Time to End China’s Economic Advantages as a ‘Developing Country’
Commentary
The U.S. Congress is waking up to the realization that the wishes and hopes of the China engagement crowd over the last several decades—that communist China would moderate its aggressive behavior over time as a natural result of massive foreign investment and trade incentives—have been a complete failure.
That realization was jump-started by the Trump administration through trade negotiations resulting in a tariff regimen on Chinese exports to counteract mercantilist trade practices and the ongoing theft of U.S. intellectual property.
One of the first actions taken by the new Republican-led House of Representatives was to establish the House Select Committee on the Strategic Competition Between the U.S. and the Chinese Communist Party, which was created on a bipartisan 365-65 vote that included 146 Democrats. Its express purpose, as stated in House Resolution 11, is “to investigate and submit policy recommendations concerning the status of the economic, technological, and security progress of the Chinese Communist Party and its competition with the United States,” including supply chain dependencies on critical and strategic materials, Chinese spying, organ harvesting, theft of U.S. intellectual property, manufacture of synthetic drugs, coercion of U.S. allies in East and South Asia, and other challenges.
House attention was quickly expanded to seven separate House committees, which held hearings on the CCP’s “perceived threat to U.S. economic and national security,” as reported by Politico, with the House Foreign Affairs committee passing 11 China-related bills and resolutions focused on Chinese aggression while the House Financial Services Committee passing 10 other bills focused on the Chinese economic threat.
A big egg roll is presently being debated by the Senate: whether or not to remove China’s developing nation status. The Democrat-led Senate Foreign Relations Committee approved the “Ending China’s Developing Nation Status Act” on June 8, as reported by Reuters. The article further noted that the House had passed a similar measure by a 415-0 vote—indicating that Congress is united in countering the Chinese economic and security threat.
Let us examine the importance of “developing nation status” and Beijing’s rather emotional response to pending U.S. actions to change China’s status.
Developing Nation Status
The United Nations World Economic Situation and Prospects classifies countries into three categories: developed economies, economies in transition, and developing economies. Countries are classified and ranked according to economic status, such as GDP, GNP, per capita income, industrialization, and the standard of living. A developed country is considered to have high industrialization, high per capita income, and a great technological infrastructure. A developing country has low industrialization, a lower standard of living, and a low Human Development Index. Economies in transition are in between the other two categories and are generally applicable to countries in the process of changing from a centrally planned economy to a market economy. A sub-category of developed economies is “major developed economies,” which includes the Group of Seven, which are among the wealthiest countries on Earth.
Being designated as a “developing nation” has benefits—including the potential for discounted long-term loans, increased foreign direct investment, and a reduction of trade barriers to facilitate exports—through agreements negotiated with the World Trade Organization, the International Monetary Fund, the World Bank, and the Organization for Economic Cooperation and Development.
Developing countries are frequently granted Most Favored Nation status by participating members of the World Trade Organization to help them grow and develop over time. MFN status provides developing countries with great economic benefits through implementing the lowest tariffs, the fewest trade barriers, and the highest import quotas than other nations without MFN status.
China was first granted MFN status by the U.S. Congress in 2000. The U.S. Senate is currently deliberating over the “Ending Normal Trade Relations with China Act,” which would end China’s MFN status.
Beijing Reacts Hysterically
Losing developing nation status with the chaser of also losing MFN status would be a body blow to the already weak Chinese economy, and the communists know it. Ergo, recent emotion diatribes and analyses in their state-run media, including:
Chinese Foreign Ministry Spokesman Wang Wenbin screeched on June 9 that “It’s not up to the United States to decide whether China is a developing country. The United States can neither deny the fact that China is still a developing country, nor stop China from moving towards national rejuvenation.” He lets the cat out of the bag by referring to “the rights that China is lawfully entitled to as a developing country.” Yep. Never mind all the hundreds of articles lauding Chinese economic growth and “economic firsts” spewed out by the Chinese press over the past several years. Just keep giving us the “rights” (money) we deserve (on the cheap).
CGTN echoed Wang’s diatribe by declaring, “China [has] accused the United States of bullying by attempting to strip it of the status of a developing country.” Bullying. Do they mean like China has been doing by having PLA Navy ships routinely circumnavigate Japan, instigate skirmishes along the India-China Line of Actual Control (LAC), and aggressively challenge transiting U.S. and other aircraft and ships in international waters and airspace in the Taiwan Strait and South China Sea?
The China Daily headline on June 10 reads, “Experts dismiss US development claims.” Various experts are quoted who discount the fact that China is the second largest economy in the world by claiming that economic progress is “uneven” throughout the country, and that Chinese sensitivity to labor costs “limits the overall level of social security protection [and] creates a large gap compared to developed countries.” This is grasping at straws. How much do the Uyghurs and other slave laborers receive in the way of “social security protection”?
Concluding Thoughts
As noted here, developing countries have a low Human Development Index, which indicates a “low Gross Domestic Product, high illiteracy rate, educational, transportation, communication and medical facilities are not very good, unsustainable government debt, unequal distribution of income, high death rate and birth rate, malnutrition both to mother and infant which case high infant mortality rate, high level of unemployment and poverty.” Not according to the endless state-run media reports praising Chinese economic growth and development during the Xi Jinping era. The state-run Chinese media and foreign ministry spokesmen are silent about these elements that actually determine whether China is developing or developed.
And how does a country that is championing at least three global initiatives—the Global Security Initiative, the Global Development Initiative, and the grandiose Global Civilization Initiative—in a bid to become the world’s hegemon still consider itself to be “developing”? Apparently, the CCP has money to burn that need not be spent domestically on raising the standards of living of the average Chinese. These are not the actions of a “developing country.”
Hurrah for the growing realization around the world that China’s meteoric economic rise has come at the expense of other countries through economic spying, theft of intellectual property, coercion through debt leveraging, and unfair trade practices. The U.S. Congress is poised to recognize that the No. 2 economy in the world has transitioned to “developed country” status and may soon join at least 32 countries that have revoked China’s MFN status.
Beijing calls this bullying. Other more rational observers call it some applied commonsense that is long overdue.
Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.
