Beijing’s angry response to the US decision to tackle Chinese piracy head on suggests that the honeymoon period may be nearing an end for the trading partners.
Over the past year, as Washington has gradually ratcheted up pressure on China to force changes to the country’s formidable export machine, Beijing’s response has been muted – even contrarian.
Beijing responded with little more than bluster both to Washington’s complaint to the World Trade Organisation about its car sector and the imposition of duties on coated paper earlier this month, a decision with potentially far-reaching, and damaging, consequences for Chinese industry.
US officials said that Beijing had taken the disputes in its stride, accepting that they were part of the cost of being a global trading power, and had not allowed them to infect other issues.
China did not threaten retaliation but instead has talked about how it can restrain exports and lift imports to damp its swelling trade surplus, which is on track to reach $240bn this year, more than double that of 2005.
Even Bo Xilai, the commerce minister, who had fashioned a name for himself by florid criticism of foreigners, has been talking about the need to cut the trade surplus.
China’s nice noises may end with the filing of the case on piracy and market access for films, books and music.
Chinese ministries have already given forewarning of a tougher stance, telling American industry prior to the filing that such a case would mean that “co-operation will stop” with them, a US official said on Tuesday.
Such threats prompted industries in the midst of sensitive negotiations with Beijing – such as software and pharmaceuticals – to lobby against WTO action.
But administration officials, with the backing of the film and music industries, point to early victories in the handful of trade actions against China.
Fred Bergsten, of the Peterson Institute, said: ”The experience so far is that when confronted in this way China has capitulated. The lesson is that the US should perhaps be more aggressive.
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Carla Hills, former US trade representative, said: “This isn’t a bilateral spitting match, it is an effort to bring China on to the world stage, which they seem to relish.”
For the moment, however, the piracy case has revived the kinds of resentment that is never far from the surface, about a powerful US putting pressure on a relatively weak China.
Zhang Yansheng, head of the International Economic Research Institute at the economic planning ministry, said the tough US stance would make it hard for China to compromise in the future.
“The US has accused China of dumping textiles, furniture and even coated paper, even though it has already lost competitiveness in these sectors,” Mr Zhang said. “The US should allow China more time to improve its system.”
“The pressing need now is not to find evidences to win disputes, but to figure out a way to make the US an ordinary member of WTO, rather than the lawmaker.
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The WTO case appears at least in part to be a negotiating tactic by the US to force further change in China, especially as rulings in such disputes can take a long time to emerge.
“If you take something into the WTO, it is like taking it into Bleak House – it won’t be over for years,” said William McCahill, a Beijing-based consultant and former US diplomat.
But whatever the merits of the piracy case, China and its main trading partners, especially the US and Europe, will have severe trade tensions to manage for many years to come.
Beijing’s generally conciliatory position on trade of late has been driven by a realisation among its leaders that China’s present economic structure, which is producing record trade surpluses, is not sustainable either politically or financially.
China’s trading partners are unlikely to accept ever-expanding surpluses. And China itself, because of its decision to manage its currency, does not want to keep piling up the extra foreign reserves that the trade surpluses produce.
Beijing has recently announced a range of small measures to try to damp exports, the latest on Tuesday being the removal of export rebates on most steel products. But the short-term impact of such measures has been minimal.
The sleeper issue for Beijing is the recent decision of the US Commerce Department to allow countervailing duties to be applied to economies such as China’s on industries that have been shown to be receiving subsidies.
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