“China remains the biggest challenge to the international trading system established by the World Trade Organization,” US Trade Representative Katherine Tai said in the report, adding that in the 22 years since China acceded to the WTO, the country still “embraces a state-directed, non-market approach to the economy and trade, which runs counter to the norms and principles embodied by the WTO”.

“Even more problematic, China’s approach targets industries for global market domination by Chinese companies using an array of constantly evolving nonmarket policies and practices,” the report said.

Firing back, China’s Ministry of Commerce accused the US of not complying with WTO rules and of implementing “discriminatory” industrial policies that disrupt the global supply chain by deferring the responsibility of defending multilateralism to others.

“The US does not reflect on and correct its own behaviour, but instead uses smear tactics and blame-shifting methods to cover up its violations and sabotage. This is extremely irresponsible,” it said.

‘Let common sense prevail’, Chinese business leader urges Beijing

On Sunday, Chinese Commerce Minister Wang Wentao met with WTO director general Ngozi Okonjo-Iweala at the 13th Ministerial Conference of the WTO in Abu Dhabi, United Arab Emirates. During the meeting of the world’s trade ministers, Wang expressed China’s support for key WTO reform initiatives that would help it play a better role in global economic governance.

This, he said, includes striving for a resumption of the WTO’s dispute-settlement mechanism – the Appellate Body that the US paralysed by not allowing for new judges to be appointed.

The US report also acknowledged that Washington had taken “critical” domestic steps to invest in key industries, including by passing the Chips and Science Act, the Inflation Reduction Act and the Infrastructure Investment and Jobs Act, and moving to implement those acts.

The report further accused China of “routinely” deploying economic and trade policies and practices that promote unfair competition and state-directed outcomes rather than fair competition and market-based outcomes.

“Critically, the WTO has been unable to effectively address China’s continued pursuit of a state-led, non-market approach to the economy and trade,” it stated.

China’s customs figures showed that the value of imports and exports between the US and China in 2023 reached US$664.5 billion – an 11.6 per cent decline from 2022.

The US is now China’s third-largest trading partner, after Asean and the European Union.

“China’s accession to the WTO has been a landmark event both for China and the rest of the world,” Alicia Garcia-Herrero, chief economist for Asia-Pacific at French investment bank Natixis, said in a report on Monday. “China has no doubt reformed and opened up its economy, but not to the extent of becoming a full market economy.

“That duality – striving to operate as a market economy in some areas while keeping the key characteristics of a state-led planned economy in others – makes it very difficult for China to comply with the principles of the WTO.”

Garcia-Herrero added that it was “highly unlikely” that a WTO-reform proposal by the EU, focusing on the behaviours of state-owned enterprises, subsidies and countervailing measures, would come to fruition.

“In particular, the urgent need to deal with market distortions – stemming from China’s economic model, and its increasing size and influence in the rest of the world – might need to be addressed through other solutions,” she added.