Franklin Lavin, Under Secretary for International Trade of the US Department of Commerce
© AFP/File Farooq Naeem

BEIJING (AFP) - US Undersecretary of Commerce Franklin Lavin said danger signs included a growing debate on the need for investment caps and suggestions China might be better off with its own standards in areas such as telecommunications.

"There is potentially a shift in the climate which is just not propitious," Lavin told US businesspeople on the final day of a five-day visit to the Chinese capital.

"(There is a risk of) an atmosphere where not only is the sense of reform fading a bit, but there's even potential for retrogression."

Overconfidence brought about by high economic growth has contributed to the looming shift in Chinese attitudes, Lavin said.

"The sustained economic performance of China... I think it starts to inure policy leaders from the need to reform," he said.

Lavin said China may now also lack the impetus for further reform as a sweeping series of liberalization measures promised in order to gain access to the World Trade Organization in late 2001 have almost been implemented.

"We're at the end of a formal set of undertakings that helped China move through a reform process," Lavin said.

What has come instead is a debate about curbing foreign investment in some sectors, along with arguments that China is better off developing its own proprietary technology.

Lavin warned that "substantially mistaken but very seductive philosophical paths" threaten to cut China off from necessary interaction with the outside world.

"China has got one of the strongest economic cards in the world to play, and that's the attractiveness of its market," he said.

"It ought to play that card. And the more it segregates itself or isolates itself from the world, the more it is not playing that card."

In third-generation, or 3G, mobile phone technology, China could commit the error of devoting itself to a standard that is incompatible with global systems, he said.

"China has the capability to play a leadership role but it requires what we call technology neutrality, meaning the government shouldn't set the standard. Let the markets set the standard," he said.

Mei Xinyu, a researcher with the commerce ministry, dismissed Lavin's remarks as "complete nonsense."

"He should look at how many American companies get better treatment than local companies here in China," said Mei.

China's own state media said earlier this year foreign companies vying for a piece of the nation's growth miracle had hit unexpected trouble in the form of "economic nationalism" and foreign dominance fears.

A broad coalition of officials and businesspeople have voiced concern that massive sales of China's assets could lead to foreign monopolies in key sectors, the China Daily Business Weekly newspaper reported in April.

In an oft-cited example, a bid by US private equity firm Carlyle Group to buy 85 percent of China's Xugong Group Construction has gathered dust after regulators reportedly balked at the pricing and controlling ownership sought.

During his visit in China, Lavin has met with representatives of the ministry of commerce and the national development and reform commission, the nation's top economic planner.

He dismissed the notion that the United States might have lost credibility in its call for trade liberalization following the collapse earlier in July of WTO talks aimed at further removing global trade barriers.

The United States and the European Union have traded accusations of inflexibility on the key stumbling block of farm subsidies as one of the reasons for the collapse of the talks.

"We remain the single most open market in the world. We remain the largest importer of products," Lavin said.

©AFP