China says no protectionism in stimulus effort

"China will not practice 'Buy China.' We will treat domestic and foreign goods equally so long as we need them," said a deputy commerce minister, Jiang Zengwei, at a news conference.

Jiang made no mention of controversy over a measure in Washington's proposed $827 billion stimulus package that would favor U.S. iron and steel producers, which has drawn criticism from Japan, Australia and Canada. Economists say coordinated efforts are needed to revive global trade and financial flows and warn that such restrictions might be seen as protectionist and prompt other nations to retaliate, hampering the global recovery.

Jiang appealed to other governments to promote free trade.

"Under these circumstances, I believe every country must energetically develop international trade," he said. "Why would one want to practice protectionism in the current situation?"

The impact of the global crisis on China is growing, Jiang said, though he gave no details and did not respond to a question about January's economic performance. The government has yet to release January trade or other figures.

China launched a 4 trillion yuan ($586 billion) stimulus plan in November, hoping to boost consumer spending by pumping money into the economy through higher spending on construction and other projects. Foreign companies are worried Beijing might try to favor their Chinese rivals for such projects.

Beijing has tried to help domestic industry by raising a rebate of value-added taxes on textile exports and revoking a tax exemption for some imported machinery. It is promising more steps to boost exports and help individual industries.

The European Union has concluded that none of the moves so far violates China's free-trade commitments, said a European diplomat in Beijing.

The end of the tax exemption on machinery raised the cost of European products sold in China, said the diplomat, who spoke on condition of anonymity due to the sensitivity of the issue. But he said the EU decided it had no grounds to challenge the change because instead of imposing a market barrier it ended special treatment and resulted in machinery imports being treated the same as other goods.

The government is trying to boost sales of electrical appliances in the countryside by subsidizing the purchase price. It says foreign suppliers can take part but Chinese products are often much cheaper and it is unclear how many rural families will opt for more expensive foreign models.

President Barack Obama has expressed concern about the "Buy American" provision in Washington's proposed stimulus that would require U.S.-made iron and steel in any projects that it pays for. Senators rejected a proposal to remove it.

Jiang also said Beijing is stepping up an effort to spur the development of retailing in China's vast countryside both to create jobs and to expand rural access to safe, good quality products. He said the goal this year is to support the creation of 150,000 stores.

The government says at least 20 million migrant workers have lost their jobs due to global turmoil and it is trying to avert rural unrest.

"This initiative can be seen as a very strong push toward employment," Jiang said. In addition, he said, "We hope to ensure farmers will be able to have access to quality products and farm produce."