Tags: china | trade | suicide

Evans-Pritchard: Buy China is Trade Suicide

By    |   Thursday, 18 Jun 2009 01:18 PM

China's "Buy Chinese" protectionist policy could well be a one-way ticket to nowhere, says Ambrose Evans-Pritchard.

China’s action is extremely disturbing, Evans-Pritchard writes in the UK Telegraph, and confirms fears that the Chinese government is sufficiently worried about rising unemployment to adopt suicidal measures.

"As the world's top exporter with a $400 billion current account surplus and an economy that lives off the America and European market, (China) will pay the highest price if it triggers a global retreat into protectionist blocs," Evans-Pritchard says.

The policy bans the purchase of foreign equipment for investment projects unless a special exemption is obtained. The measures apply to European goods, even though EU states have not imposed any such “Buy Europe” clause of their own.

EU producers of wind turbines already have been excluded from a $5 billion wind project, whether or not they have factories in China.

Beijing risks making the same catastrophic mistake the U.S. Congress made when it passed the US Smoot-Hawley Tariff Act in 1930, Evans-Pritchard notes.

“By imposing tariffs, Washington triggered massive retaliation,” he says. “While nobody escaped the Great Depression that ensued, the effects were unequal. The U.S. suffered a far steeper decline in output than the rest of the world.”

Meanwhile, the "Buy Chinese" doctrine, although no making headlines, has always been Chinese law. Government procurement cannot use imported goods and services, Forbes magazine reports.

Beijing did not strictly enforce the regulation in the past, particularly when the Chinese economy was ballooning at a double-digit growth rate.

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China's "Buy Chinese" protectionist policy could well be a one-way ticket to nowhere, says Ambrose Evans-Pritchard.China’s action is extremely disturbing, Evans-Pritchard writes in the UK Telegraph, and confirms fears that the Chinese government is sufficiently worried...
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2009-18-18
Thursday, 18 Jun 2009 01:18 PM
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