China is nothing if not creative in protecting its local industries. Although it has liberalized its economy in recent years, it has also erected a sophisticated set of barriers to safeguard companies it views as national champions. Increasingly, this is a counterproductive approach.
The usual method of assessing protectionism is to look at metrics such as tariff rates. And by that measure, China remains one of the least open major economies: According to the World Trade Organization, it maintains an average most-favored nation tariff of 9.6 percent on imports, compared with 5.3 percent in the European Union and 3.5 percent in the U.S.
But tariffs only tell part of the story. China has also become adept in using non-tariff barriers to prop up favored companies. The European Union Chamber of Commerce in Beijing recently identified a raft of such measures China was using to protect manufacturers, including subsidizing local businesses and forcing foreign firms to turn over technology to Chinese partners.