New Zealand has announced that it will officially recognize China as a market economy, a breakthrough that paves the way to a better international trading status.

A New Zealand government statement said that China had already developed a strong and vibrant private sector.

China has logged an annual economic growth rate of 10 percent since it decided to move away from a centrally planned economy 10 years ago.

In another important move, New Zealand has also agreed not to apply anti-dumping provisions in China's World Trade Organization (WTO) Accession Protocol.

Experts have applauded the initiative shown by the New Zealand authorities, hoping other countries will follow suit.

New Zealand was also the first country to support China's accession to the WTO, which fully integrated China with the global trading system.

The Chinese government has frequently urged its trading partners to realize China now has a thriving market economy. Their failure to recognize this is damaging China's trade.

As a condition of WTO membership, China agreed other members could treat it as a non-market economy for 15 years after its entry.

But by defining China as a non-market economy, anti-dumping rules adopted by China's trading partners refuse to recognize China's domestic production costs. They instead use production costs in a third "surrogate" country to calculate the "normal value" of Chinese exports.

The use of a surrogate, usually an emerging economy such as Turkey or Mexico where material and labor costs are much higher than in China, often means Chinese exporters are deemed to be selling below their normal value. As a result, they become subject to tariffs that may exceed 100 percent.

The central government's efforts to remedy this situation have met with some success.

Australia has promised to grant China market economy status and the European Union is also considering the request, according to Wang Hejun, deputy commissioner of the Bureau of Fair Trade for Import and Export under the Ministry of Commerce.

Chinese Premier Wen Jiabao also conveyed to Vice President Dick Cheney that China hopes the United States will give it market economy status. The two met in Beijing on Wednesday.

The Ministry of Commerce is also requesting a revision of the WTO rules that distinguish between market and non-market economies. The ministry contends that the organization's criteria prevent non-market countries from joining it.

Both the United States and the EU have granted market economy status to Russia, which has yet to join the WTO.

Chinese Academy of International Trade and Economic Cooperation Deputy Director Li Yushi said China's non-market economy status is the result of compromise, rather than objective assessment.

"It is understandable that some countries did not want China to have full market status as a result of their own self-interests," Li said. "But with the constant development of China's market system and enhanced understanding between China and other WTO members, China's market status should be a negotiable issue."

(China Daily April 16, 2004)