US official warns China to open markets

By Reuters

China could pay a political price in Washington for not doing more to open its markets in sectors ranging from aviation to financial services, a senior US official said on Thursday.

Undersecretary of Commerce for International Trade Frank Lavin acknowledged the efforts China had made to liberalise its markets after it joined the World Trade Organisation in 2001, but he said Beijing had made little to no progress in opening a number of critical sectors over the past two years.

Lavin said the US trade deficit with China, which on US figures was $232.5bn in 2006, was putting US-China economic ties under a cloud, making it important for Beijing to take steps to open up.

”China pays a political price potentially for the substantial trade surplus it enjoys if it is not also responsive to some of the market access points that we’re trying to raise,” Lavin told US businessmen in Beijing.

Lavin cited pharmaceuticals, aviation, telecommunications, autos, steel, entertainment and financial services among the areas where foreign businesses still faced obstacles and that were the main priorities for Washington.

”We can’t simply say, ’Well, in 2002 we fixed a problem or in 2004 we fixed another problem’. We have to say, ’What are we fixing in ’07, in ’08?’ And in our view there has been little to no movement in some of these areas,” he said.

A number of US lawmakers have been pushing legislation to address what they see as unfair trading practices by Beijing.

Much of that attention has revolved around the yuan, which many US politicians and manufacturers believe is seriously undervalued, giving Chinese companies an unfair advantage in global markets.

Two leading US Senate critics of China’s currency policy – Sen. Charles Schumer, a New York Democrat, and Sen. Lindsey Graham, a South Carolina Republican – said on Wednesday that they expected Congress to pass a ”veto-proof” bill forcing Beijing to raise the value of the yuan.

Lavin said the United States needed to see some concrete results from the Strategic Economic Dialogue, a policy-setting forum chaired by US Treasury Secretary Henry Paulson and Chinese Vice-Premier Wu Yi, when the sides next meet in Washington in May.

”We want to have some score on the scoreboard that some of the US is going to say, ’Thank you for fixing that problem. Before I couldn’t do something, now I can do it – my business life is better’,” he said.

Still, Lavin pointed to 32 per cent growth in US exports to China in 2006 as a positive for commercial relations.

Exports to China last year jumped by about $14bn, more than all US exports to India, he noted.

Asked about US equity fund Carlyle’s drawn-out negotiations to buy a stake in Xugong, China’s leading machinery maker, Lavin said China needed such investments to help well-performing firms become internationally competitive by improving their technology and management.

”The controversy shouldn’t be Carlyle-Xugong,” he told reporters. ”I think China needs 100 Carlyle Groups to come in and buy 100 Xugongs.”