context: developed economies have been pushing China to address its opaque and discriminatory subsidy policies through multiple channels, including China-US trade talks, WTO reform proposals and the US-EU-Japan joint statement. The inclusion of the subsidy issue in the China-EU joint statement signals China's willingness to respond to the EU's demand for reciprocity and its pledge to competitive neutrality.
China and the EU released a joint state after the summit on 9 Apr 2019, covering much-discussed issues like the bilateral investment treaty, government procurement, intellectual property protection, WTO reform, competition policy, 5G and dispute settlement mechanisms for investments.
The joint statement is a win-win deal and strategic triumph under the current international circumstance, says Wei Jianguo 魏建国 former Ministry of Commerce vice minister, who observed the whole process in Brussels.
The two sides started negotiations on the joint statement quite early, says Wei, noting that president Xi’s state visit in March 2019 set the tone for the statement.
On the technical aspect, one key expression that appeared for the first time in such a statement is ‘intensification of discussions on strengthening international rules on industrial subsidies’, which is closely related to WTO reform, says an anonymous trade negotiation expert to Yicai.
China is trying to ease tensions on its subsidy policies by promoting the principle of competitive neutrality, notes Yicai. China’s fair competition review system tries to ensure that no discriminative price and subsidy policies will be imposed on imported products and services, says Gan Lin 甘霖 State Market Supervision Administration deputy director at a briefing on 9 April 2019.
China has substantially reduced market-distorting subsidies as it transitions from a planned to a market economy, says Zhou Xiaochun 周小川 former People’s Bank of China governor, stressing that the government is willing to speed up reform to eradicate the legacy of unreasonable subsidies; he explains that inconsistent and improper enforcement at the local level has weakened the effect of central government policies.