Short Takes

Trade

The US
International Trade Commission (ITC) in late November found no material injury or threat to US industry from imports of coated free sheet (glossy) paper, ending the first case that would have imposed countervailing duties (CVDs) on a nonmarket economy. The US Department of Commerce found that certain types of glossy paper were subsidized and sold in the United States at less than fair value and made a preliminary decision on March 30 to apply CVD laws on glossy paper imports from China. If allowed to stand, Commerce's affirmative decision would have reversed a 23-year policy of not applying CVD laws to nonmarket economies.

China in late November announced that it would terminate all the subsidies to Chinese and foreign firms challenged by the United States in a World Trade Organization case launched in February 2007. Most of the alleged subsidies were in the form of tax breaks to encourage the development of certain industries in China.

Having long treaded softly on trade issues with China, the European Union has stepped up its criticism of PRC trade policies and joined the United States in calling for a faster appreciation of China's currency. Ahead of the EU-China Summit on November 28, European Commissioner for External Trade Peter Mandelson gave several speeches in which he called on China to lower market access barriers and protect intellectual property more effectively.

Banking & Finance

The Federal Reserve Board in November approved the China Merchants Bank Co. Ltd. to open a branch in New York, marking the first time in 16 years that a Chinese bank has done so. Two other Chinese banks, Bank of China Ltd. and Bank of Communications Co. Ltd., maintain US branches, which were approved before the Foreign Bank Supervision Enhancement Act took effect in 1991. The Fed's approval letter cited China's strengthened super-vision and anti-money-laundering regimes as reasons that China Merchants was approved, according to reports.

Olympics

Controversy surrounding the Beijing Olympics will likely intensify in 2008 as international advocacy groups step up their lobbying efforts on China's human rights record, which will pose a challenge to some Olympic sponsors that wish to project a positive corporate image. For example, US-based "Dream for Darfur," a group that criticizes China for its inaction on the Darfur, Sudan issue, called on 19 Olympic sponsors to raise the issue with the PRC government and the International Olympic Committee. It then released a 100-page report that graded the sponsors on their subsequent actions. The report failed 13 of the 19 sponsors, including several US companies.

China plans to showcase its indigenously developed third-generation mobile technology standard (time division synchronous code division multiple access [TD-SCDMA]) during the Olympics, despite doubts about whether the technology will be ready in time, according to reports. The new technology reportedly underwent trials in eight Chinese cities at the end of 2007, and several domestic telecom equipment makers, including ZTE Corp., have already begun developing equipment to support the new standard.

Laws and Regulations

The PRC National People's Congress (NPC), China's top lawmaking body, had a full legislative calendar in 2007, passing key laws such as the Labor Contract, Employment Promotion, Enterprise Income Tax, Employment Service and Management, and Rural and Urban Planning laws. All of these laws took effect January 1. Collective bargaining regulations, passed by the Shanghai Municipal People's Congress in August 2007, also took effect January 1. Shanghai's rules may act as a test case for the processes the Labor Contract Law will require nationally.

The new year will also prove to be a busy one for the NPC, which has several key draft laws slated for passage, including the Energy, Labor Dispute Arbitration, and Food Safety laws. In addition, the NPC recently announced that it will issue 20 support- ing regulations on mergers and acquisitions before the Antimonopoly Law takes effect on August 1.

Bilateral Relations

The con-
clusion of the 18th session of the US-China Joint Commission on Commerce and Trade (JCCT) in mid-December brought incremental progress on issues important to US industry, but no single headline-grabbing out-come to satisfy critics of China's trade regime. Chaired on the US side by Commerce Secretary Carlos M. Gutierrez and US Trade Representative Susan C. Schwab, and Vice Premier Wu Yi on the PRC side, the JCCT produced several memoranda of understanding on pharmaceutical and food product safety, agreements to prevent misuse of company names and cooperate on developing environmental technologies, and Approved Destination Status for the United States, among other results.

As the CBR went to press, the third round of the Strategic Economic Dialogue was convening on the outskirts of Beijing, where officials from both sides sought solutions to issues such as bilateral investment policies, energy and environmental cooperation, food and product safety, and financial sector reforms and market openings. Early reports suggested that China will be unlikely to allow faster appreciation of the renminbi, one of the thorniest issues in the bilateral trade relationship.