China and the United States are partners, not rivals, in trade, and the Sino-US relationship is one of the most important bilateral relationships in the world. Cooperation between China and the US since the establishment of Sino-US diplomatic relations almost four decades ago has benefited the peoples of both countries, as well as the people in the rest of the world.
Moreover, the US is China’s biggest trade partner while China is the US’ biggest creditor nation. The trade volume between the world’s first and second-largest economies reached $514 billion last year, and the two sides have great potential for deeper cooperation.
True, China has a trade surplus with the US, but the US cannot resolve its trade deficit issue in the short term, because it is the long-term result of economic complementarity, industrial structure and international division of labor. So both sides have to make concerted efforts to balance Sino-US trade.
Three major factors have contributed to China’s trade surplus. First, to maintain the US dollar’s status as the global currency, the US accumulated a trade deficit.
Second, the trade deficit is also the result of the US’ low savings rate, and high demand for high-quality but inexpensive Chinese products.
And third, the US has a big trade deficit also because it has imposed strict restrictions on exports of high-tech products to China. As part of the global value chain, China needs to import hundreds of billions of dollars worth of high-tech products every year. But due to its exports policy, the US, which is a leading producer of high-tech products, cannot balance its imports with exports leading to the trade deficit.
No wonder despite the US imposing high tariffs on Chinese products and instigating a trade conflict with China, its trade deficit hasn’t reduced. And contrary to the US claim that the Chinese market is not open enough, China has attracted more foreign capital than any other country this year. In January to October, China attracted foreign direct investment worth $107.67 billion, up 6.5 percent year-on-year.
China is one of the world’s fastest growing markets and an important export market for the US. Thus, it makes sense for the two countries to cooperate, instead of fighting a trade war.
The trade war the US has instigated is hurting both sides. The recent plunge of the US stock market is one such example. Besides, the Sino-US trade frictions are spreading negative sentiments among global investors, and thus increasing the financial risks.
Since many economists have forecast that the US’ gross domestic product growth will drop in the next two years, the US should cooperate with China, which has a huge consumer market, to prevent a possible economic downturn.
Treating China as a rival, rather than a trade partner, is a serious strategic misjudgment on the part of the US, and by doing so it could bring upon not only itself but also the world a huge crisis.
China made great contributions to stabilize the world economy after the global financial crisis broke out in 2008, helping in the process the US to overcome its serious financial woes. Even after US President Donald Trump assumed office, China and the US have, to a large extent, engaged in mutually beneficial economic and trade cooperation, including the 100-Day Plan and several enormous business deals.
But now the US is treating China as a rival in fields such as trade, technology and diplomacy, prompting China to cooperate with other countries. But the US wrongly believes it can reduce its trade deficit and balance its foreign trade by doing so.
China is not the same country it was four decades ago, nor is the world the same place. Thanks to economic globalization, the global value, industrial and supply chains are closely connected with all the countries. No country can flourish in isolation, and no country can maintain hegemony by provoking trade conflicts. For its own sake, therefore, the US should enhance cooperation with China.