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America's Biggest Threat Is China's State-Owned Firms, Not Its Currency, Business Group Says

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CHINA THREAT ECONOMY

WASHINGTON (Doug Palmer) - The United States should focus less on China's currency practices and more on the threat to U.S. companies posed by Beijing's support for state-owned enterprises, a business group said on Monday.

China has used regulatory and other barriers to promote "domestic champions" in high-tech areas such as electric cars, green energy and high-speed rail, officials with the American Chamber of Commerce in China told Reuters.

Many state-owned firms are of "a scale now that they can expand internationally and can win business from American companies and other foreign firms, not only in China but potentially overseas," said Ted Dean, the group's chairman.

Instead of pressuring China to raise the value of its yuan currency against the dollar, the United States should be going after market access barriers that prevent American companies from competing fairly in Chinese market, Dean said.

China, for its own internal reasons, already recognizes it need to revalue the yuan even if it is not moving as quickly as the United States would like, he added.

The business group is in Washington to meet with members of Congress and the Obama administration before high-level U.S.-China talks next week on economic and geopolitical concerns. U.S. frustrations over China's exchange rate policies are expected on the agenda, with Congress threatening once again to pass legislation to force Beijing to revalue.

Many U.S. lawmakers accuse China of deliberately undervaluing its currency to give its companies an unfair price advantage in international trade.

That's a dangerous preoccupation because "by focusing on that issue they allow China to get away with a hundred other industrial policies that are probably more disturbing for American business," said James McGregor, a senior counselor at APCO Worldwide who advises the American Chamber.

"It takes the focus off the big picture and looks for a simple answer to a complicated question," McGregor said.

China uses a number of discriminatory policies aimed at promoting domestic innovation that prevent foreign companies from competing on a level playing field against Chinese companies, the industry officials said.

With China's entry into the World Trade Organization nearly a decade ago, "it's past time for China to return to a policy of opening markets," said Christian Murck, president of the American Chamber of Commerce in China.

"With respect to state-owned enterprises, one of the most things would be for them to join the WTO Government Procurement Agreement."

That pact requires countries to treat foreign suppliers of goods and services for the public sector as favorably as domestic companies and requires laws and regulations related to government procurement be transparent and fair.

The United States and China should also finish long-delayed talks on a bilateral investment treaty, he said.

A major U.S. government effort to boost the competitiveness of American industry would also help, Murck said.

(Reporting by Doug Palmer; Editing by Christopher Wilson)

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