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The Trade War Within China

Local protectionism is pernicious and persistent

Although many are embarrassed to admit it, foreign correspondents learn a lot from taxi drivers. In China economic correspondents can also learn a lot from the taxis themselves. Most cabs in Beijing are Hyundai Elantras. In Shanghai they are often the Volkswagen Touran or Passat. And in Wuhan they are commonly Citroën Elysées. In each case, the explanation is the same. These foreign brands have joint ventures with local state-owned carmakers that the city government is keen to champion—even if it is at the expense of other carmakers and their own consumers.

This is one prominent example of China’s persistent “local protectionism”. Many of its provinces, prefectures and counties try to shield local firms from outside competition. These measures divide the mainland’s vast, singular market into something more plural. “China in many ways resembles the European Union,” says Jörg Wuttke, president of the eu Chamber of Commerce in China. “We have 27 member states; they have 31.” The eu has been trying to perfect its single market for three decades, often in the teeth of national rivalries and resentments. China has been battling local protectionism for just as long.
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