Can Chinese state firms compete fairly? Beijing claims ‘competitive neutrality’
The label is being adopted to justify China’s preferential treatment of such companies, viewed as unfair internationally – but trade partners are unconvinced
Chinese government officials are referring to an obscure term promoted by Europe, “competitive neutrality”, as a new catchphrase to defend the country’s state-owned firms at a time when the United States and the European Union are complaining loudly about distorted competition caused by them.
Beijing is known for giving preferential treatment to state-owned enterprises (SOEs), and has kept a distance from international efforts to draft rules governing such firms, which Chinese President Xi Jinping has hailed as “the material and political foundation of socialism with Chinese characteristics” and “the key power and reliance for the Communist Party’s rule of China”.
But as trade confrontations with Washington rage on, partly due to divergence over the role of SOEs, Chinese officials have started to cite “competitive neutrality” to argue there could be a level playing field between state, private and foreign firms in China.
However, China’s major trading partners are not buying the claims, given that Beijing is trying to portray itself as a market economy. The US has opposed giving China “market economy” status through the World Trade Organisation.
The idea of “competitive neutrality” is promoted by the Paris-based Organisation for Economic Cooperation and Development (OECD) – a club of industrialised countries of which China is not a formal member.