Why China-US trade conflicts won’t end in war – no matter how loud the threats
Patrick Mendis and Sheng Cui say with China-US economic and investment relations strengthening by the day, points of disagreement could well be resolved by finding more ways to cooperate for mutual benefit, notwithstanding the warnings of tariffs and other punitive measures
China and US can avoid trade war - if Beijing stops ‘appropriating our technology’, says Steve Bannon in Hong Kong
Here are the American companies most at risk in a trade war with China
Over the past three decades, China has also been one of the most important FDI destinations for the US. In the past quarter of a century, there has been over 6,700 individual FDI transactions from the US to China, with a total value of US$228 billion. By 2015, 29 out of 31 provinces and regions in mainland China were recipients of American FDI. Shanghai, Beijing and Jiangsu took the lead.
This commercial and investment engagement is now threatened by economic and trade protectionism, as current Chinese policies relating to market access and security issues are obviously unacceptable to US companies.
Watch: Xi launches his globalisation strategy at the Belt and Road forum in May, 2017
China’s pledge to open its market for trade and investment must be honoured on the ground
China has pledged to introduce “a new open economic system” to encourage foreign investment. The State Council issued two statements this year to announce loosening restrictions on foreign investment in industries. This is good news for the US companies in the service industry, as the statements suggested the Chinese government is easing entry for foreign companies in finance, telecommunications, the internet and transport. A recent example is J.P. Morgan, which in the past 12 months obtained licences in China for corporate bond underwriting and stand-alone asset-management.
As the Chinese middle class grows, the demand for American products – particularly safe foods, dietary supplements, and nutritious agricultural crops – increases significantly. It may be a possible solution for Washington to address the balance of trade issues by exporting more to China – as illustrated by the most recent trade agreements – rather than just imposing the reported 45 per cent tariff to restrict Chinese imports into the US.
The US and China can beat the trade deficit with a treaty, not all-out war
Trump’s infrastructure plan would also offer plenty of opportunities for both countries to cooperate in investment opportunities, as demonstrated in American railroad construction in the 19th century. Chinese companies’ advantages of quality and cost control could be of use in Trump’s infrastructure programmes.
A trade war is imminent, but not inevitable. Can mindsets change before it’s too late?
In fact, the ongoing investment and trade probes have more symbolic than practical implications, and brings into sharper focus the emerging co-dependency of the two major economic powers.
Patrick Mendis, a former visiting professor of Peking University’s School of International Studies, is an associate-in-research at the Fairbank Centre for Chinese Studies at Harvard. Sheng Cui, an alumnus of Peking University, is an MPA student in international policy and management at New York University’s Wagner Graduate School of Public Service