this year. But behind such sparkling figures, economic friction and displeasure are brewing. As China becomes the world's factory and builds huge trade surpluses, there are growing complaints in the US, the EU and Asia about its unfair trade practices. There are also growing concerns over the poor quality and health standards of Chinese foods and other products.
Beijing has implemented several control measures this year, such as raising the deposit reserve ratio and interest rates and lowering export rebates. But such macroeconomic measures have done little to slow trade. The rapid rise in its trade surplus has spurred inflation, with the consumer price index surging 4 percent last month. This has placed an even greater strain on China's macroeconomic controls.
US President George W. Bush's administration has repeatedly criticized the Chinese government for keeping the yuan's exchange rate artificially low and for not doing enough to enforce intellectual property laws and punish factories that make fake products. The US' complaints reflect the feelings of many countries that are fed up with the deluge of Chinese products and having Beijing turn a deaf ear to their complaints.
Some are striking back. The European Commission has decided to impose a provisional anti-dumping tax on Chinese bicycle seats. The US is taxing steel pipes and copperplate paper from China.
Taiwanese manufacturers have complained about imports of low-priced Chinese copper and steel wire, bedding, socks, boots, shoes and dowling paper -- not to mention Chinese products labeled "Made in Taiwan." They have asked the government to take measures to help protect them, such as imposing an anti-dumping tax.
But some of the poor-quality products are potentially dangerous, or even fatal -- poisonous crabs, poisonous puffer fish labeled as monk fish, toxic writing materials for children, bicycles and beds whose frames collapse, artificial trees that are prone to catching fire, poisonous pet food, unsafe cribs and, of course, tainted cough medicine that killed scores in Panama and tainted toothpaste that retailers the world over have scrambled to pull off their shelves.
These incidents have humiliated China and are turning the label "Made in China" into a synonym for poorly made and dangerous. But Beijing has shown a great unwillingness to face this problem. On Monday it accused the foreign media of smearing its good name by playing up such stories. Denying reality and appealing to nationalist sentiment only further erode the international community's confidence in Chinese-made products.
China's double-digit trade growth naturally provokes envy, but as its exports become increasingly integrated in the world economy and as Beijing's foreign reserves grow, domestic and international pressure will do so, too. The Chinese government may help short-term development by ignoring or disrespecting the rules of international trade, but this strategy will only plant the seeds for international animosity. That's bad for long-term economic development and China's international image.
Once a commercial reputation is damaged, restoring it is a long and difficult process. Taiwanese businesses manufacturing goods in China should take precautions, lest they be tarred by the same brush.
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