China, US will have to find ways to cooperate

Source:Global Times Published: 2018/5/3 21:13:41

Illustration: Luo Xuan/GT

Editor's Note:

US and Chinese officials are currently carrying out high-level talks in Beijing, trying to find a solution to the recent trade disputes. The negotiations between the world's two largest economies have drawn a lot of attention due to their potential influence on the global economy. The arrival of the US trade delegation indicates that the US has taken a step toward avoiding a massive trade war. China has also shown an open attitude to negotiations. Since both sides have their bottom lines to keep, it may be hard to reach a deal, but it is good to start somewhere. The China  Research Center (CMRC) of Peking University held a seminar on Sunday, at which researchers contributed their opinions on China-US economic and trade relations, which may shed some light on what is to come.

Yuan Peng, vice president of the Chinese Institute of Contemporary International Relations

The US and China are currently competing on three fronts simultaneously. One is political negotiations with US President Donald Trump. Trump's goal is to repay his supporters and deal with certain domestic contradictions. The second involves US businesses and entrepreneurs who care more about opportunities in Chinese industries such as finance and insurance than they do about the US trade deficit. The third, and the most important, is strategic wrestling between the two countries. China has to fight against the US strategy, which is to inhibit China's high-tech competitive potential via punitive trade measures.

China has to deal with all of these factors at the same time, and must negotiate with the US on the trade issue while continuing with the new round of opening-up. Meanwhile, competitiveness in high-tech sectors must be maintained via industrial and trade policy. There cannot be any slackening off in development, since that would directly affect the plans for 2025, 2035 and even 2050.

China has to be more prudent and modest than ever in this crucial moment. It has been making more friends. China's relations with India and Japan have improved. Relations with Russia, the EU, and African and Latin American countries are better than ever.

Liberalization of trade, which China strongly favors, is still the trend. In the current round of trade friction, European countries and Japan did not immediately take the US side because of the anti-globalization role the US has been playing in recent years.

Following this line of thought, China should be confident about its own growth. Moreover, China should be optimistic about the future of China-US relations. Cooperation is the only way forward.

Cui Fan, professor at the University of International Business and Economics

The charges in the US Section 301 investigation all pointed to the technology sectors. The trade friction has already gone beyond the WTO framework and boils down to a technology competition.

It is also a question about how to divide the high-tech market. Some US concerns are understandable, though its restrictive business practices are a headache for most developing countries. China needs to improve in certain areas, especially in drawing a clear boundary between the market and the government.

But the US has adopted inappropriate ways to express its concerns. We have seen that the EU and Japan oppose the US methods as they trample on the WTO agreement.

Former US president Richard Nixon held conservative views, but he achieved a major breakthrough in the China-US relationship. If Trump were to send friendly signals, there could yet be a new boom in the bilateral relationship.

Xu Chengjin, research fellow at the Center for International Economic and Technological Cooperation under the Ministry of Industry and Information Technology

The US launched its Section 301 investigation into alleged theft of intellectual property by China due to US concerns about the development trend and model of Chinese industries.

The "Made in China 2025" plan focuses on 10 manufacturing sectors. The first and foremost is the information technology industry. If the "Made in China" plan succeeds, China will take the leading position in the information technology industry, which covers 5G, big data, cloud computing and artificial intelligence. China's fast pace of development has shocked the US. According to the Section 301 investigation, China accounts for 27 percent of global high-tech manufacturing, not far behind the US' 29 percent. Considering that China is a late-comer, its progress has been remarkable.

The Section 301 investigation will have various effects. First, more tariffs will be imposed on Chinese products. These are likely to be used as bargaining chips during the negotiations. The US and China could reach agreement on this front.

Second, more restrictions will be placed on Chinese investment in the high-tech sector. Since the 2008 financial crisis, asset value has fallen in Western countries, attracting more Chinese businesses to conduct mergers and acquisitions in areas including the high-tech sector. In 2016, the US proposed reforming the Committee on Foreign Investment in the US (CFIUS) to tighten reviews of Chinese investment. Congress passed the Foreign Investment Risk Review Modernization Act (FIRRMA) to pursue reform of the CFIUS. And the US is not alone: Now the EU and Japan are also restricting investment from China.

Fourth, the US will continue to boycott Information Communications Technology (ICT) products from China on the basis of national security concerns. The US has elevated the concept of national security to such a crucial status. US companies such as AT&T and Best Buy and also the Australian government have started to cancel orders from Chinese firms Huawei and ZTE.

Fifth, the US will continue to put pressure on China's industrial policy in the foreseeable future using WTO rules.

China's industrial policy and trade policy need to have more synergies. The mindset that industrial policy does not have much connection with trade policy is outdated. The methods of supporting industrial policy will have to be updated, at the same time as promoting the competitiveness of Chinese industries.


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