Last month, the U.S. House of Representatives voted to remove China’s status as a developing nation and essentially strip away its various trade, emissions and finance privileges.
According to Newsweek and other media reports, the U.S. House of Representatives voted unanimously on March 28 - 415 votes for and 0 votes against - and passed a draft legislation aimed at stripping China of its "developing country" status.
Context is important
Yi Fan, a Beijing-based observer in his article “China is still a developing country” points to Baisha, a small county in Hainan, a tropical island province of China, as an example of China’s contemporary struggle with poverty alleviation in parts of the country.
In 2021, despite a pandemic unseen in a century and devastating floods, China managed to achieve its poverty alleviation goals as scheduled, lifting nearly 100 million rural people out of abject poverty, realising the poverty reduction goals set out in the UN 2030 Agenda for Sustainable Development 10 years ahead of schedule.
China’s poverty alleviation experience has injected new impetus into the global poverty reduction cause.
As the largest developing country in the world, China has always given top priority to poverty alleviation in its state governance. Since the reform and opening up, China has lifted more than 850 million people out of poverty, contributing more than 70% to global poverty reduction in this regard.
And this is why context is important.
While China is making great strides against poverty alleviation it has not completely eradicated poverty.
Baisha, before 2020, long remained the only deeply impoverished county in the province.
Again context is crucial as this was not three decades ago but three years ago.
“The county has rich and precious ecological resources. Yet its large areas of tropical forests and mountains also cut it off from the outside world.
“After years of relentless effort, a sustainable natural rubber industry was finally built up in Baisha, and the county successfully shook off poverty in 2020.
“Success stories on poverty alleviation in places such as Baisha can be found throughout China. In 2021, China declared victory against extreme poverty, but that does not mean China has graduated from its developing country status,” writes Yi Fan.
The factors that determine developing versus developed
The classification of "developing countries" and "developed countries" is generally based on the evaluation indicators of various international organisations such as the United Nations Statistics Division, the World Bank, the International Monetary Fund and the United Nations Development Program, and is determined after a comprehensive comparison.
Although different international organisations define developing countries in different ways, all of them, without exception, classify China as a developing country in their classification. The United States may not know the situation of other countries, nor does it represent the United Nations in making this determination.
Critics accuse the U.S. of overstepping its authority through "hegemony" and then to compel the approval of other uninformed countries through its own public opinion influence.
The reasons given for the House of Representatives vote essentially place China and the United States on the same level of development.
One of the bill's sponsors, Kim Young, chairman of the House Foreign Affairs Committee's Asia-Pacific Subcommittee, said in her speech at the House meeting that China is the world's second largest economy, accounting for 18.6 percent of the global economy, second only to the United States. The United States is considered a developed country, and so should the People's Republic of China.
The concept of developing countries is relative to developed countries, and the WTO does not have criteria for identifying developing countries, but in fact, combines the criteria of the World Bank and the United Nations Development Program.
So how exactly to determine whether a country is a developing country or not?
In 1990, the United Nations Development Programme (UNDP) introduced the Human Development Index (HDI), a comprehensive measure of the level of economic and social development of each member country.
The HDI is calculated using three basic variables: average life expectancy, years of schooling, and gross national income per capita, and is generally considered a developed country when the index exceeds 0.8. In this index, China reached 0.758 in 2019, ranking only 85th in the world, which does not meet the criteria of developed countries at all. In addition, the World Bank also has a set of criteria for determining that a country is considered a high-income economy if its gross national income per capita (GNP) exceeds a certain threshold.
The World Bank's World Development Indicators report shows that China was still a low-income country until 1998, with a per capita GNI of less than $800. From 1998 to 2009, China entered the lower-middle income group. This decade was also a period of rapid economic development for China, with per capita GNI rising from $800 in 1998 to $3,690 in 2009.
In 2010, China officially entered the upper-middle-income group, and according to the latest data released by the World Bank in 2018, China's GNI per capita was US$8,690 in 2017, which is still in the upper-middle-income group, and there is still a large gap from the developed countries in the high-income group.
In 2018, the standard was $12,355. In that year, the U.S. GNI per capita was nearly $63,000, South Korea reached $30,000, and China was $9,471.
By 2022, China's gross national income (GNI) income per capita, although making a new leap, will only reach $11,890.
It follows that China is still in the developing world by the World Bank's WDI standards.
By any standard, China is still a developing country. This concept is not "self-proclaimed" by China to "try to take advantage of the WTO framework", but is recognised by major international organisations and the majority of countries in the world.
The data looked at from an unbiased point of view, reflects this.
The fact that China's per capita GDP is not yet high is ignored by the US. In the eyes of the United States, China will no longer be a developing country. The Office of the United States Trade Representative announced on February 18 of this year that it would update its list of "developing countries" to exclude 25 economies, including China, Hong Kong and India.
So why is the United States so eager to make China a "developed" country?
The reason given by the United States is that "the Chinese government is using its status as a developing country to continue to manipulate the system internationally, depriving countries that really need help of resources.
Critics say that the U.S. voted for this bill for a different purpose. No sooner had the bill been passed than the U.S. State Department exerted its influence on international organisations to classify China as a high-income, upper-middle-income or developed country and to deny China any special treatment given to developing countries.
Eyeing Preferences for Developing Countries
Being considered a developing country in international trade has tangible preferences.
In 2001, when China joined the WTO, its GDP per capita was less than $1,000, so it could enjoy the treatment of developing countries - import tariffs averaged 14%, higher than the 7% of developed countries; the transition period was 4 to 8 years, longer than the 2 years of developed countries; and it enjoyed lower criteria for determining dumping than developed countries, etc.
In this regard, the U.S. is particularly keen on these preferential policies, especially the issue of subsidies, which is one of the main accusations of the U.S. against China, the most high-profile of which is the "Made in China 2025" program.
In the first phase of the U.S.-China trade agreement, the U.S. began to play hard ball and refused to mention the issue of subsidies.
Suppressing China's Economic Development
The U.S. has been accused of plotting to promote the "transformation of China into a developed country" for a long time. As early as 2019, the U.S. released a report accusing the WTO developing country self-identification mechanism of injustice, pointing at developing countries such as China, Brazil and Mexico. Subsequently, a U.S.-drafted reform proposal was published on the WTO website, pushing to cut the framework of special treatment for some members that self-designate as developing countries. These countries are those classified as "high-income" by the World Bank, OECD members or countries that have initiated the accession process, G20 members, and any country that accounts for 0.5% or more of global trade.
Of course, this proposal, deemed by many to be absurd, was quickly rejected by developing countries such as China, India, Venezuela and South Africa, and the U.S. attempt did not succeed. If the U.S. had included China as a developed country, it would have meant that the U.S. would no longer recognise the treatment enjoyed by the economy when trading with China and would have had a lower threshold for countervailing investigations against China.
Critics state that the U.S. Congress collectively agrees that China is a "developed country" because the U.S. has a deep-seated fear of China becoming a truly developed country and that the U.S. is eager to make China a "developed" country in order to suppress China's economic development.