U.S.: China Can't Fall Back On Protectionist Policies

While the risk of China resorting to protectionist policies rises during difficult times, it could create problems and possible backlashes in other countries, a U.S. trade official said.

BEIJING (AP) -- China should not fall back on protectionist policies during the current economic crisis, a U.S. trade official said Tuesday.

While the risk of resorting to such measures rises during difficult times, it could create problems and possible backlashes in other countries, said Tim Stratford, assistant U.S. trade representative for China affairs.

He said inefficient companies will have trouble competing and may be forced to close their doors.

"That's obviously a problem that's going to cause some pain," Stratford told a group of reporters at a briefing.

"The government of China may be tempted to take some trade measures that will help support those companies, but if they do it in a way that does not follow WTO rules, then companies in other countries will have a right to complain," he said, referring to the World Trade Organization.

Stratford is in China for talks with his counterparts, including those from the Ministry of Commerce.

"It is a time that we have to be particularly careful that we don't adopt protectionist means ... to deal with problems," he said.

China earlier this month said it would raise export tax rebates on toys, textiles and more than 3,000 other products, moving ahead on promises to counter a slump that is forcing many factories that produce for overseas markets out of business.

The changes, which affect 3,486 types of products, or about one-quarter of all exports listed by customs authorities, take effect Nov. 1, the Finance Ministry said.

The hikes are part of a series of measures, most of them still not announced, that Chinese leaders say will be rolled out to help manufacturers weather falling orders and rising costs amid the world credit crisis.

Thousands of factories have already closed down, leaving workers without jobs or paychecks, especially in thin-margin, labor-intensive industries like toys, clothing and small appliances.

China's economic growth in the third-quarter fell to 9 percent from 10.4 percent in the first half of the year and 10.9 percent in 2007. While still strong, it was the slowest in five years.

Slumping demand for exports has barely registered in trade figures; China's surplus for September rose to a new monthly record of US$29.3 billion thanks to falling costs for crude oil and other commodities.

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