China is decisive to sustain its state-led economic model. Instead, Beijing even intends to reinforce the system.
Vice-Premier Liu He, China’s top trade negotiator who deals with US-China trade war, unveiled the country’s viewpoint. Bloomberg reported that he channels that China will make the state economy stronger, better, and bigger.
“We will promote state-owned economy reforms and structural adjustments, and invest more in industries related to national security, serving the national strategic goals,” he said in an article.
Amid the trade war, Beijing remains resolute to continuously empower its Stated-owned Enterprises (SOE). The dominance of SOE to determine the country’s economy is considerably an attempt to integrate socialist market economy with a degree of macroeconomics regulation.
Regarding China’s moves, this actually one of the major concerns of the establishment of the trade war. Accordingly, it is one of the demands the US required China to address in order to reach a trade deal.
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What Happens if China Keeps Promoting Its Economic Model
If China economic model stays this way, its SOE will surely get stronger. SOE is one of the major components that acts as a pillar to boost China’s economy.
Considering the current and long-term impacts, SOE’s dominance in the country will weaken the foreign businesses competing in that country. In particular, for the US and European countries, China’s top trade partners, the favoritism is indubitably unfair.
For those western countries, the favoritism potentially prevents the market from being transparent. Without a transparent market, it is possible for business to compete in an uneven condition.
In response to the skepticism, China wants to ensure the foreign firms that the market will remain transparent despite the economic model it follows. In so doing, the country sets to implement a new foreign investment law in January next year.
However, that does nothing to reassure the US and the world as there will never be a trade deal if the condition remains the same. This is so despite the US and China’s plan to sign the Phase One deal ahead of the new year.
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