Source: CGTN Published: 2019-1-18
Editor's note: The following is a transcript of an interview with Jin Canrong, vice dean of the School of International Studies at the Renmin University of China.
Chinese Vice Premier Liu He will visit the U.S. on January 30-31 for the next round of trade negotiations, China's Commerce Ministry said on Thursday. Over the past year, the escalation of the trade war triggered by Donald Trump has put China-U.S. relations under considerable strain.
Even though both China and the U.S. are willing to address their trade frictions, a ceasefire agreement cannot be easily reached, and relations between the world's two biggest economies are at a delicate point in time. Will Vice Premier Liu He's visit bring new developments to the intense trade war and where is the future relationship between China and the U.S. heading? Jin Canrong shares his views with CGTN.
CGTN: Is Vice Premier Liu He's visit to the U.S. unexpected?
Jin: After the previous China-U.S. vice-ministerial dialogue, the U.S. has already expressed its willingness for further discussions. Therefore, Vice Premier Liu's visit is not a surprise. Actually, this is good news, and an agreement is likely to be reached.
The best result is when the two sides reach an agreement that satisfies both countries, which means the Chinese side agrees to the U.S.'s reasonable requests, such as better protection of the intellectual property rights, and the U.S. gives up unreasonable demands, such as those related to Chinese state-owned enterprises. But achieving an absolutely satisfactory result is almost impossible.
Instead, it is possible to reach a new phased-agreement, which may be the best result at the moment. For example, China buys more American products and purchases more high-value-added products. This phased-agreement may only be effective for a few months and will not last long.
Even that, it is also good news for the market, and the uncertainty is reduced in the short term. In the case of a prolonged ceasefire, Chinese companies must pay special attention to the under-table moves of the United States. For example, the Huawei incident is quite unexpected, as it has expanded into the judicial field, not just in the field of trade.
Therefore, it is necessary to pay special attention to the U.S.'s behavior against leading Chinese companies such as TCL and Huawei. It is recommended that Chinese companies temporarily reduce their business with the U.S. and decrease their assets in the U.S. as well. Extra attention is also required for Chinese senior executives both in China and the United States.
'A ceasefire agreement is likely to be reached in the second half of this year.'
CGTN: When will the China-U.S. trade war end?
Jin: In terms of China-U.S. trade war alone, I believe that a ceasefire agreement will be reached in the second half of this year, because the Chinese economy will get better in the second half of the year, while the U.S. economy will turn worse, and the negotiating status of both sides will reverse.
In the past few years, China's macroeconomic policy has always emphasized de-capacity, destocking, deleveraging, cutting costs and overcoming weakness, but did not consider increasing effective demand. However, in last year's Central Economic Work Conference, an emphasis was placed on expanding effective demand.
The macroeconomic policy changes, the central bank's RRR cuts, and other measures were successively introduced. Then, after a period of implementation, there will be a marked improvement in the second half of the year.
At the same time, the U.S. economy will face a crisis. After Trump took over a healthy economy from the Obama administration, he made a few more shots: cutting tax for businesses, encouraging returning overseas capital, and implementing an infrastructure policy worth one trillion U.S. dollars. In particular, the removal of the controlling plan for the Wall Street implemented in the Obama administration encouraged speculation and brought prosperity to the Wall Street.
That's why the U.S. economy was particularly good in the first three quarters of last year. But in the fourth quarter, the economy began to deteriorate, and the market value of the stock market evaporated by five trillion U.S. dollars. As earlier stimulation effect faded, its economy showed its original shape, and growth is weak. Therefore, by the second half of this year, the China-U.S. negotiations status will change and a long-term armistice agreement will be reached.
'Frictions between China and the United States may be normal occurrences in the future.'
CGTN: How will China-U.S. relations develop in the future?
Jin: The frictions between China and the U.S. will be a new normal. This is an inevitable change.
Trade frictions could be resolved, but there will be other measures taken by the U.S. to suppress China. For example, initiating trade sanctions against China, launching Huawei's judicial investigations, spreading bank fraud allegations, as well as triggering public opinion battles. Last year, there were rumors spread almost every month, such as so-called "Xinjiang independence" and "Tibet independence."
However, trade wars cause damage on both sides. The China-U.S. trade war also affects the U.S. stock market, which provides 80 percent of the funds for U.S. companies, so the stock market is turbulent and hurts the United States.
Last year, U.S.'s tools suppressing China started from trade and then spread to technology, finance, and public opinion, reducing the confidence of the Chinese people.
This year, I am worried that it will take Taiwan as an entry point. This is China's internal affairs. If the U.S. intervenes in the Taiwan issue, it will be very troublesome. The scope and extent of the impact will be very serious and the cost will be high.
Jin Canrong is vice dean of the School of International Studies at the Renmin University of China.