USITO Weekly 3/27/2009: The Letter of Anti-Protectionism

The Open Letter from China's Top Trade Association Calls for Anti-Protectionism

On March 21, 2009, the All-China Federation of Industry and Commerce (ACFIC), China 's top national trade association, issued an open letter which protests "the rising international trade protectionism". The letter, entitled "Resist protectionism and implement responsible global business practices," was issued by the ACFIC's subcommittee the Mergers and Acquisitions Association and posted in most top government websites that day.

The opening message of the letter says that the financial crisis is spreading across various industries in different countries, and protectionism only makes the situation worse. It then calls on all trade associations, chambers of commerce, and multinational corporations in all countries to help rebuild confidence in the journey of globalization and common goal of economic development. The letter applauds that globalization provides an easier environment for cross-border investment and reduces regulatory barriers to trade. Since the financial crisis broke out world-wide, a sharp drop in demand has been seen globally, and it would be more dangerous if more countries are closing their door.

According to the letter, all kinds of protectionism, in whatever form, are short-sighted and would cause a domino effect within governments, multinational corporations and a variety of international and domestic organizations and consumers. USITO members please click here for the translation of the key messages in the open letter.

USITO Notes: Anti-protectionism has been recently highlighted by some Chinese non-governmental organizations. Known to all, the global economic turndown has taken heavier toll on China as a export reliant country, as it is suffering from growingly shrinking external demand. While economic growth was lowered substantial in past months, millions of the migrant workers across China found they became jobless shortly after the Chinese New Year holidays (official figures say 20 million jobless workers now). This does create social unrest. These factors laid out the background for the official letter from ACFIC, China 's largest NGO representing all Chinese businessmen's interest. It is absolutely for the letter to alert that any country taking protective actions would risk itself the loss of more business opportunities and sustained growth.

China sees a threat of becoming a major target of rising trade protectionism amid the global economic crisis, as some senior government officials voiced their worries in a few recent public occasions. A State Council think tank published a report last month which stated the protectionism around the world is escalated, especially evidenced by the “Buy America” clause in U.S. 's stimulus bills.

We have noticed that there are various forms of misinterpretation on the U.S. stimulus bills among the Chinese industry, academia and government agencies. Fortunately, the people are keen on learning more. USITO was recently approached by some Chinese authorities and think tanks such as a MIIT Department to host discussions on the U.S. stimulus bills. We would appreciate member company contributions to this topic.

MOFCOM: China 's investment policy remain unchanged

The Minister of Commerce (MOFCOM) Mr. Chen Deming, said to the press early this week that it would be wrong to assume China didn't welcome foreign investment based on the country's disapproval of Coca-Cola's proposal to acquire China Huiyuan Juice Group. According to him, Huiyuan is a firm registered in Cayman Islands of the Caribbean region, hence, it is a foreign invested enterprise. So the Coca-Huiyuan acquisition is a case between two foreign companies and didn't involve the country's policy on investment. Mr. Chen said MOFCOM made the rejection decision based on concerns over whether these two companies' sales in China would cause a monopoly.

MOFCOM has approved many foreign applications for acquisition in China since the country's anti-monopoly law took effect in August 2008, such as American Johnson & Johnson's purchase of Beijing Dabao Cosmetics, said Chen. According to MOFCOM website, of the total 40 anti-trust applications from companies under the ministry's investigation since August 2008, the majority, or 24 mergers and acquisitions, have received approval so far (others pending).

China would continue to actively utilize foreign investment and fight against emerging protectionism in action; the country would continue to guide more foreign investment in high-tech, energy saving and green industries as well as the service sector, and introduce more investment to the less developed central and western regions, according to Chen. He added that China has always adhered to the principle of keeping open in times of crisis, for instance, despite the world financial crisis in the later half of 2008, China imported goods valued at USD 1.13 trillion in 2008, up 18.5% year-on-year. people.com.cn, 3/24/2009

USITO Notes: As reported in the last issue of USITO weekly newsletter, MOFCOM applied China's new Anti-Monopoly Law to reject Coca-Cola's bid for Huiyuan, and the ministry claims its decision properly justified since it was for the purpose of “maintain market competition, protect consumers and safeguard the public interest”. Following the last weekly edition, we received a few questions on the cross institutional administrative structure in China , as a number of authorities are involved in the AML enforcement.

In brief, three government organs, including the National Development and Reform Commission (NDRC), the Ministry of Commerce (MOFCOM), and the State Administration for Industry and Commerce (SAIC), will jointly enforce the law. SAIC has an independent bureau for AML, in charge of investigating and punishing unfair competition, commercial bribery, smuggling and other cases that broke relevant economic laws. The NDRC oversees the anti-price monopoly regulation, a component of the anti-monopoly law, which states monopolizing enterprises intending to control prices and dump their products at extremely low prices would face punishment. MOFCOM will mostly responsible for handling M&A cases, for instance, these cases involving foreign companies and with combined worldwide annual revenues of over USD 1.5 billion would require approval from MOFCOM.

Protectionism not way out of economic crisis

According to the World Bank, since the signing of commitment banning resort to trade protectionism by G 20 in November, some countries in the group have already adopted 47 restrictive measures at the cost of other countries' interests. Economists attending the just concluded China Development Forum 2009 in Beijing agreed protectionism is not the way out of the current economic crisis while asking for a more active role of G20. Detail

China eyes eastern metropolis for economic boost

China 's State Council says eastern Shanghai 's future lies in modern service, manufacturing and continuing to be an international financial center and shipping hub. It says the city's development pace in modern service, manufacturing, financing and shipping would be of great significance for the Yangtze River Delta and the whole nation at large. Detail

China 's 4T package differs from U.S.'s

China 's announced economic stimulus package, amounting to RMB 4 trillion, will work to achieve the economic growth at 8 percent and lay a good foundation for next year's growth by starting the economy's clean-up process of the inventory this year, China 's noted economist Fan Gang said. According to him, the 4 trillion stimulus is different from America 's USD 800 billion package, because China doesn't have the financial black holes to fill up. All the money will go to the real sector and become kind of demand. Detail

China industrial profits fall almost 40%

Profits of China's major industrial enterprises fell by 37.3 percent year on year in the first two months, as the world's fastest growing economy slowed down, according to the National Bureau of Statistics (NBS) Detail