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With 'Buy Chinese' edict, another nation tiptoes toward protectionism

Beijing stipulates that $586 billion in stimulus funds be spent only on Chinese goods

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A new Chinese government edict requiring that economic stimulus money be spent only on Chinese goods takes the world a step further toward a dangerous international trade war, foreign businessmen and some economic analysts here warn.

"It is a new sign of global protectionism," worries Xu Xiaonian, who teaches at Shanghai's China-Europe International Business School. "This will definitely hurt the global economic recovery."

The new regulations, dated May 26 and reported in the China Daily this week, say that "government-funded projects should purchase domestic products unless they cannot be obtained under reasonable business conditions."

Imports paid for from the government's $586 billion stimulus plan must be approved in advance, it stipulated.

The measure drew strong criticism from the European Union Chamber of Commerce here, which warned in a statement that giving local firms preferential treatment "sends the wrong signal to the domestic and international business community at a time when international cooperation is key to sustaining economic recovery."

Nations creep toward protectionism

Most economists agree that protectionist trade policies turned the 1929 United States stockmarket crash into the Great Depression, and since the current economic crisis began world leaders have repeatedly pledged to avoid repeating that mistake.

Nevertheless, the World Bank has accused members of the Group of 20 key world economies of imposing more than 50 trade restricting measures in the past seven months.

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