Beijing starts a ‘Buy China’ policy

This comes via the Financial Times:

China has introduced an explicit “Buy Chinese” policy as part of its economic stimulus programme in a move that will amplify tensions with trade partners and increase the likelihood of protectionism around the world.

In an edict released jointly by nine government departments, Beijing said government procurement must use only Chinese products or services unless they were not available within the country or could not be bought on reasonable commercial or legal terms.

The government also said it was launching an investigation in response to complaints from domestic industry associations which accuse local governments of favouring foreign suppliers in procurement related to the country’s Rmb4,000bn ($585bn, €421bn, £356bn) economic stimulus package.

“From a domestic political perspective this makes some sense because local governments do tend to favour foreign products in some categories,” Dong Tao, chief China economist for Credit Suisse, said. “But given how important free trade is for China’s economy this is not the right message for them to be sending to the rest of the world right now.”

Just a few months ago Beijing was raging against a proposed “Buy American”clause included in the US economic rescue package.

This could get ugly.

  1. Guest says

    uh oh.

    First place I read this, thanks for the link. And the new era of protectionism begins. This is big big news.

  2. aitrader says

    Wow – yet another echo from the first Great Depression.

    And still the “green shoots” and “this is not a 1930’s depression” mantras abound.

    So which side of the fence are you leaning to right now Edward – a still budding recovery or a bear-market rally that will soon bust?

    1. Edward Harrison says

      aitrader, you’re spot on. This is the real protectionist echo of the Great Depression – China going protectionist. I have always said we are in a cyclical bull aka bear market rally. The only question is how long the rally lasts. With precedents like these, it could end sooner than later.

  3. Glen says

    More talk from China attempting to assert their supposed power and talk of a new reserve currency, ‘Buy China’ policy etc is all it is. In the end, the Chinese still own $1.7 trillion in US$ denominated holdings and they need the US to buy their junk goods as much as the US needs China to keep buying their junk bonds. 20-30 years ago it was mutually assured destruction that kept the USSR and the US from obliterating each other with plenty of rhetoric between the two sides each keeping up the appearances of superiority. The same is being played out again today between China and the US in the economic sphere.

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