Author: Guoqiang Long
Translation by Celine Cai
Guoqiang Long is Director in the general office of development and research of the State Council
Ex director, vice director and secretary in the International economic research department of the State Council
It is deducible by reasoning that there won’t be severe trading war between China and United States. This deduction becomes clearer from the development of politics and economic trends in the past few months.
The first main reason we made such deduction is that the trading relationship between these two nations are more complementary than competitive, though the competition is increasing. It doesn’t matter whether you look at the relationship from the trade perspective or the investment perspective, China and United States have different status in global division of labor. The economic bond between the two nations has developed rapidly such as goods trading, service trading, and investments. These frequent economic activities are the important evidence to embody this complementary relationship. China, as the biggest developing country, has comparative advantages in labor-dependent products and service. America, as the leader in developed country, in contrast, has comparative advantages in sectors like high-tech, agriculture, and energy products which are exactly what China is weak at. In a relatively long foreseeable future, this complementary relationship between the two is not likely to change.
In addition, the trading war between China and United States would be a lose-lose decision to make. Neither side of the leaders would want this to happen.
U.S.-China 100-day plan is determinant.
To say there won’t be serious trading war does not mean there won’t be conflicts. In fact, as two co-exist partners with frequent economic trades and investments, collisions are inevitable. In contrast, only countries who do not have tight trading relation can reduce conflicts. Therefore, collision is a normal phenomenon as a result of constant and enormous trading.
Of course, we can not ignore those conflicts. Hence, the 100-day plan is particularly important to maintain a stable relationship. During the meeting held in Mar-a-Lara, Chinese government proposed the 100-day plan. The plan entails the following:
In the short term, both nations take some specific actions to further explore the potential partnership in trading and investment in order to gain some foreseeable results.
As I mentioned, in this trading relationship, China and United States have totally different focus. America cares more about the severe imbalance of trades and China is the origin which causes this imbalance. But please be reminded that, due to the formation of the world’s production chain, the value of a product is not only added in China but also from other countries, and in a high proportion. For example, apple phones are assembled in China. However, components like chips come from the U.S. itself. In East Asia like Japan, South Korea and Taiwan also produce some of the important components for the apple products. Apple phone is the epitome of such transferred value-adding product between China and America.
Plus, the connection of the two nations is not limited to trading of goods. There’s also service trading, and investments, especially how American enterprises have brought enormous profits for its investors through their sales in China. It is important not to neglect any field including the trade of goods, trade of services, investment and finance while analyzing the China-U.S. relation. It is significant to use a comprehensive map to view the relationship hence find the potential for a further partnership.
U.S. also keeps a watchful eye on the formation mechanism of exchange rate in China, industrial policies (especially a series of measure in relation to “made in China 2025”), market access of the service field and the protection of intellectual property. These problems are not novel and have already been communicated overtime.
From Chinese’s standpoint, we also care a lot about United States. For example, U.S. government’s restriction on the export of high-tech products, the misuse of trading relief measures and lastly, the economic status of Chinese market. As China has more and more investments in America, we care about the nation’s secure audit mechanism which is whether there would be discrimination against China. It is actually impossible to solve all these problems all at once.
Since both sides have their own worries, the proposal of 100-day plan is indeed a good advice. We hope to take actions, to gain some concreate economic outcomes, to give society confidence, and to establish the basis for latter partnership. After the suggestion of 100-day plan, the two nations began their discussion on the possible achievement for the short run. This includes expanding exports of agricultural, automobiles, high-tech, and cultural products (particularly Hollywood movies) from America to China. The U.S. has realized the independence of energy and started to export energy products like coal and natural gas. The two parties can now talk about partnership in energy. The other important field is basic facilities. President Trump suggested investing one billion in improving basic facilities. China in the past 20 years has also paid high attention to this field. Therefore, China-U.S. has huge potential partnership in the financing, construction and management of the investment of basic facilities. Also, in regard to regional partnership (e.g. Chinese provinces and America’s cities and states), we welcome American government and enterprises to join in our ‘the Belt and the Road’ plan.
Therefore, we can actually find lots of goals which can be achieved quickly in the short run. By pushing the 100-day plan, both parties will see apparent results which demonstrate both parties’ desire to partner and also the confidence for further collaboration.