Top US Treasury official slams China's 'non-market behavior'

  • The U.S. Treasury's top diplomat accused Beijing of "patently non-market behavior" and said that the United States needed stronger responses to counter it.
  • David Malpass, Treasury's undersecretary for international affairs, said that market-oriented, democratic governments were awakening to the challenges posed by China's economic system, including from its state-owned banks and export credit agencies.
  • He reiterated his view that China had stopped liberalizing its economy and was actually reversing these trends.
David Malpass, Under Secretary of the Treasury for International Affairs.
Cameron Costa | CNBC
David Malpass, Under Secretary of the Treasury for International Affairs.

The U.S. Treasury's top diplomat ramped up his criticisms of China's economic policies on Wednesday, accusing Beijing of "patently non-market behavior" and saying that the United States needed stronger responses to counter it.

David Malpass, Treasury's undersecretary for international affairs, said at a forum in Washington that China should no longer be "congratulated" by the world for its progress and policies.

"They went to Davos a year ago and said 'We're into trade,' when in reality what they're doing is perpetuating a system that worked for their benefit but ended up costing jobs in most of the rest of the world," Malpass said, at the event hosted by the Jack Kemp Foundation.

He said market-oriented, democratic governments were awakening to the challenges posed by China's economic system, including from its state-owned banks and export credit agencies.

He reiterated his view that China had stopped liberalizing its economy and was actually reversing these trends.

"One of the challenges for the world is that as China has grown and not moved toward market orientation, that means that the misallocation of capital actually increases," Malpass said.

"They're choosing investments in non-market ways. That is suppressing world growth," he added.

China said that its state-owned enterprises operate on free-market principles and is battling within the World Trade Organization's dispute settlement system to be recognized as a
"market economy" — a designation that would weaken U.S. and EU trade defenses.

Malpass said the Trump administration was "pushing back" against such policies in international forums such as the G20, and was seeking to join "like-minded" countries to press for changes.

But he did not provide any details on the responses that the Trump administration is considering, which include potential trade sanctions against Beijing under a "Section 301" investigation into China's intellectual property practices and technology transfer requirements for foreign companies.

The administration is also considering steep global tariffs on steel and aluminum, largely aimed at curbing excess production in China, on national security grounds.