Development of bilateral trade and investment between China and the United States
In the context of deepening economic globalization, China and the United States, as the world’s most important trade and investment powers, have formed a “community of interests” with the depth and breadth of economic and trade cooperation more than ever before. According to the U.S. Department of Commerce, from 2006 to 2016, U.S. exports to China (trade in goods and services) showed a year-on-year increase (see Table 1), from $653.9 billion in 2006 to $169.82 billion in 2016, an increase of nearly 16 times; while during the same period, U.S. imports from China (trade in goods and services) increased from 299.39 billion U.S. dollars to 479.57 billion U.S. dollars, a 16-fold increase. in 2015, U.S. trade in goods with China totaled 600.82 billion U.S. dollars, surpassing the 583.98 billion U.S. dollars with Canada, making it the largest U.S. trading partner. According to the China Bureau of Statistics, the U.S. was our second largest trading partner after the European Union in 2015, with U.S. trade in goods at $557.02 billion, second only to the EU’s $696.31 billion.
Meanwhile, international direct investment between China and the U.S. has grown rapidly. According to the U.S. Department of Commerce (see Table 2), in 2006, U.S. foreign direct investment (FDI) outflows to China were $26,459 million, and in 2015, U.S. FDI outflows to China were $74,560 million, an increase of 182 times; the U.S. attracted $785 million in FDI from China in 2006, and this value grew to $14,838 million in 2015 During the 10-year period 2006-2015, the global financial crisis, trade frictions between the U.S. and China intensified, the U.S. “reindustrialization” and the strong push for the “return of manufacturing”, the trade and investment between the U.S. and China fluctuated slightly. The trade and investment between China and the United States have slightly fluctuated, but in general, there is a steady increase and good development, and the dependence of trade and investment is getting higher and higher.
With the continuous promotion of China’s “going out” strategy and the gradual implementation of national strategies such as “One Belt, One Road” and “Made in China 2025”, coupled with the inherent demand of Chinese enterprises to transform and upgrade and improve their international competitiveness, China’s trade and investment has become increasingly dependent on each other. In recent years, China’s outbound direct investment has continued to grow at a high rate due to the inherent demand of Chinese enterprises to upgrade and improve their international competitiveness. The U.S., with its relatively transparent policy and legal environment, superior infrastructure, high-quality labor force and other location advantages, has become increasingly popular as an investment destination and has become the world’s largest FDI-absorbing country.
As shown in Table 2, U.S. direct investment inflows to China in 2015 were $14,838 million, up 1506% year-over-year. According to the Chinese Ministry of Commerce, Chinese investment in 2016 increased by 2/3 over the same period last year, with 1/3 of total Chinese investment going to the U.S. The share of Chinese companies investing in the U.S. is low, but the growth rate is the fastest among Asian countries. FDI from China is mainly concentrated in the U.S. manufacturing sector, with Chinese investment in the U.S. manufacturing sector accounting for 499% of total investment in 2015. Chinese enterprises can not only save tax and logistics costs and give full play to the advantages of localization by investing directly in the U.S., but also avoid the frequently encountered trade barriers.
The main problems of bilateral trade and investment between China and the United States
(A) The problem of trade imbalance between China and the United States
Table 1 shows that from 2006 to 2016, the trade imbalance between China and the U.S. gradually increased. the trade balance between the two countries was 233.4 billion U.S. dollars in 2006 and reached 309.76 billion U.S. dollars in 2016. The main reasons are:1 The trade statistics of both sides are different, taking the data of 2015 as an example, according to the data published by the Chinese Bureau of Statistics, China’s exports of goods to the United States amounted to 409.21 billion U.S. dollars and imports amounted to 147.81 billion U.S. dollars, with a trade balance of 261.4 billion U.S. dollars, while according to the data published by the U.S. Department of Commerce, the trade balance between China and the United States was 3,340.8 billion U.S. dollars, and the difference between the two values 726.8 billion U.S. dollars, which undoubtedly artificially exaggerates the trade deficit of the United States.
2 The U.S. embargoes China in high-tech products.
3 The different levels of economic development and economic structures of the two countries determine the different positions of trade structures, industrial competitiveness and international industrial division of labor between the two countries, and the trade profits of the two countries are different.
4 The global-scale industrial transfer has led to the expansion of the U.S. trade deficit. The United States has focused on the development of service industries at home, while shifting high-energy, high-pollution, labor-intensive production to other parts of the world, including, of course, China. A significant portion of China’s exports to the U.S. are exports to the U.S. from enterprises invested by U.S. capital in China, and the products produced by these enterprises are sold back to the U.S. The direct beneficiaries are U.S. capital and U.S. enterprises.
(2) U.S. domestic trade protectionist sentiment and the tendency to politicize economic and trade issues always exist
The U.S. foreign trade policy has obvious two-faced characteristics, promoting the principle of liberalization on export trade, while insisting on protectionism on import trade and demanding the so-called “fair trade”. Along with the rapid development of bilateral trade between China and the United States, trade protectionism is prevalent and trade frictions are increasingly frequent. Anti-dumping, countervailing measures, safeguard measures, special safeguard measures, technical barriers to trade and 337 investigations are frequently used by the United States to maximize the obstruction of Chinese exports to the United States. According to the World Trade Organization, in 2016, the U.S. launched 20 trade remedy investigations filed against China, second only to India’s 21. In addition to the spread of?Q-easy protectionism, the U.S. government has continuously introduced new regulations on export controls to China, thrown out China-related trade protectionist bills, accused the Chinese government of manipulating the RMB exchange rate, intentionally undervaluing the RMB, and pressured the Chinese side with issues such as unfavorable intellectual property protection and market access.
(iii) Higher risks for Chinese enterprises to invest in the U.S.
The U.S. often blocks Chinese companies from acquiring U.S. companies or business projects on the grounds of national security risks. For example, Chinese Huawei and ZTE have been banned by the U.S. Congress from entering the U.S. ICT market on the grounds of threatening U.S. national communications security. Although investing in the U.S. has some advantages, such as in terms of taxation, logistics costs, advanced manufacturing technologies and levels, and sound and complete laws, the U.S. has strict regulations and high environmental requirements for businesses. Therefore, Chinese companies that are not familiar with U.S. laws, culture and market rules should not take the risk to invest.
Suggestions to reduce trade and investment disputes between China and the United States
With the gradual development of trade and investment between China and the United States to depth and breadth, the inequality between the two economies in interdependence is becoming more and more obvious, which determines that the local friction in the field of trade and investment between China and the United States becomes a norm and will not disappear in the short term, the two countries must take active and effective measures to eliminate the factors that trigger trade and investment disputes between China and the United States and maintain the healthy and smooth development of trade and investment between the two countries.
(a) strengthen communication and advocate dialogue and consultation.
Strengthen the mechanism of regular or irregular talks between the Chinese and U.S. governments, promote high-level strategic communication between the two countries, keep abreast of the strategic intentions and policies of both sides, and proactively resolve trade and investment disputes. Launched in 2006, the China-U.S. Strategic Economic Dialogue mechanism is the highest-ranking exchange mechanism in the economic field between China and the U.S. Eight rounds of economic dialogues under the framework have been held until 2016. Through in-depth exchanges, the economic relations between the two countries have reached a lot of consensus on global, long-term and strategic aspects, and have achieved many positive results, which have strongly promoted China-US economic and trade cooperation and smooth development.
(2) Chinese enterprises should increase innovation, enhance product competitiveness, improve the added value of export products, build their own international brands, raise awareness of intellectual property protection, and implement export commodity structure and export market diversification strategies.
(3) Both sides should maintain the good momentum of investment cooperation, follow the principle of equal treatment and mutual benefit, and continue to promote the negotiation of the U.S.-China Investment Agreement (BIT), with a view to reaching a bilateral agreement at an early date. The two sides should strengthen cooperation in agriculture, manufacturing, services and infrastructure construction to form complementary advantages for common development. China has strong production capacity in many areas of manufacturing, but technology, quality and services cannot keep up with market changes and need U.S. technical and service support. In dealing with trade and investment disputes with the United States, strictly follow the WTO rules and Chinese legal provisions to implement remedial measures and make full use of the WTO trade dispute settlement mechanism to safeguard China’s economic rights and interests.