China, U.S. and the ‘buy local’ debate

Scott Tong Jul 28, 2009

China, U.S. and the ‘buy local’ debate

Scott Tong Jul 28, 2009


Kai Ryssdal: Two days of high-level talks between the U.S. and China wrapped up in Washington today. It’s an annual affair called an economic and strategic dialogue. That could mean almost anything. Usually it does. Currency manipulation. Trade policy. Climate change. Those last two got rolled into one this week amid cries of green energy protectionism. Our China correspondent Scott Tong reports.

SCOTT TONG: China’s solar energy ambitions rest on companies like Suntech Power. In the eastern Chinese city of Wuxi, Suntech factory workers spread out giant sheets of solar energy cells. Eventually, they’ll be turned into solar panels.

Suntech makes lots of panels. Enough to make the company’s founder Zhengrong Shi the seventh richest person in China.

ZHENGRONG SHI: Our aspiration is to become a giant solar energy company.

This $3 billion man wants to grow Suntech into a global energy titan, like British Petroleum or Shell.

SHI: We produce much higher efficient solar panels than all our peer companies, at low cost. And apart from that our scale. We will continue to grow in the next few years.

Much of that growth will come from the fledgling China market. Billions of dollars are being spent on renewable energy projects in China. Suntech was just picked to supply two of them.

The problem is, clean energy competitors from the U.S. and from Europe complain they’re frozen out of this bidding. And Chairman Shi acknowledges local governments in China tend to favor local contractors.

SHI: This is very common in China. They want to grow their local GDP, it’s understandable.

CHRIS Murck: The commonly used term is local protectionism.

Chris Murck used to chair the American Chamber of Commerce in Beijing. He points out that China’s $600 billion stimulus package requires that the money be spent on domestic products in most cases.

Murck:I think there is a rising level of what you might call ‘Buy China’ feeling in this market.

Western windpower companies are especially miffed. This spring when China took bids on 25 contracts, Chinese companies won every single one.

Earlier this month, U.S. Commerce Secretary Gary Locke said denying multinational companies access to the China market could pose a “serious threat” to trade cooperation.

But there’s a problem with Washington’s position: the U.S. stimulus has “Buy America” language, which makes it easy for China to play the I’m-rubber-you’re-glue-card. Again Chris Murck.

Murck: The buy America provision that was in our law certainly opened the door very wide for the Chinese to follow suit.

And for Washington it will be hard to challenge China. Beijing has yet to ratify an international free-trade deal on government purchasing. And if this is protectionism, sustainable development researcher Hu Zhenyu says it’s because China’s still trying to catch up in green energy.

Hu ZHENYU: The U.S. and the European Union are the global leaders in solar and wind power. China is behind in the development of technology. And it’s behind in government subsidies.

Maybe so. But there’s growing talk of trade friction around the world. And if it gets worse, economists think the countries that get hurt the most may be the ones that export the most. I.e. China.

In Wuxi, eastern China, I’m Scott Tong for Marketplace.

Staff researcher Cecilia Chen contributed to this report.

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