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China: We’re Still a Developing Nation. US Lawmakers: No Way

The U.S. House of Representatives has voted unanimously to challenge China’s status as a developing nation, a classification made by organizations such as the World Bank and the United Nations that gives the world’s second-largest economy special treatment for trade and low-interest loans.

Young Kim, a Republican congresswoman from Southern California who introduced the bill, told lawmakers before the vote that China accounted for 18.6% of the global economy.

“Their economy size is second only to that of the United States. [The] United States is treated as a developed country, so should PRC,” Kim said before the March 27 vote on The PRC Is Not a Developing Country Act. Kim, who chairs the House Foreign Affairs Indo-Pacific Subcommittee, introduced the bill with Gerry Connolly, a Virginia Democrat.

China’s state-backed media Global Times responded by saying that the U.S. has no right to play referee on China’s developing country status.

“Such attempt has only further exposed Washington’s sinister intentions to increase China’s development cost and force China to assume international responsibilities beyond its ability,” it said.

How is China, the world’s second-largest economy and home to the most billionaires —China has 969 while the U.S. has 691 — still categorized as a developing country, which means it enjoys the same special treatment in international trade as nations such as Bolivia and Zambia? When will China graduate and join the U.S. as a developed country?

FILE - An elderly woman pushes a cart after searching through rubbish bins to collect recyclable items to sell, along a street near the Great Hall of the People in Beijing on March 5, 2021.
FILE – An elderly woman pushes a cart after searching through rubbish bins to collect recyclable items to sell, along a street near the Great Hall of the People in Beijing on March 5, 2021.

Developing or developed?

China has long referred to itself as a developing country in its official narrative. Wang Yi, director of the Chinese Communist Party (CCP) Central Foreign Affairs Office, said when he was serving as China’s foreign minister in 2019 that China’s per capita GDP was only one-sixth that of the United States.

“Requiring a country that has only been developing for a few decades to shoulder the responsibilities of those industrial countries who have developed for hundreds of years, this itself is unfair,” he said at a news conference when meeting with European scholars, according to Xinhua News Agency.

Yet on the world stage, people are watching China’s economic power explode. Since 1978, its GDP has increased from less than $150 billion to $18.3 trillion in 2022, making it the second-largest economy after the United States. In 2023, China’s military spending will reach $230 billion, ranking second in the world after the U.S., which will spend more than $800 billion in fiscal year 2023.

And China has established a series of international organizations, including the Asian Infrastructure Investment bank and the Shanghai Cooperation Origination, to challenge the international aid order established by the U.S. after World War II.

“A widely adopted understanding for assessing a country’s development status is the income per capita, not the size of the whole economy,” said Weifeng Zhong, a senior research fellow at the Mercatus Center at George Mason University.

The World Bank uses gross national income (GNI) per capita and categorizes the world’s economies into four income groups: low, lower-middle, upper-middle and high income. The high-income countries, which need to have a GNI per capital above $13,205, are commonly considered to be developed countries.

The latest GNI per capita for China, $11,880 in 2021, is $1,325 below the threshold, so it is a developing country by the World Bank standard. Yet experts cautioned that classifying a country’s development status is inexact.

“International organizations … do not always have a clear income threshold for a country to ‘graduate’ from a developing country status,” Zhong told VOA in an emailed response.

The United Nations uses an aggregate indicator called the Human Development Index, which includes but is not limited to income. By this measure, China is a developing country.

The World Trade Organization allows countries to self-declare whether they are a developing country, and China always maintains that it is.

With that self-declaration being approved by other members when China joined the WTO in 2001, Beijing is able to enjoy special treatment, such as higher subsidies and better tariff rates, reserved for developing countries.

Robert Ross, a professor of political science at Boston College and an associate at Harvard’s John King Fairbank Center for Chinese Studies, told VOA Mandarin that the WTO classification of China is political rather than economic.

“China lobbies hard to pressure countries not to change China’s status because it benefits immensely from the conditions for its exports and tariff levels and other issues. The U.S. has been unable to reach a consensus among WTO membership to change China’s status,” he said in a phone interview last week.

FILE - Minority women collect cabbages at a farm near their village houses built by the Chinese government for the ethnic minority members in Ganluo county, southwest China's Sichuan province on Sept. 10, 2020.
FILE – Minority women collect cabbages at a farm near their village houses built by the Chinese government for the ethnic minority members in Ganluo county, southwest China’s Sichuan province on Sept. 10, 2020.

Why China wants the label

Experts who spoke with VOA Mandarin said there are tangible benefits in international trade to being recognized as a developing country.

When China joined the WTO in 2001, its GDP per capita was less than $1,000. Trading as a developing country meant China could impose an import tariff of 14%, compared with the 7% imposed by developed countries, according to the WTO. Developing countries also enjoy relaxed restrictions on trade subsidies and receive technical assistance from developed countries.

“Being considered a developing country for an unduly long time may allow China to enjoy a host of special and differential treatments that it may no longer fairly deserve,” said Zhong of George Mason University.

He said the Chinese government is known for heavily subsidizing preferred sectors to encourage growth. For example, as the world confronts the challenge of over-fishing, being considered a developing country would allow China, a world leader in fishing capacity, to retain more subsidies in negotiations with other countries, making the global over-fishing problem harder to tackle.

James Wen, an emeritus professor of economics at Trinity College in the U.S. state of Connecticut, said that in addition to tariff reductions and subsidies, China also enjoys special treatment in terms of loans from international financial institutions.

“International financial institutions have long been providing low-interest or interest-free loans to developing countries. China is qualified for such preferential treatment as a developing country. There are also many private NGOs offering financial aid to developing countries; China has benefited immensely from them as well,” he told VOA Mandarin via phone.

Brian Hart, a fellow with the China Power Project at the Center for Strategic and International Studies, said that apart from material benefits, China is using the label as a political signaling tool.

“I think in places like the WTO, what China really likes to do is to be able to cast itself as the leading developing country. It sees itself as being able to corral developing countries together on certain issues, and that’s a place where it really likes to be,” he told VOA Mandarin.

Ross from Boston College told VOA Mandarin said that the contradiction between China’s developing country status and its economic and political influence worldwide is “frequently frustrating to other countries, because China has these advantages that enable it to have a greater impact than it would otherwise have if we examine its political and economic clout.”

Zhong from George Mason University cautioned that the vote in the U.S. House of Representative won’t be enough to change China’s status.

He told VOA Mandarin, “U.S. representatives at various international organizations would need to work with like-minded countries to challenge China’s development status, which, depending on an international organization’s rule, may be a bigger undertaking than Washington policymakers think.”

Source : VOANews