updated 2/16/2009 2:37:13 PM ET 2009-02-16T19:37:13

China stepped up criticism Monday of "buy local" restrictions like those in Washington's new stimulus plan, warning they will worsen the global slump.

"We believe that trade protectionist measures will make the already bad conditions under the financial crisis even worse," Commerce Ministry spokesman Yao Jian told reporters.

In a weekend editorial, the official Xinhua News Agency criticized measures in Washington's $789 billion stimulus package that favor American steel and other goods as "poison to the solution" of the global downturn.

Yao mentioned no countries by name but said several have taken steps that would hamper trade and slow the global recovery.

"There still are countries that are including conditions in their stimulus plans that require the purchase of those countries' goods," Yao said at a regular news briefing. "We are deeply worried."

Economists say coordinated efforts are needed to revive global trade and financial flows and warn that "buy local" provisions might be seen as protectionist and prompt other nations to retaliate, hampering the global recovery.

The U.S. stimulus, approved Friday by Congress, favors American producers of steel and manufactured goods for projects financed by the plan. That drew criticism from Europe, Canada, Japan and Australia, which said it could undermine pledges to avoid protectionism in response to the global downturn. The final version of the plan promises that Washington will abide by its trade commitments.

Beijing promised earlier to avoid "buy local" provisions in its own 4 trillion yuan ($586 billion) stimulus package unveiled in November.

"All countries should avoid `beggar thy neighbor' actions and increase cooperation and consultation," Yao said. "This will be to the fundamental benefit of all countries."

Meanwhile, Yao said foreign investment in China plunged by 32.7 percent in January to $75.4 billion. It was the fourth straight month of decline as companies slash spending to cope with the global downturn.

However, Yao cautioned the data were distorted by the Lunar New Year holiday, which fell in January this year and meant the month had fewer working days. The holiday came in February last year.

Even with the holiday factored in, analysts say trade and other indicators still are likely to show a sharp decline.

The number of new foreign-financed companies set up in January fell 48.7 percent from the year-earlier period to 1,496, Yao said.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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