US deficit fears prompt open policy call

The mainland should reform its economy by opening wide its doors to foreign trade and competition rather than closing itself off to the world, according to US Commerce Undersecretary for International Trade David Aaron.

Increased trade would help reduce the mainland's trade surplus with the US and hasten its domestic growth, he said.

Addressing the American Chamber of Commerce at the end of a business development mission to Beijing and Shanghai, Mr Aaron said there was a need 'for significant improvement in our mounting trade deficit and in market-opening measures by the Chinese Government'.

'The Asian financial crisis and its potential impact on China's continued economic vitality in the region make these market-opening measures and other reforms more necessary than ever,' Mr Aaron said.

He said the protectionist system that many Asian countries, such as Japan and Korea, had followed until recently - closing off domestic industries from foreign competition in an effort to give them a boost - did not work, as evidenced by the regional economic turmoil.

'In this approach, openness is seen as antithetical to reform . . . but this option will slow reforms as it has done in Asia, not hasten them,' he said.

Moreover, Mr Aaron said, the trade deficit between the US and the mainland was 'unsustainable'.

He said mainland exports to the US had grown by an average 25 per cent per year since 1985, while US exports to the mainland had grown by only 10 per cent per year.

The growing imbalance could have a sombre effect on relations between the two countries, he said.

But he added: 'By increasing foreign imports, the mainland would speed the state-sector reform programme, increase structural reforms and infrastructural development and create world-class industries for domestic use.'