Recently, China’s Premier, Wen Jiabo, announced that it would extend its hand to Europe in efforts to help ease their financial crisis but no without a catch. In doing so, Europe would have to renounce its main legal defense against low-priced Chinese exports. Also, China wants Europe to classify them as a “market economy” instead of a “nonmarket economy.” This would make extremely difficult for Europe to impose tariffs on Chinese goods considered unfairly cheap. China already buys billions of euros worth of European debt each month, but that level of lending has done little to ease the euro zone’s crisis. “Since China dictates the speed with which market-oriented rules and laws are effectively enforced centrally and locally, the timing of the conclusion on its market economy status is largely in China’s hands,” John Clancy, the European Union’s trade spokesman in Brussels, wrote by e-mail. The new market economy designation Mr. Wen seeks would let China avoid the steep import duties assessed on Chinese companies that sell goods in Europe for less than it costs to produce and market them or what trade lawyers describe as the “normal value” of these goods.
It seems as though China has a tremendous amount of leverage in the midst of this global financial crisis. Although China is doing well it still depends on the high-consumption markets to buy their goods; to keep Chinese workers employed. So it makes perfect sense to invest in these types of countries. Also, China has enough financial clout to manipulate other countries. I guess China lives by quid pro quo.
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