Why is the Chinese government so protectionist

Free trade

Margot Schüller

To person

is an associated scientist and China expert at the GIGA Institute for Asian Studies. Her research interests include industrial policy and the external integration of China, as well as the competitiveness of Chinese companies. [email protected]

Yun disciple-zhou

To person

is a Senior Research Fellow at the German Raw Materials Agency and an associated scientist at the GIGA Institute for Asian Studies. Her research topics include the globalization of Chinese companies, structural change and innovation policy as well as the Chinese raw materials industry. [email protected]

At the World Economic Forum in Davos in January 2017, China's President Xi Jinping appeared as a vehement defender of globalization. Without directly naming the newly elected US President Donald Trump and his "America First" policy, he warned of the consequences of increasing protectionism and the resulting trade wars. The Chinese president combined his commitment to globalization with the announcement of further steps in foreign trade liberalization and the assurance that China's doors will remain open to foreign companies. [1]

Xi Jinping's Davos speech was received with great international interest and interpreted as a signal for China's new leadership role in global governance issues, not least because he also advocated tackling the challenges of climate change. With the withdrawal of the US government from the Paris Climate Agreement and the Trans-Pacific Partnership Agreement (TPP) as well as the fundamental criticism of multilateral trade agreements, a leadership vacuum has arisen that China can use. However, whether China will take on a leadership role depends on the country's willingness and ability to lead.

In the past, integration into the world economy was an important engine of growth in China's domestic economic development. However, export-oriented production is heavily dependent on imports of components and intermediate products. As an active participant in the international division of labor, China is therefore dependent on a liberal world trade order. With the beginning change towards a stronger domestic market orientation and the technological upgrading of domestic industrial companies, it can be assumed that an ever higher proportion of the added value will remain in the country and that foreign trade will contribute less to growth than in the past. [2] With this development, the question arises whether China will continue to pursue a liberal trade policy, perhaps even advocate greater liberalization in the global market, or prefer the protection of domestic industries.

We use the term "free trade" in this article with some reservations, because in the practice of international trade there is never a completely unhindered exchange of goods and services. The political discussion about free trade is also not about foreign trade that is completely without barriers. We are therefore concentrating on the question of whether China will drive forward the liberalization of global trade and assume a leading role in the future. First of all, China's integration into the global trading system will be analyzed at the multilateral and regional level. We then turn to the question of whether China will take a more active role in trade liberalization in times of increasing protectionism. Finally, we discuss the chances of closer cooperation between the EU and China to take a common stand against protectionism.