Liu Zhiqin, a senior fellow of the Chongyang Institute for Financial studies at Renmin University of China (RDCY), was interviewed by CGTN on July 20, talking with the reporter of the Global Watch program over the topics at the first China-U.S. Comprehensive Economic Dialogue (CED) held in Washington D.C. on July 19.
Q: America and China basically failed to agree upon new steps to the reducing of trade imbalance between these two countries. Which one is the top issue at the economic dialogue and Why?
A: The trade deficit is the main problem between these two countries. Both of them are eager to find a solution to narrow or to limit it. As we know, the deficit can’t be solved easily within one hundred days or half a year, so we need to do a lot of work and spend long time to reduce such imbalance. But actually the key point is the different structure of the both sides. Especially in the past two decades, American industrial structure has tremendously changed. That means their demands are different from other normal countries. So trade deficit is still a key problem for America. He has the problems not only with China, but also with all the major economic countries in the world. That’s why he should consider restructuring its economy and the industry to solve such problem. But China is doing its best to narrow the gap. I think in the near future, new steps could be found out.
Q: America wants to rebalance the trade between China and US by selling more US-made products into China, and Donald Trump said that imposing more tariff on Chinese steel could happen. So we are seeing stick waving to China, but where is the carrot?
A: The whole world’s people are looking what could happen between China and America. On the one side, he’s trying to sell more products to China. On the other side, he wants to get less import from China, so it is already an imbalanced request. How can we coordinate the balance and imbalance? This is not mutual benefit, and totally unequal. That’s why China needs a lot of work and time to consult the occasion, especially for the steel products. The problem doesn’t lie on the Chinese side, because we are the supply side. So you cannot easily impose the tariff on Chinese products, and it also damaged American side interest. I think the both sides are still negotiating and trying to find real factors and reasons.
Q: America first is a basic principle of Donald Trump. Do you think it contradicts with principles of equal rights and equal interests in International negotiations?
A: Trump doesn’t care whether it’s equal or unequal. He wants America first. it’s already unequal. He said we need the job in America, and we need the profit in America. He needs everything in America. Then what else is left for the rest of the world? We have to do our best to make our products in best quality, lower price and high efficiency, then America has no other choice and has to buy something from China.
Q: Is trade deficit something necessarily to worry about? Does it indicate an unhealthy trade relationship?
A: It depends on what you promise during the election campaign. If you promised a big job for reducing the balance of trade deficit, you have to realize it. Normally, many Presidents in America announced such target but never realize it. But now Trump is trying to realize what he promised. However, deficit is kind of something that you can not be avoidable. Sometime you have to have it to keep the trade balance. You have to find a good point to make new jobs and new industry sections. So there is nothing to worry about the appropriate deficit. But we need to worry about too big deficit, which means you lose your employment domestically and lose your foreign market. The overreaction to the deficit, such as banning all the productions from outside, cutting all the relations with foreign companies, is also very dangerous. To be too extreme is not a good solution.
Q: China is not the only country that the US has deficit with. What are the root causes of the US deficit in general then?
A: In fact, the structure of it should be reformed again, both economically and politically. They can find a better way to further develop its economy. I think American should rethink and restructure what they have done before. Because 10 or 15 years ago, he gave up all the producing lines in America for environmental reasons, healthy reasons and cost reasons, and he put these producing lines in Mexico, in Canada, in Germany or in China. Now he wants to take them back, but it’s not easy, not a one-day job. You need one year to restore it, to install it and to restart the production. So I think they have to be more patient.
Q: What does the future look like between the two countries?
A: I’m optimistic about the relations between China and America. The largest two countries in the world cannot always in conflict. As we know that we have enough experience in dealing with the Cold War decades ago. That’s why China and America know each other much better than any other countries. Chinese President Xi Jinping already announced that there are thousands of reasons to improve the relation with America. There is no reason to damage the relation. This is the principle for two countries. So in the near future, I think that the both sides are clever enough to find a new way to get a solution. As we suggested, more compatible solution should be found out. That means we recognize they are different issues, and we are trying to find a common point. All these different issues should be compatible with each other. In this way, we can coordinate and cooperate in all fields.
Q: Does it mean that China and America are relying on each other more and more?
A: I think so. Because in the economic relation they are already closely interconnected, and we cannot imagine what would happen if they separated. As the Chinese high official already said that China and America are like family members, we cannot depart from each other. If American dream wants to be realized, it will take another hundreds of years longer without Chinese help.
Q: Are we expected to see any export from the US that was previously close to China, such as high-tech products？Is it possible for the US to allow Chinese telecommunications investment into tech sector?
A: I think it takes some time, because it is one of the major obstacles between these two sides. We want to buy high tech products, technologies and companies, but not allowed, even clean energy. So Chinese companies should try them best to reduce the cost and improve the quality of management in order to merge into American Market.
Q: So do you think the cases of Huawei and ZTE being banned from the US couldn’t happen once again?
A: It is impossible to have a trade war between these two counties, because it may damage both two sides and everybody knows it clearly. Actually, we are trying to warm up our relations.
Q: How to achieve a win-win situation? How to warm up the relationship?
A: Both sides should have a sincerity re-treatment in dealing with the different issues. For instance, America should recognize the status of market system of China. In this way, I think China products can be cheaper than America. Secondly, standard barriers should be lifted up, which can give more freedom and space for Chinese companies to work together with American people.
Q: China has lost much of its foreign reserves in the past few years. What measures has the government taken to deal with it?
A: We should find more ways to resolve it, not only put it in American banks for lower interests or lower return earns. We have to find a new investment to use these reserve. On the other side, foreign reserve is a guarantee for Chinese economy, especially for our international trade balance. The international trade needs a lot of settlement, so foreign reserve is very important for Chinese economy in the future. But it is not really enough for Chinese future development. If we want to be NO.1, we need a lot of foreign exchange. We have to develop our Renminbi internationalization process, to get more safety in this way.
Q: If the U.S. Federal Reserve alter the interests again, are we expected to see more losses of Chinese foreign exchange reserves?
A: I do not think it has so big influence on foreign exchange rate. In China, we have enough tools to monitor such situation, even we can change our interests rate to keep the value of exchange rate in America. Actually we have to put our investment to more safe and high gain products and projects in order to save the value of foreign reserve.