Confronted by internal conflict within the export sector, Chinese enterprises have called for stricter management on under-pricing or under-cutting. An official from the Ministry of Commerce said that Regulations on Investigating and Penalizing Unfair Conduct in Exporting will be issued in August and not in July as originally scheduled, according to a report in the Economic Observer reported on July 8.

"We still must solicit opinions and criticisms, revise the draft, and submit it to the State Council for examination and approval," the official said.

According to the ministry, internal conflicts within companies are to blame for the export sector's heavy economic losses. For example, coke exports in 2004 were valued at US$450 per ton. By the end of 2005, that figure had dropped to US$120 per ton. The drastic drop in value is inconsistent with the general rise in price of other resources in recent years, the ministry said.

According to ministry statistics, Chinese coke exports account for nearly half of the world's total, with north China's Shanxi Province producing 80 percent of the country's total volume of exports.

About 70 percent of coke in the EU is imported from China.

Industry insiders say that, in this situation, it would be reasonable of China to raise the export price of coke. However, increasing competition for business with foreign companies has forced prices down. Chinese companies fight tenaciously for business, accepting lower prices and even unreasonable terms of contract.

Some insiders say that China's lack of legislative control in this respect is responsible. The Anti-Monopoly Law hasn't been issued yet, and the current Anti-Unfair Competition Law doesn't specifically address the matter.

This is why Chinese enterprises are waiting anxiously for the new regulations in August, in the hope that it will set things right.

At the same time, other industry insiders disagree and say that the problem is really with non-enforcement of legislation. In 1996, the central government issued Temporary Regulations on Penalizing Unfair Conduct in Exporting, but the regulations have not been applied in practice.

In this case, the best way forward for the moment is to curb internal conflicts.

To do that, it is first necessary to understand that internal conflicts aren't just within companies or between competing enterprises. In China's economic structure, there is the central economy and local ones. By separating local economy from the central economy, local governments set their own production levels and prices, which encourages competition between local economies. But this also gives rise to protectionist measures.

Further, it is common that local governmental officials take the lead in fuelling such conflicts. A typical example is seen when local governments try to attract foreign investment. Local authorities have been known to offer concessions in contravention of existing laws and policies, more often than not benefiting only the foreign investors.

To address the issue, industry experts suggest two things: One, the central government must improve and strictly implement laws and regulations to combat local protectionism. Two, it must encourage the establishment of a national industrial association, perhaps in the form of an authoritative non-governmental organization, to promote solidarity in the sector and fair play.

International experience has shown that an industrial association is an effective tool for strengthening industrial unity and curbing internal conflicts.

(China.org.cn by Li Jingrong, July 16, 2006)