IN the 21st century, the interaction of global economic entities has significantly strengthened. Extensive participation in international trade and investment activities has further enhanced interdependence among countries. The spillover effect of major economies has become evident, both positively and negatively. The global economic maelstrom in 2008, which was triggered by the subprime mortgage crisis in the U.S., rapidly engulfed the whole world, presenting a significant manifestation of this close link.
Stable Sino-U.S. Economic Development
In recent years, the sound economic development of China and the U.S. has promoted and supported the recovery of the global economy from the crisis. Currently, China’s economy makes up more than 30 percent of global economic growth, while the U.S. economy has hit a historically rare high growth rate. The steady economic growth of China and the U.S. stabilized the development expectations of the global market, enabling the establishment of a market-oriented transnational economic and trade cooperation network based on the full utilization of advantages of production factors for multiple resources such as capital and labor. The U.S. government takes pride on its historically low unemployment rate, while the Chinese government also attaches great importance to the stability of social employment. Good and stable Sino-U.S. economic and trade cooperation is an important guarantee for the continuous growth of employment in both countries and an important condition for social stability in both countries. The recent Central American refugee crisis facing the U.S. is also a spillover of its domestic economy. Compared with small countries, the spillover effects of large countries’ economic and social development will transcend the regional scope, possibly provoking global shocks. In fact, international organizations such as the WTO, IMF, and the OECD have repeatedly expressed concern about the global impact of the slowdown in economic growth of both China and the U.S.
Cooperation Benefiting Both
Maintaining mutually beneficial and win-win economic and trade cooperation is conducive to the stable economic and social development of China and the U.S.
According to the expenditure approach, GDP is derived from the combination of consumption, investment, government purchase, and net export. Mutually beneficial cooperation contributes to the economic development of China and the U.S.
On November 7, 2018, visitors to the first China International Import Expo in Shanghai experience video games using computers equipped with Core i7 processor chips at Intel’s exhibition area.
The U.S. has a huge consumer market and a developed credit economy. Bilateral trade between China and the U.S. has provided a large quantity of high-quality and low-cost goods for U.S. consumers and guaranteed them a high quality of life. China’s consumer market is rapidly upgrading and blossoming. The growing middle class’ consumption capacity, concepts, and preferences have created greater demand for imported goods. There is a huge space for U.S. enterprises to export to China.
Foreign capital is an integral part of social investment. As the most important investment destinations in the world, China and the U.S. have provided a huge development space for investors from all over the world. Investment activities are conducive to optimizing the globally networked layout of multinational corporations and improving the competitiveness of their products or services while reducing internal costs. Government procurement serves as an important approach to address market failure and allocate social resources, which is also significant for the effective development of the economy. China and the U.S. have different ways of government procurement management, but long-term communication has been carried out in the negotiations of the WTO “Government Procurement.” China’s smart cities initiatives and public management needs like environmental protection and governance demand cooperation with U.S. enterprises, while the participation of Chinese enterprises can provide important support for the upgrading of interstate and urban transport infrastructure in the U.S.
Sino-U.S. Trade Relations Impact the International Situation
Like two gigantic magnets, China and the U.S. not only attract each other across the Pacific Ocean, but also gather their neighboring economic and trade partners and resources through that magnetic attraction. Since the establishment of North American Free Trade Agreement (NAFTA) among the U.S., Canada, and Mexico in 1994, an industrial manufacturing and production chain layout in North America has gradually formed. U.S. enterprises have shifted their labor-intensive manufacturing links to lower-cost Mexico, reducing overall costs while promoting trade between the two countries. With the global industrial transfer, Asian economies such as Japan, South Korea, and China have successively taken over some industries transferred from the U.S. and European countries, and formed their own unique industrial advantages.
On July 12, 2019, locally-produced wood products are on display in Caoxian County, Heze City, Shandong Province, which enjoy a very large market overseas. The wooden national flag hanging in many parts of the U.S. is also made in Caoxian County.
With its stable business environment, abundant human resources, complete industrial system, and other advantages, China has gradually become a global manufacturing hub. At the same time, China has gradually formed a more complex economic and trade cooperation network with neighboring countries; their enterprises in the upstream and downstream of the industrial chain, and related industries carry out cooperation. Stable economic and trade relations between China and the U.S. are very important for the stable development of the international networks gathered by the two countries. From the impact of trade frictions over the past year, we can find that some enterprises began to restructure the international industrial chain, trying to find a new profit margin under tariff barriers. However, the initial costs of setting up a suitable, conducive industrial environment and labor training required by the manufacturing industry are higher, and dependence of the manufacturing sector on the scale effect is greater. Frequent and drastic environmental changes will bring larger adjustment costs, which is not conducive to the stable development of countries.
Although China and the U.S. play different roles in the establishment of the current international order, they both exert a noticeable and important impact on the development of the future international economic and trade order. In the current world, any international system lacking the participation of either side is incomplete, while the development of technology and the complex links of various interests demand global synergy to solve problems.
In addition to purely economic and trade issues, climate change, cyber governance, terrorism, financial risks, other global issues also need to be addressed jointly by all parties. Historical experience has proven that international agreements jointly promoted by China and the U.S. have greater appeal and influence. It is necessary to listen to and respond to the needs of all participants while paying attention to their specific interests. The international economic and trade order needs to be based on the basic principle of mutual respect. Development is the common demand of all countries. Only by finding an appropriate development path and forming a synergistic force can we fully mobilize the enthusiasm and potential of all parties.
Cooperative Innovation Is Promising
Innovation serves as an important driving force to promote social development, but the technological capabilities, market prospects, and business transformation capabilities needed by innovation itself affect and determine in varying degrees whether innovation has practical significance.
Both China and the U.S. have important concerns about innovation. The U.S. has strengthened the construction of the international intellectual property protection system through various international economic and trade agreements. China has intensified its efforts in intellectual property protection and strengthened enforcement of the law. As an important driving force of innovation, broad and effective market application is particularly critical. The huge market not only provides guarantees for the return of innovation cost, but is also an important guide for all kinds of innovation. The strengthening of mutually beneficial cooperation between China and the U.S. could provide more effective guarantees for innovative activities. In addition to enhanced stimulation of R&D and innovative efforts of local enterprises in both countries, it will also release strong signals of innovation and development, attract more global innovation resources to gather with China and the U.S., and play an effective role under the support of a more sound incubation system of innovative technology. We should make use of the advantages of all parties to form a stronger driving force for innovation and provide better support for global economic development and solving common challenges.
ZHOU MI is deputy director of the Institute of American and Oceania Studies of the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce.