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Zhao Minghao: Certainty in Sino-US ties ensures stable global economy

2017-04-19

By Zhao Minghao    Source: Global Times    Published: 2017-4-18

 

On April 12, US President Donald Trump said that he would not label China as a currency manipulator. The decision dramatically reduces the probability of a trade war between US and China.


It seems the relationship between China and the US has become more predictable than before after the first meeting between Chinese President Xi Jinping and his US counterpart earlier this month. Amid a myriad of uncertainties, Washington and Beijing have the responsibility to reassure the world by stabilizing their bilateral relationship.


Trump`s choice of venue, the Mar-a-Lago estate in Palm Beach, has symbolic significance. It implies that he is willing to establish a personal relationship with Xi.


His granddaughter also sang a famous Chinese folk song, which was well-received by Xi and his wife. Apparently, the meeting has yielded many tangible results, including the establishment of the comprehensive economic dialogue mechanism.


In the past, Trump saw the China-US economic relationship as a zero-sum game, blaming China for job losses in the US. At present, the US is reviewing the bilateral economic relations from an overall perspective, which is encouraging to America`s policy toward China.


Both China and the US agreed to implement a 100-day plan in an endeavor to resolve the trade imbalance between them. According to the US statistics, the total US trade deficit exceeds $500 billion, and the US-China trade deficit amounts to $350 billion. An article co-written by Peter Navarro, head of the White House National Trade Council, and Wilbur Ross, secretary of commerce, pointed out that trade deficit is the main cause for the US economic downturn.


In reality, many trade experts believe that Trump`s knowledge on trade deficit is inaccurate. In fact, it is the cheap commodities from China that are upholding the US public`s purchasing power.


In addition, many trade partnerships that appear to be "US-China" on the surface are actually between the US and itself. American companies, such as Apple, establish factories in China and then sell the assembled products in the US. The Chinese only earned the small profit from assembling the products while the US is the receiver of most of the revenue.  


Trump`s change of tone is mainly influenced by members of the establishment in Washington, including US Secretary of Treasury Steven Mnuchin and Chief Economic Advisor Gary Cohn.


Trump is no longer a presidential candidate. He is in need of experienced senior officials to help him make and implement feasible policies, particularly in the fields of economy and trade.


Through the 100-day plan, China and the US should be able to come up with better solutions to tackle trade imbalance. China should further open up its service industry to provide US enterprises more business opportunities while the US should reduce the limits on the export of high tech products to China. In addition, Beijing hopes the Trump administration can play a more positive role in signing a bilateral investment treaty. If the process of green field investment could be made more smooth for China, not only would imports from China to US be reduced, but many jobs would be created.  


The elimination of the possibility of a trade war benefits the global community.


Since almost every country in the world is concerned about the Trump`s America First doctrine, the dissolution of the possibility of a trade war would alleviate the anxiety that Trump has caused. Asian countries, including India, South Korea, Indonesia and Malaysia all have trade deficits with US and have all been worrying about being targeted by the Trump administration.


A trade war between the world`s first and second largest economies will only cause damages to both sides, and simultaneously, make other countries that have been drawn into the global industrial chain suffer.


The author is a visiting fellow of Chongyang Institute for Financial Studies at Renmin University of China.

Key Words: China   US   trade   Zhao Minghao  

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