US official urges China to stick to reform path

Beijing, Aug 29: The United States is worried that a potential rise in economic nationalism in China could undercut Beijing's promises to the World Trade Organisation, the top U.S. trade official said on Tuesday.

A chorus of calls by Chinese officials for closer scrutiny of foreign investment, especially into key industries, has prompted concern among foreign businesses that Beijing may backtrack on free market reforms.

''We'll be watching for substantive developments that would indicate a resurgence of economic nationalism,'' U.S. Trade Representative Susan Schwab told a news briefing, warning that such moves could retard China's growth.

U.S. companies have been ''anticipating improvements that haven't necessarily been forthcoming'', she said, citing long-running negotiations about U.S. investors' bids for a stake in Guangdong Development Bank.

A Citigroup-led consortium is bidding against one led by Societe Generale for a controlling stake in the mid-sized bank.

Schwab said Washington was especially anxious to see progress on opening up China's financial sector. When China joined the World Trade Organisation in 2001, it promised to open up banking and insurance to foreign firms by December 2006.

Schwab later told a business gathering that it was imperative that China implement its remaining WTO commitments.

While the United States wanted to see disputes solved through negotiations, it would bring WTO suits if necessary.

''We do not enjoy bringing WTO cases,'' Schwab said. ''What we want is to resolve these issues before they require litigation.

But when good-faith dialogue does not yield positive results, we cannot stand by and allow commitments to go unrequited.'' Schwab told reporters that she had raised a range of issues in addition to market access for financial services in a meeting with Chinese Commerce Minister Bo Xilai on Monday.

Other complaints focused on China's lax enforcement of intellectual property rights and barriers to U.S. firms entering China's express delivery, beef and telecommunications markets.

Schwab said China has made significant improvements in fighting piracy of films, software and other patented and copyrighted products, but much remained to be done.

During her speech, Schwab stressed that market reforms, including better enforcement of intellectual property rights, were in China's own best interest.

''If you are serious as a country about promoting your own entrepreneurial class, your own innovations, your own inventors, your artists, your creative class, you need to offer them protection for their intellectual property,'' she said.

The same held true for market access. Schwab said there was a ''distinct relationship'' between the market opening that has occurred since the late 1970s and China's growing prosperity.

Schwab told reporters she had pressed China to help global trade talks, which were suspended in July after key countries again failed to agree on how to cut tariffs and lower barriers.

China had benefited from joining the WTO and now needed to show its commitment to trade liberalisation by speaking up, rather than deferring to India and Brazil, the most vocal developing countries.

''China has as much of an interest in an open world trading system as any country in the world,'' she said. ''My purpose here is to urge China to reflect that in its actions and rhetoric.''

Reuters