Chinese government aid leads to overproduction and sales at lower than market prices, i.e. dumping, which undermines competition. The B20 (G20 business leaders) calls for same level playing field for both state-owned and private enterprises. If China followed the rules of a market economy, it would destroy itself in a few months.
Beijing (AsiaNews) – The trade war between China and the United States is not the only economic showdown Beijing faces.
Given the advantages Chinese state-owned enterprises enjoy, many countries, in particular the members of the G20 group, have called on Beijing to respect international rules that require a level playing field for both state-owned and private companies.
In recent years, many governments have become more and more critical towards China. The latter strongly supports its state sector, which has led to overproduction of steel and aluminium, thanks to the generous government funding. In turn, this has led to Chinese dumping, sales at below market prices.
According to Caixin, a week ago, Business 20 (B20), a group of G20 business leaders, asked G20 member countries to work together to establish “measures that ensure that state-owned enterprises do not have privileged access to non-commercial assistance in order to allow for a level playing field for investment and trade.”
At the meeting of the International Monetary Fund in Bali last week, Yi Gang, governor of the People's Bank of China, admitted that his country was considering adopting the principle of "competitive neutrality".
However, a day later, Peng Huagang, head of the State-owned Assets Supervision and Administration Commission (SASAC), criticised the B20, claiming that "state-owned companies have fully integrated into the market".
The next G20 meeting in Buenos Aires (30 November-1 December) is likely to tackle the issue of subsidies to state-owned enterprises.
Government subsidies for Chinese state enterprises have become the most common complaint at the G20.
In April, several aluminium industry groups representing Brazil, Canada, Europe, Japan and Mexico drafted a letter urging the G20 to take action against China’s industrial support.
The letter pointed out that, despite some steps taken by Beijing, there is still too much overproduction.
For example, in 2017 Chinese aluminium production actually grew by 13 per cent compared to 2 per cent for the rest of the world.
According to some experts, if China were to totally convert to a market economy without state subsidies for enterprises, its economy would collapse in a few months.