CHINA ESQUIRE

Only mild coverage on the blogosphere about the EU and American proceedings against China regarding financial news and the “Xinhua Rule”, which was pretty surprising since China’s loss at the WTO regarding the auto parts rules was such a big deal. (though it was the first loss China suffered at the WTO)

Let me start with some details about the WTO action. From an article at the International Herald Tribune ( h/t to Donald Clarke):

In an escalation of trade disputes with China, the Bush administration joined with the European Union on Monday in filing a complaint with the World Trade Organization to protest China’s requirement that foreign financial news services operate through a government-designated distributor.

The action would affect Dow Jones, Reuters, Bloomberg and other foreign suppliers of stock prices and other financial information. It followed months of negotiations by the United States to get China to lift its requirement that these suppliers distribute their data and news reports through Xinhua, the official Chinese news agency.

“China’s restrictive treatment of outside suppliers of financial information services places U.S. and other foreign suppliers at a serious competitive disadvantage,” said Susan Schwab, the U.S. trade envoy. “We have raised this matter with China repeatedly, yet the problem has not been resolved.”

Schwab said that since Chinese regulations bar foreign financial information suppliers from directly soliciting customers for their services, they are in effect required to develop new customers only going through a major Chinese competitor.

So the EU and American action was filed earlier this week–on 3/3/2008 to be precise. Now what I had expected was that the Chinese government would fly off the handle, accuse the EU and America of being preposterous and out of line, and deny everything. Or put the blame on someone else. That has been the Chinese way of dealing with negative attention in almost all ways. (think SARS or even Heparin)

Imagine my surprise when the Chinese government doesn’t cry wolf and instead responds in a civil manner. From the Financial Times ( h/t to CDT):

China’s commerce ministry on Tuesday reacted in unusually mild fashion to a World Trade Organisation action brought by the European Union and US over Beijing’s regulation of financial news and information.

In its response to the EU and US requests for consultation, the first step of a formal complaint, the commerce ministry said China would look into the issue and handle it according to WTO dispute resolution procedures.

“As a WTO member, China respects other members’ choices,” the ministry said in a statement. Officials declined to comment further.

The statement’s conciliatory tone will fuel hopes that a deal can be reached on the Xinhua rules, which have not been enforced but are seen by international news agencies such as Reuters, Bloomberg and Dow Jones as a potential threat to their China operations.

Maybe hell has frozen over. Anyways, this move on China’s part was definitely a surprise. But perhaps it signals some things in my mind: 1) China has accepted that the WTO process will mean some painful changes for it after the auto parts loss. China’s ascension to the WTO was a big deal and I think it is now owning up to the consequences of this decision.

2) China is now willing to sit down at the table in a more diplomatic means to resolve disputes. Do not interpret this as a sign of weakness. I don’t believe it is. That China is now willing to sit down and talk out issues in favor of resolution is in my mind a show of more maturity and strength in the realm of international diplomacy and international relations. China isn’t going to bend over backwards, but it won’t try to deny everything anymore. It will entertain discussions on the world’s terms. But that means that China may be willing to start similar dialogue with the world as well.

3) Perhaps this is more a move that goes along with the Olympics since everyone is focused on China’s abuses of this and that. China just wants to avoid more of the limelight if it can. Granted, that’s a more cynical view, and not my own, but I wanted to throw it out there.

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