U.S. warns at WTO of China backsliding on economic openness

By Tom Miles

GENEVA (Reuters) - The United States is worried that China is retreating from pledges to open its economy to market forces as it tries to cope with a slowdown in growth, U.S. trade diplomat Chris Wilson told the World Trade Organization on Tuesday.

China is undergoing a regular two-yearly review of its trade policies at the WTO this week, in which the body's other 162 members get to quiz its officials and critique its policies.

Wilson, the deputy chief of the U.S. mission to the WTO, said China's leaders had endorsed a number of far-reaching reform pronouncements, including that the market would be "decisive" in allocating resources, and it was clear that serious efforts were being made.

"Over the past year, however, as growth in China's economy has slowed, the United States has sensed an increasing reluctance among China's economic planners to pursue further reforms," he said, according to a published transcript.

"In addition, more and more U.S. enterprises have been expressing concern about a less welcoming business and regulatory environment for foreign enterprises."

The United States hoped the developments were temporary and China would aim for a more transparent, predictable and welcoming regulatory environment, but that this would be impossible as long as the state supported and favoured domestic industries, Wilson said.

China's support for its bloated steel and aluminium industries clearly showed that state intervention would never be as efficient as the market, he said.

Other U.S. concerns included quotas and duties on China's raw material exports, manipulated value-added tax rebates on exports, thin agricultural imports despite strong demand, and prohibitions on foreign investment in China's movie market, the world's second-biggest.

Wilson was speaking less than a week after the United States launched a WTO complaint to challenge China's export duties on key metals and minerals.

That complaint was expanded on Monday when the European Union joined the legal action against China.

Washington and Brussels have also clashed with Beijing over China's demand to be treated as a market economy at the WTO, which would make it harder to challenge China's cheap exports.

Another concern cited by Wilson was the "Made in China 2025" initiative, which aims to ensure Chinese-made components and materials account for 70 percent of China's manufacturing inputs by 2025.

So-called "local content requirements" have become a hot issue at the WTO, where they are closely scrutinised in case they are used to illegally promote domestic firms at the expense of foreign suppliers.

(Reporting by Tom Miles; Editing by Raissa Kasolowsky)