Zhang Xiaoqiang, Executive Vice Chairman and Chief Executive Officer at China Center for International Economic Exchanges (CCIEE).
The year 2020 has been extremely remarkable one for the world. Unilateralism and protectionism produced a profound impact: The coronavirus spread around the world, and the global economy fell into a severe recession. Since President Biden took office last week, the direction of U.S. foreign policy has become a topic of huge interest. And at this critical moment, it is important for us to discuss China-U.S. relations. Here I would like to share my thoughts about bilateral trade and economic issues.
First, in a world in which our economic interests are deeply intertwined, China and the United States can’t and won’t decouple from each other.
The trade war initiated by the Trump administration in 2018 has not only failed to bring manufacturing back to the United States but has resulted in huge losses for both countries. American consumers now see their interests undermined, and Chinese companies are also affected.
Statistics from Chinese customs authorities reveal that in 2020, two-way trade in goods was about $587 billion, including Chinese exports worth $452 billion and Chinese imports worth $135 billion; and that the U.S. trade deficit with China was nearly $317 billion. In particular, China’s exports of medical supplies to the U.S. surged after COVID-19 broke out in the country. These figures illustrate that the trade war did not help reduce trade deficit and that China-U.S. trade relations are unshakable, with neither side being able to decouple from the other.
Second, there are many obstacles to China-U.S. cooperation in trade, investment and high technology, but rule-based and mutually beneficial cooperation remains mainstream and serves the interests of both sides.
In the past two years, the U.S. government undertook a series of measures to crack down on Chinese companies. For example, it used its state power to place a large number of Chinese companies on its trade blacklist known as the Entity List, forcibly thwarted cooperation between Chinese and U.S. companies in the supply chain, tightened investment controls and increased restrictions on two-way technology exchanges and cooperation.
These moves were quite damaging to both sides. U.S. exports of high-technology products to China fell to $33.91 billion in 2019, compared with $39.14 billion in 2018; between January and November 2020, the figure fell to $27.8 billion, down by 10.2 percent year-on-year. The self-defeating nature of the trade war is there for all to see. The Trump administration imposed severe restrictions on the exports of U.S.-made integrated circuits to China. This caused trouble for China, but also led to huge economic losses in a large number of U.S. semiconductor companies. Throughout 2020, China’s IC imports reached $350 billion, an increase of 14.6 percent over the previous year, and its domestic production reached 260 billion units, up by 16.2 percent year on year. Both short-term data and long-term projections indicate that semiconductor companies in Europe, Japan, South Korea and China are the real winners of the trade war.
In addition, as with U.S. companies hoping to invest in China, Chinese companies want more investment opportunities in the United States. Due to unreasonable restrictions under the Trump administration, however, Chinese investment in the country has plummeted. Between 2017 and 2019, Chinese direct investment in the U.S. nosedived from a peak of $45 billion to $5 billion, according to data from Rhodium Group. In addition, two-way investment recorded a year-on-year decrease of 16.2 percent to $10.9 billion in the first half of 2020. While the decline is partly attributable to the pandemic, it is closely related to the U.S. crackdown on Chinese companies, which affects their confidence and expectations.
By contrast, China has taken an open approach toward U.S. companies investing in China. In early 2020, the country rolled out the Foreign Investment Law and its implementing regulations, and in July issued the Special Administrative Measures for Foreign Investment Access (2020 National Negative List) and the Special Administrative Measures for Foreign Investment Access in Pilot Free Trade Zones (2020 FTZ Negative List). On Feb. 1 this year, China was to have put in place the Special Administrative Measures for Foreign Investment Access in the Hainan Free Trade Port, as part of its effort to relax market access.
Today, U.S. companies enjoy greater opportunities in China. For example, the first phase of Tesla’s Shanghai plant has the capacity to produce 200,000 vehicles a year. Since it went into operation, the company’s global production capacity has increased significantly, surpassing 500,000 in 2020. In addition, in 2020 Tesla sold 147,000 vehicles in China, which accounted for nearly 30 percent of its global sales, and the figure is expected to exceed 40 percent. In another instance, Goldman Sachs is applying to take full ownership of a mainland securities business.
In stark contrast, the New York Stock Exchange recently decided to delist three compliant Chinese telecom companies just to comply with an executive order signed by President Trump. While asking China to expand market access for U.S. companies, the United States impose unreasonable restrictions on the opening of the U.S. market to China for a variety of fabricated reasons. This unilateralist approach, which violates the principle of equality and mutual benefit, is completely contrary to the basic principles of fair competition, and Chinese and U.S. businesses have expressed their strong dissatisfaction.
In the United States, some preach the virtues of expanding market access and fair and reciprocal economic and trade cooperation, but they use double standards in what they do on the ground. China and the United States must move forward in the same direction and work together to improve the business environment and create development opportunities for enterprises in both countries.
Third, China and the United States need to work together to restore and develop their economic and trade relations, stabilize global supply and industrial chains and fulfill their responsibilities as major countries in global affairs.
Since the outbreak of the pandemic in early 2020, China has exported an enormous amount of anti-pandemic material while striving to bring the virus under control at home. From March to December last year, its exports of medical supplies reached $63 billion, including 224 billion masks, thus making contributions to pandemic response in the world and in the United States.
As one of the world’s most important manufacturing centers, China doesn’t install barriers to impede the flow of goods and technology across borders. It believes that globalization is in the common interest of all parties and has taken practical action to boost the global economic recovery. In November, China signed the RCEP agreement with Japan, South Korea and ASEAN countries, and in December it completed negotiations with the European Union on a comprehensive investment agreement. These are important achievements that China has made in promoting an open world economy in partnership with other parties.
I believe that the broader U.S. business community is ready to put bilateral economic and trade relations on the right track. As the world’s largest economies, China and the United States cannot turn back the wheel of history amid the global push for enhanced globalization. As they work together to overcome difficulties and strengthen cooperation, Chinese and U.S. businesses will definitely make notable contributions to the sound development of bilateral relations, the well-being of both peoples and win-win cooperation in a real sense.