Workshop of the world grows into a formidable trading giant

STANDING NEAR a squat metal fabricating machine on a recent visit to China, United States Undersecretary of Commerce for International Trade Grant Aldonas praised the might of American manufacturers.

'The machines you saw outside are terrific examples of what American companies are best at. We produce the capital equipment that is essential to manufacture the precision equipment and manufactured goods for the world market,' he said.

Washington wants China to buy more machines like the US$500,000 punch press made by New York-based company Strippit. After a record monthly trade deficit with China of US$14.2 billion in June, the US is pushing Beijing to reduce the gap.

But mainland companies want to sell more of everything from clothes and toys to appliances to US consumers and the rest of the world. At the same time, Chinese firms are gathering the know-how to produce their own brands of advanced equipment.

China has become a trading power to be reckoned with, causing other countries to view its massive potential market with hope - and its cheap products with fear.

'It's hard to export to China. They make everything,' said Ricardo Blazquez, head of an office in Shanghai set up by the Spanish city of Valencia to promote exports to the mainland.

The mainland was the world's fourth biggest exporter and third biggest importer last year, according to the World Trade Organisation.

Total trade volume reached US$851 billion last year, up from US$35.5 billion in 1978, the year the government launched economic reforms.

The nation's thirst for raw materials to fuel a surging economy and exports made in the workshop of the world have caused trade volumes to surge.

Chinese officials argue low production costs are making mainland goods competitive, both in overseas markets and at home. 'When I go to the barbershop to have my hair washed, L'Oreal shampoo is double the price of others,' said the chairman of the Shanghai foreign economic relations and trade commission, Pan Longqing.

China's major trading partners say they welcome the rise of the mainland as a trading power so long as Beijing plays by World Trade Organisation rules and ensures order in the global trading system.

'The role of China in the world is growing. We have to work closer together to protect the world economy and safeguard harmonious and stable development in the world economy,' said the European Commission's director-general for economic and financial affairs, Klaus Regling.

China had become Europe's second most important trading partner, moving up from fourth place five years ago, and the country was destined to be No1, he said.

Since China's entry into the WTO nearly three years ago, trade friction has increased along with greater integration.

The US has been the most vocal critic. Various interest groups have raised the alarm over the value of the mainland's currency, the loss of manufacturing jobs at home and a possible surge in imports of mainland textiles.

In general, China has tried to meet its WTO commitments, though most trading partners have some outstanding issues.

'The Chinese are making efforts to adhere to their commitments - that's very clear,' a European diplomat said.

However, one of the biggest complaints of foreign companies remains the mainland's record of protecting intellectual property, the American Chamber of Commerce in China and AmCham Shanghai said in their just-released policy 'white paper'.

'Widespread infringement of intellectual property rights continues to impact a broad variety of products and technologies. We believe the situation in the marketplace is worsening, not improving,' the policy paper said, though it added China had put a 'sound' legal framework in place.

The mainland has so far resisted calls from Washington to revalue its currency, which US officials says is undervalued and keeps the price of Chinese exports artificially low.