The aircraft carrying United States Secretary of Commerce Don Evans had barely left mainland soil before Shanghai officials gave their own verdict on China's progress towards a 'market economy'. All state companies under the municipal government's control were ordered to halt stock-market trading by tomorrow - potentially a rather large sell order. During his visit, Mr Evans offered limited encouragement that China can easily shed its classification as a 'non-market economy' in the context of US anti-dumping actions, and it appears the European Union feels the same. This was always going to be a tough sell for Beijing, with its economy gripped by many failures attributable to a lack of market mechanisms - such as state interference in the banking and financial markets - that have only exacerbated already prevalent overinvestment, overcapacity and overheating. China could feel that however much it tries, its best is never going to be good enough. After marathon negotiations to get into the World Trade Organisation, the 'is it or is it not a market economy' debate might just be replacing the former Most Favoured Nation review as America's latest trade-negotiating lever. The semantics matter, as its classification under WTO rules renders China nigh defenseless against a growing deluge of anti-dumping sanctions from the US and Europe. And China could point to a slew of US multinationals such as General Motors or Procter & Gamble who are surely happy with its economy's progress, as they begin tallying their growing market shares and mainland-generated profits. Adding to China's sense of grievance is the apparent inconsistency that Russia - whose president habitually interferes in private companies, never mind state-controlled ones - has this coveted market-economy status. Like it or not, the flip side of China's prodigious economic progress is that it be held to more exacting standards than other nations. Not only is China competitive across industries from low-tech assembly to sophisticated electronics, it is now fully integrated into the world economy. Unchecked, China's economic workshop has the potential to dislocate industries across the globe from data communications routers to plastic toys. The threat from Russia is less ominous, bar perhaps flooding world markets with cheap vodka. China has already shown an ability to move a range of global commodity markets such as copper, coal and steel. Last year its appetite for steel spurred expansion in coke mines and mills from Australia to South America. This presents an additional risk to the world economy if the original investment was predicated on a malfunctioning mainland economy. Holding few alternative bargaining chips, the US and Europe are unlikely to cheaply concede China 'market economy' status. They have much to gain from keeping its huge economy on track. China, of course, recognises that reforms make sense and is making progress on, for example, banking system reform and bankruptcy laws. With luck, it may one day deserve the market status it aspires to.
