LIU He, a member of the Political Bureau of the Central Committee of the Communist Party of China and director of the General Office of the Central Leading Group for Financial and Economic Affairs, is visiting the US this week. Ahead of China’s annual meetings of the National People’s Congress (NPC) and the National Committee of Chinese People’s Political Consultative Conference (CPPCC), known as the “two sessions,” Liu’s visit has attracted public attention. Since it is connected with tense bilateral trade relations, this trip is of extraordinary significance.
Since last year, US President Donald Trump has repeatedly pressured China – for example, by denying China’s market economy status after taking orders of more than $250 billion from his visit to China, conducting a high-profile “Section 301” investigation of China, halting acquisitions by Chinese-funded enterprises in the name of national security and imposing high tariffs on China’s solar panels.
All these actions raised growing concerns that a trade war is inevitable. Although trade disputes have been heated recently, the amounts involved only account for a small portion of total Sino-US trade. Bilateral trade achieved double-digit growth in 2017, and the figure for 2016 was up by more than 28 times from 1992.
Before 2000, trade with China accounted for less than 4 percent of the US’ foreign trade. Today, the share is 14 percent, indicating that the two sides have mutual needs.
Although Trump always emphasizes the US trade deficit with China, he must understand that the export capacity of a country cannot be realized in one go, while import capacity grows along with the economy.
As we all know, the US experienced a strong economic recovery last year. With the continued expansion of domestic demand, its import demand will inevitably increase. What’s more, China has become the largest export market of the US, except for other countries in North America. Official data shows 62 percent of US soybeans, 14 percent of cotton, 25 percent of Boeing aircraft, 17 percent of cars and 15 percent of integrated circuits are exported to China.
Also, China has a firm core at home, while political infighting in the US is still serious. To put it plainly, Trump will have to rely on China’s support if he wants to steadily push forward all his policies.
Not long ago, at the World Economic Forum in Davos, Liu said that China will announce more policies to open up its economy this year and some of those measures may exceed the expectations of the international community. Obviously, this is a reassuring sign for the Western world.
This is actually similar to the philosophy of Trump’s speech at the forum. That day, he changed his tone and for the first time, he clarified that “America first” does not mean the country is alone. He said the US is the place to do business. Obviously, there is a consensus on mutual cooperation, opening-up and coordination.
For the world’s two largest economies, the US and China, coordination is important. Economists believe that problems in China-US relations will affect the global economy.
In reality, over the past decade, the contribution rate of China to global economic growth has exceeded 30 percent, and the combined contribution of China and the US has exceeded 50 percent. Under these circumstances, strengthening bilateral economic and trade ties is significant to both countries as well as world economic development.
Lately, the US stock market has encountered severe turbulence. As this year is the 10th anniversary of the 2008 financial crisis, some market participants are worried about whether the monetary policy of the US will cause a US stock market crash. Thus, it is especially urgent for China and the US to figure out how to coordinate their taxation and monetary policies, and maintain stability in world economic development at the macro level. Although bilateral disputes over merchandise trade will greatly affect market participants’ psychology, the objective impact is actually limited.
[The author is a research fellow with the Chinese Academy of International Trade and Economic Cooperation]