World Bank Urges China to Open Tech Industries

September 17, 2019 Updated: September 17, 2019

BEIJING—The World Bank and a Chinese Cabinet agency have urged Beijing to roll back plans for government-led technology development that are fueling a tariff war with Washington.

The appeal on Sept. 17 comes in a report on technology industries as “new drivers” for China’s economy that was commissioned three years ago, before the trade war erupted.

It urges Beijing to open markets and reduce subsidies and government involvement in technology industries that it says might hamper development instead of promoting it.

The report makes no mention of the trade war, but Washington, Europe, Japan and other trading partners cite the same policies as violations of Beijing’s free-trade commitments.

Critics of those policies complain that they are based on stealing or improperly pressuring foreign companies to hand over technology and shielding Chinese industry from competition.

The report was issued by the World Bank, the Chinese Finance Ministry and the Cabinet’s Development Research Center (DRC).

It marks the third time the Washington-based bank and the DRC have collaborated on reports urging that the government scale back its role in the state-dominated economy. They have had a limited impact on policy.

“Developing new drivers of growth is becoming more urgent” due to a “complicated international environment” and weakening Chinese economy, a DRC official, Zhang Junkuo, said at a news conference.

The report portrays its recommendations as an extension of the ruling party’s market-oriented development plans.

The Chinese Communist Party (CCP), which has waged a crackdown on liberal intellectuals and activist lawyers, has attacked reform advocates who criticize government development plans.

One of China’s most prominent economic think tanks, the Unirule Institute in Beijing, announced last month it would shut down after the government banned it after seeking for years to silence its criticism of economic policy.

The Chinese regime has announced tariff cuts and market-opening measures including allowing full foreign ownership of auto manufacturers for the first time. But it is resisting pressure to discard technology development plans considered to be crucial for prosperity and global influence.

The World Bank report calls on Beijing to “remove distortions and market barriers” and to ensure government policies “supplement market competition instead of supplanting it.”

The government should provide a “clear and fair business environment” instead of making commercial decisions, the report said. It calls for faster action in reforms aimed at making state-owned companies more competitive and “greater discipline” in official support to specific industries.

A survey of 500 entrepreneurs in five Chinese cities found they believe the most effective government initiatives improve business conditions and promote competition rather than provide direct subsidies or official financing, the report said.

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