Wed, Aug 30, 2006 - Page 1 News List

US warns China over rise of `economic nationalism'

AGENCIES , BEIJING AND WASHINGTON

The US is concerned that a potential rise in economic nationalism in China could undercut Beijing's promises to the WTO, the top US trade official said yesterday.

A chorus of calls by Chinese officials for closer scrutiny of foreign investment, especially into key industries, has prompted concern among foreign businesses and officials that Beijing may backtrack on free market reforms.

"We'll be watching for substantive developments that would indicate a resurgence of economic nationalism," US Trade Representative Susan Schwab told a news briefing in Beijing.

She warned that such moves could retard China's growth.

"That direction is a known failure. We have had that experiment in this country and it did not work," she said, referring to the command economy that China enforced until the 1980s.

US firms have been "anticipating improvements that haven't necessarily been forthcoming", she said, citing long-running negotiations about US investors' bids for a stake in Guangdong Development Bank.

A Citigroup-led consortium is bidding against one led by Societe Generale for a controlling stake in the mid-sized bank.

Schwab said Washington was especially anxious to see progress on opening up China's financial sector. When China joined the WTO in 2001, it promised to open up banking and insurance to foreign firms by this December.

Schwab said that financial services were one of a range of issues she raised with Chinese Commerce Minister Bo Xilai (薄熙來) on Monday in a three-hour meeting.

US Secretary of the Treasury Henry Paulson will also lobby for more foreign competition against China's banks when he visits the country next month, an official said yesterday in Washington.

"His view is that it is in countries' interest to open up their financial sector," Treasury Department spokesman Tony Fratto said.

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