It is the Right Time to Improve Sino-US Economic and Trade Relations



Zhang Yuncheng | China Institutes of Contemporary International Relations

The China Institutes of Contemporary International Relations is a think tank under the Ministry of State Security, China’s primary foreign intelligence gathering organ, with significant influence on state and party leadership thinking about foreign policy.

Since the beginning of this year, Sino-US economic and trade relations have shown strong complementarity and tenacity. First, a rapid rebound. in the first three quarters of 2021, Sino-US trade volume increased by 35.4% year-on-year to reach US$543.116 billion, of which China’s exports to the US were US$411.536 billion, an increase of 32.9%; China’s imports from the US were US$131.580 billion, an increase of 43.5%. The second is unprecedented growth rate and scale. Since July 2020, except in February and April this year, the total monthly trade volume between China and the United States has continued to exceed US$50 billion. This sustained high-speed growth has been rare before. The total economic and trade volume of China and the United States in the first nine months has approached the total amount of last year (US$615 billion in 2020). According to the current growth rate, it will reach 700 billion US dollars in 2021, the highest in history. The third is showing signs of structural adjustment. In terms of trade structure, manufacturing products such as machinery and electronics still account for the main part of Sino-US trade, but agricultural products and energy products are growing rapidly, of which the growth rate of agricultural products exceeds 120%; in the future, as the epidemic further improves, the service industry continues to unfreeze, and there is plenty of room for growth in service trade. Fourth, Sino-US economic and trade are resilient. At the moment when the global supply chain is disrupted, the epidemic continues to repeat, Sino-US relations continue to be tense, and the US has increased its “decoupling” efforts, Sino-US economic and trade growth appears to be very “eye-catching”. This shows it is a win-win situation for both China and the United States.

There are still many “dark reefs” and uncertainties in the Sino-US economy and trade relations respectively. Both China and the United States need to increase management and control to maintain the hard-won positive momentum of Sino-US economic and trade. In this regard, I would like to discuss the following four points:

First, rebuild regular channels of dialogue on Sino-US economic and trade issues. During the Bush administration, there was a “strategic economic dialogue” between China and the United States; during the Obama administration, there was a “strategic and economic dialogue” between China and the United States; during the Trump administration, China and the United States had a continuous dialogue to reach the first-stage economic and trade agreement. Such dialogue or negotiation mechanisms have become important interactive platforms for China and the United States to clear up misunderstandings, manage differences, unify goals and reach consensus, and have played an important role in stabilizing Sino-US economic and trade relations. After Biden took office, the US business community eagerly looked forward to the restoration of Sino-US economic and trade relations. Unfortunately, however, after nearly 10 months of evaluation of Sino-US economic relations, the Biden administration does not seem to intend to initiate the second phase of economic and trade agreement negotiations. The US should restart regular bilateral economic and trade consultations at an early date.

Second, Sino-US economic and trade negotiations should adopt an “all-topic dialogue” approach, rather than a “case by case” approach. At present, the Biden administration is pushing for individual solutions to Sino-US economic and trade issues, such as climate cooperation, with a very positive attitude. This kind of “one case, one discussion” mode is called “results-driven” cooperation mode by some American scholars. It seems that this method can avoid the involvement of other thorny problems and improve the efficiency of solving problems, but the actual situation may not be so. Such a “partial hot, the whole cold and fragmented” negotiation approach will not enhance strategic mutual trust between China and the US, but will fall into the dilemma of “warming up in the early stage, cooling down in the late stage” due to the lack of linkage mechanism between different topics.

Third, China and the United States should attach great importance to crisis management of bilateral economic and trade relations. At present, the possibility of a sudden impact of the “black Swan event” on Sino-US economic and trade relations is increasing. U.S. Trade Representative Katherine Tai recently described China and the United States as “dry sticks” where misunderstanding can ignite a fire, and said the temperature needs to be turned down. It is hoped that the US side will not put out the fire in Sino-US economic and trade relations on the one hand while setting the fire on the other. China and the United States should keep the channels of economic and trade communication open. In particular, we should improve our crisis management capabilities to ensure that when an emergency breaks out, the two countries can exchange views as quickly as possible, control the situation and come up with a common solution. It is imperative that the US stop imposing sanctions on Chinese companies and remove additional tariffs on Chinese goods.

Fourth, inject new momentum into Sino-US economic and trade relations. In addition to traditional bilateral and multilateral issues such as world economic growth, global financial stability and inflationary pressure, there are many areas where China and the US need to strengthen policy communication, coordination and cooperation. On the one hand, in view of the current global supply chain crisis, China and the US should strengthen trust and understanding and jointly shoulder the important task of repairing the global supply chain. An international forum on the resilience and stability of industrial and supply chains could be convened by the G20, the WTO and the IMF. On the other hand, China and the United States should work together to explore areas of cooperation in green economy and digital economy. In particular, we should establish balanced rules on cross-border data flows that balance development and security. At the G20 Summit in Rome, President Xi Jinping said that China has decided to apply for accession to the Digital Economy Partnership Agreement, which reflects China’s determination to pursue high-quality development, all-round opening-up and share development dividends with the world. Future trade talks between China and the US should focus more on future industries and less on historical issues, focus more on incremental creation and less on stock allocation, focus more on the opportunities for common development and less on the differences between different systems

Zhang Yuncheng is the Director for the Institute of World Economic Studies, Doctoral tutor, CICIR. He joined the Institute of American Studies, CICIR, in 1994 and was transferred to the Institute of World Economics Studies, CICIR in 1997. He stayed at the Graduate School of International Studies (GSIS), University of Denver(DU), US, from 2001 to 2002 and got his Ph.D. by CICIR and GSIS’s Joint-Supervision in 2002. From January 2004 to July 2013, he worked for the Center of Hong Kong and Macau Studies, CICIR. From December 2005 to January 2008, he visited the Department of Political and Economic Research at the CITIC Pacific Ltd, a well-known financial institution based in Hong Kong. From August 2012 to July 2013, he stayed at One Country Two Systems Research Institute Limited, a think tank based in Hong Kong. Professor Zhang Yuncheng authored several dozens of internal research reports and published more than a hundred papers in both internal and external academic journals.

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