Cooperation Is Integral to the Sino-U.S. Economic Relationship

By HU JIANGYUN

THE strong economic connections between China and the U.S. are understandably at the core of bilateral ties. Developments in the two countries' economic relationship are keenly watched by the rest of the world.

In this context, the recent visit to the U.S. by Chinese Vice President Xi Jinping, not long before the 18th CPC National Congress (to be held in the latter half of this year), has been deemed a significant event. During his five-day visit, the two sides held extensive talks, expressed their respective stances and concerns, reiterated their willingness to further intergovernmental collaboration and contributed to improving mutual understanding between the two nations.

A common thread through the numerous meetings was Vice President Xi's constant reiteration of the principle that China's foreign trade is not a zero-sum game – trade benefits all parties involved. This principle is backed up by hard statistics.

Data from Chinese customs show that since China's accession to the WTO its cargo imports and exports have soared from US $620.766 billion in 2002 to US $3.642 trillion in 2011. China has risen to become the world's second largest trader, only to the U.S. Two-way trade between China and the U.S. has also displayed meteoric growth, up from US $97.181 billion to US $446.447 billion, a 3.6-fold increase. The U.S. share in China's foreign trade, however, has shrunk from 15.65 percent to 12.26 percent.

While continuing to be a strong exporter, China is also buying more from abroad. Its imports have expanded 4.9-fold, from US $295.17 billion in 2002 to US $1.743 trillion in 2011. Of this growth, imports of primary products swung up from US $49.272 billion to US $604.376 billion – and increase by a factor of 11.27. Imports of high-tech products surged 459 percent over the same period, from US $84.797 billion to US $462.992 billion.

The dynamics of China's foreign trade and the ensuing trade diversion and trade creation bring benefits to China and its trade partners in both the developing and developed worlds. To take the U.S. as an example: the sheer scale of intermediate goods and inexpensive labor-intensive consumer products bought from China offers American consumers far more choices in the shops and malls of their country, and helps keep inflation at bay. These benefits from trade are all lending the country strength to shake off its financial crisis and reignite domestic economic growth.

China holds the same, reciprocal attitude towards foreign investment coming to its shores. The U.S. has long been the primary source of foreign direct investment (FDI) in China. American businesses contribute to local economic and social development, and also make robust profits in Chinese markets. According to figures from AmCham-China, in 2010, 85 percent of American operations in China reported revenue growth, and 41 percent realized profits above the global average level.

As the Chinese economy booms, domestic enterprises are heading to the American market as well. Nowadays, more than 1,600 Chinese companies operate in the U.S., and direct investment from China has leapt from US $65 million in 2003 to US $1.38 billion last year – an increase by a factor of 20.11. Chinese companies in America are engaged in many fields of business activity, including manufacturing, retailing, wholesaling, commerce, finance, science and technology and geological prospecting.

There is no doubt that Sino-U.S. relations are growing steadily closer. Since full diplomatic ties were established between the two countries, over 60 dialogue mechanisms have been forged at different levels and in numerous settings. Personnel exchanges are also on the way up – as many as three million passenger journeys are made across the Pacific annually, or approximately 10,000 every day. The Sino-U.S. relationship now constitutes one of the most significant, robust and promising bilateral ties in the world.

Nevertheless, such advances should not blind us to existing problems. Trade imbalance is a persistent issue of discord, and the U.S. never fails to place blame for this on China and inflict debilitating measures on Chinese exports. In addition, it demands "indemnity" from China, such as calling for Chinese government delegations to make token big-ticket shopping trips in the U.S.

The truth about trade imbalance is more complicated than U.S. fear mongers claim it to be. U.S. restrictions on its high-tech exports, its entrenched industrial structures and a number of other complex factors all have something to answer for. And what's more, the U.S. unexplainably stays silent on the other side of the story: China has long suffered from a large deficit in its service trade with the U.S. This fact is all but ignored by the economics pundits in the American media.

The U.S.'s 'China containment' strategy is incarnated in varied forms and implemented on all fronts, ranging from exchange rate bashing to trash-talking China's development model and to enacting specifically anti-China protectionist trade measures. This strategy is regarded as the root of the Chinaphobic thinking in the U.S. at present. Such a phobia is nothing new in the U.S., but after 30 years of rapid growth, China has shown it is willing to share the benefits of its economic rise with the world through the medium of trade.

In the age of globalization China cannot achieve its economic and social development goals in isolation from the rest of the world. China's reform and opening-up continues. The future looks bright for bilateral and multilateral ties, and China looks forward to forging partnerships with emerging economies like ASEAN, Russia, India, South Africa and Brazil, as well as enhancing cooperation with developed economies such as the EU and the U.S.

Cooperation endeavors empower Chinese growth and also give other countries the impetus they need to move on from the global downturn. All this should be good news, but for some reason China-U.S. tensions continue to hog the headlines. Relations between China and the U.S. are nothing like those between China and Japan in the 19th century, or between the UK and the U.S. a century earlier. Countries today must work together or else face handicapping their own economies. To prosper in a global environment, China and the United States must focus on long-term interests, drop Cold War thinking and seek out a new bilateral approach with cooperation at its core.

Hu Jiangyun is a researcher at the Development Research Center of the State Council.