The Status of China's Market Economy and Structural Reforms: The Issues Behind the U.S.–China Trade War

Abstract

This paper investigates the most essential issues behind the ongoing U.S.–China trade war. In addition to the apparent bilateral trade imbalance, China's status as a non-market economy (as labelled by the Trump administration) is one of the most fundamental reasons that the United States triggered the U.S.–China trade war. Accordingly, the United States’ most pressing request is to urge China to implement further structural reform. This paper argues that the current Chinese economy is quickly becoming a modern market economy with a unique Chinese character. This is evident from ongoing structural reform to create a competitive environment between state-owned enterprises and private enterprises, and through a further opening-up of the market by guaranteeing a wider and deeper market access for inbound foreign direct investment.