When U.S. and Chinese trade negotiators start a new round of talks on Wednesday, one often-overlooked issue is bound to get a lot of U.S. attention: the role of China’s state-owned companies in its economy.
China started overhauling its state-centric economic model 40 years ago under Deng Xiaoping. After joining the World Trade Organization in 2001, Beijing pushed further to wean the economy off state-owned firms. But under President Xi Jinping they have re-emerged as a centerpiece of his economic policies and a stumbling block for U.S. negotiators.
China’s state firms dominate industries that U.S. firms want to enter, including telecommunications, energy, banking and insurance, and have made inroads into industries Mr. Xi is staking out as top priorities for the future. Beijing and local governments, for instance, have announced more than $100 billion in financing, mainly to state-owned firms, to develop a domestic semiconductor industry.
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