The House Votes Unanimously Against Beijing

Unanimous votes in Washington are as rare has hen’s teeth. But it happened recently in the House of Representatives which agreed that is would be a good thing to strip China of its status as a “developing country.” Of course, Washington has little power to force the issue, even if all the rest of the government agreed. That power lies with the international community and to some extent with China itself. Still, a stand on the matter from the United States does make matters awkward for Beijing. If nothing else, the vote makes even clearer than before Washington’s growing hostility to China.

Decades ago, when China first opened to the world and even in 1999, when it finally joined the World Trade Organization (WTO), there could be no doubt that it was not developed. The huge nation in 1990 had a gross national income (GNI) of the equivalent of $374 billion, less than 1.7 percent of global GNI. The nation’s imports and exports equaled barely 1.0 percent of global totals as did the amounts of direct investment into and out of the country. There was every reason to treat it as a developing economy.

But things have changed since then. China now has the second largest economy in the world, producing the equivalent of $20.3 trillion goods and services last year. Its GRI per capita verges on the equivalent of $12,000 a year, not far from $13,200 that the World Bank classifies as “high income.” China’s exports and imports account for around 12 percent of global totals. Flows of investment funds into China amount to 21 percent of global totals and flows out of China account for a still sizable 8 percent of the global total. The nation’s Belt and Road program includes some 13,427 projects across 165 countries worth the equivalent of $850 billion. China is also a leading member in the Asian Infrastructure Bank and the Shanghai Cooperation Organization.

Hard as it is, given this scope and size, to argue that China is still developing, Beijing insists on it. The designation simply has too much value. For one, it holds down expenses at the United Nations (UN) and other international bodies. The designation, for instance, is worth $48 million in China’s 2023 UN assessment alone. As a developing economy, China can claim allowances in climate treaties including the Rio Declaration on Environment and Development, the UN Framework Convention on Climate Change (UNFCCC), and the Kigali Amendment to the Montreal Protocol on Substances and the Depletion of the Ozone. Not only does the developing designation reduce fees under these agreements, but it also relaxes the degree to which China must comply and lengthens the schedule on which it is expected do so. It also obligates the United States and other developed economies to transfer technologies to help China meet its promises.

There are more important benefits. The developing designation also allows Beijing extra latitude on policy. The WTO, for instance, allows developing economies to impose tariffs up to 14% but allows developed economies to impose tariffs of only up to 7%. It also allows Beijing more room for subsidies to sectors of its economy than it would have under a developed designation. A developing designation, furthermore, gives China better terms on loans from international financial institutions, lower interest rates, for instance, and sometimes zero interest rates. Beijing has, of course, shown an easy willingness to ignore the rules of international agreements, for instance when it refused to abide by the Hague ruling in its dispute with the Philippines. But the pass offered by developing status saves embarrassment and diplomatic trouble.

It is hardly surprising then that Beijing has resisted any change on this front and further decried the recent action by the U.S. House of Representatives. The Beijing-backed Global Times has described the vote as indicative of “Washington’s sinister intentions to increase China’s development cost and force China to assume international responsibilities beyond its abilities.” Beijing’s mouthpiece insists that the U.S. has no right to referee on China’s developing country status. Wang Yi, director of the Chinese communist Party (CCP) Central Foreign Affairs Office put Beijing’s position this way: “Requiring a country that has only been developing for a few decades to shoulder the responsibilities of those industrial countries who have developed for hundreds of years, this is unfair.”

In one sense, the Global Times is correct. Washington has no way to force the issue. In some places, such as the World Bank, China’s status will depend on a statistical review. On this basis, it seems likely to lose its developing status soon. In other areas, such as the WTO, the designation is self-directed. Given what Beijing is saying, that is not likely to change any time soon, if ever. Even if a change were forced on Beijing, it is not apparent that it would compel a change in China’s policies or practices. Still, this vote does constitute another step in Washington’s growing anti-Chinese momentum, and that, in itself, is significant.