Changing China-US trade ties requires new global outlook

Global Times note: A seminar on the situation five years after the United States launched a trade war against China and the evolution of China-US relations, organized by the Global Times, was held in Beijing recently. What changes have occurred to trade relations between China and the US? How does the trade war affect the overall bilateral relations? The Global Times selected the opinions of seven scholars who participated in the seminar.

Shi Yinhong, professor of International Relations and director of Center for American Studies at Renmin University of China: China has firmly upheld the international legal system with the UN at its core and a globalized world economic environment for many years and supports the reform of international economic and trade rules in a direction that is beneficial to developing countries. However, today, various complex factors have led to a shift in the priorities for improving globalization. A considerable number of people in developed countries have grown to believe that globalization has infringed on their basic interests. Taking advantage of this dissatisfaction, the US has begun to win over Western allies to form cliques, contain China in terms of high tech, and restructure industrial and supply chains. The Indo-Pacific Economic Framework promoted by the Joe Biden administration is essentially an extension of the “Indo-Pacific strategy” in the economic field. A few days ago, Treasury Secretary Janet Yellen delivered a speech on China-US economic relations at Johns Hopkins University. I’m not very optimistic about that because its underlying theme is to safeguard US national security at the expense of economic relations with China if necessary. Therefore, the fundamental logic of the world’s political economy has changed, which requires corresponding changes in everyone’s global outlook.

He Weiwen, former economic and commercial counselor in the Chinese consulates general in San Francisco and New York: Regarding China-US trade relations, I have six viewpoints. First, bilateral trade between China and the US is falling sharply. But it may not be sustainable. It started to pick up in March. The reason for this is that the US basically concentrates its main source of imports on North America and its trans-Atlantic partners, but this situation is not sustainable.

Second, the US’ supply chain in the high-tech sector is incomplete. The future is likely to change, but whether it will actually change depends on the trend.

Third, the contradictions in bilateral relations are structural. We can’t cure the “roots”, but we can cure the “symptoms.” The US believes that its global hegemony and the rules and order dominated by it should not be challenged by China. Hence, it is hard to solve the “root.” But we can address the “symptoms.” We can avoid armed conflict brought about by miscalculation. We can also maintain basic economic and trade relations, as the enterprises and supply chains between China and the US are complex and interwoven, which makes them difficult to replace.

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Fourth, the two sides should discuss on a more pragmatic level. A dialogue mechanism should be established in three areas: security, rules, and supply chains. In addition, two more working groups should be established, mainly in the fields of bilateral and multilateral cooperation.

Fifth, in response to the US’ containment, China should make more friends and carry out global cooperation.

Sixth, hope for China-US relations lies in the people. We can do more to reach out to US states, businesses, and ordinary people. Although it is difficult for us to fundamentally change bilateral relations, we can at least stabilize them, dare to fight, and strive for cooperation.

Huo Jianguo, former director of a research institute under China’s Ministry of Commerce: Looking back at the five years of the US trade war, we can see that many factors are weakening the US’ capabilities. Washington is bogged down in the Russia-Ukraine conflict, and supplying arms and money to Ukraine is like filling a bottomless pit.

Moreover, severe inflation and aggressive interest rate hikes in the US have made the financial system very vulnerable. The Silicon Valley Bank incident seems to have calmed down so far, but it is not over. In fact, the risks behind still exist. In addition, domestic consumption and employment in the US also have problems.

We should notice a couple of new changes. First, the share of Chinese products in the US market is declining. Therefore, consolidating the export share of the European and American markets is a key link to stabilizing foreign trade.

Second, foreign trade surplus has risen excessively. China’s trade surplus reached $877.6 billion in 2022. From the perspective of trade, a surplus is a good thing, but an excessive surplus will bring negative factors to external relations.

Third, new changes in industrial and supply chains must also be highly valued. It is an objective fact that China has strong competitiveness in the entire industrial chain. But we must also see that some multinational companies are forced to adjust their production layout due to various restrictions and pressures from the US. At the same time, Southeast Asian countries have stepped up efforts to attract investment in the past two years. Therefore, we must plan ahead and make full preparations and responses.

Chen Fengying, a research fellow at China Institutes of Contemporary International Relations: The US-China economic and trade relationship is undergoing significant changes. I’d like to describe it as the second “Sputnik Moment.” The launch of the first artificial Earth satellite in 1957 by the Soviet Union ahead of the US accelerated the Cold War. Now the US is trying to use the same approach against China with the so-called democratic alliance, the Indo-Pacific strategy and the Indo-Pacific Economic Framework. Hence, China needs to be prepared for the next decade of decisive and institutional change. I believe that we must pay the US back in the same coin. In response to the return of US manufacturing, we should also improve our own economic and industrial system. When the US relies on divided camps, China can further develop relations with non-Western countries. If China does well for itself, no one can defeat China. Why don’t we make China a new role model for the world and compete with the US’ strength by Chinese modernization?

Cui Hongjian, director of the Department of European Studies at the China Institute of International Studies: The US trade war against China is the first domino in an attempt to subvert the current multilateral trading system against the trend of globalization in the past five years. The second is the Covid-19 pandemic, which has seriously exposed the fragility of the supply chain and industrial chain. The third domino is the Ukraine crisis. Geopolitical factors have hit the world economy one after another and formed a progressive effect, and the confidence index of world trade has also shown a downward spiral.

This period of time is also a period when the trade policies of Western economies undergo major adjustments, and geopolitical considerations continue to permeate and intensify. From the previous interest-based trade expansion policy to the values-based concept of economic security, the West re-adjusts and re-defines the two principles of realizing interests and promoting values in its foreign and economic policies: maintaining values is equivalent to maintaining interests, and safe and sustainable economy is a “good economy.” Trade with “like-minded” countries is more value-added than pure trade, which is very different from the “free trade” principle they advocated in the heyday of globalization. The China-US trade war and its subsequent impact are making the next stage of globalization more and more regionalized, especially in terms of supply chain security. In terms of industrial chain adjustment, the US is trying to win over its allies through the so-called friend-shoring to reorganize industry alliances.

The above changes are posing new challenges to us. One is that we are now truly standing at the starting point of “fully opening up.” In the early days of reform and opening-up, we mainly opened up to Europe and the US, learned their technology and experience, and attracted investment. But when we have also become an economic highland and center, how to use our own technology, experience and capital to fully open up to the global market, and whether we have the ability and courage to form an overall industrial chain layout with ourselves as the core will become a pivotal long-term challenge. Second, under the premise of adhering to bottom-line thinking, it is still necessary to open up to developed economies and achieve the goal of institutional opening and high-level cooperation. In the context of more complex geopolitical factors, maintaining the balance and sustainability between development and security is the next major test we will face.

Li Haidong, a professor at the Institute of International Relations at China Foreign Affairs University: The US trade war with China reflects several features of bilateral relations. First, the change in the two sides’ foreign policy orientation toward each other is evident. There was a time when China-US relations accounted for a considerable part in our foreign policy, once the relations with the US were handled well, other relations would be naturally smooth. While China policy was only a small part of overall US foreign relations. Today in China’s overall diplomacy, the US is of a small part, while China has become the center of focus for the US, with its policy in Africa, Latin America and South Pacific being largely driven by that of China.

Second, there is indeed a “deadlock” in China-US relations. It is mostly led by the misinterpretation and misjudgment of US diplomacy toward China. This is deeply related to the long-standing policy tradition of the US that has habitually made mistakes in major aspects such as its understanding of China and the definition of strategic goals. Therefore, it is difficult to expect the US to develop a balanced and objective understanding of China in the short term.

Third, the solution to change this “deadlock” can be found in China’s overall diplomatic strategy. In other words, China will focus on diplomacy with emerging economies as well as diplomacy with European, African and Latin American countries. With higher-quality mutual relations, a possible outcome will be reached that will eventually bring the US policy toward China back to a pragmatic and responsible path.

Fourth, US mentality of dealing with China-US relations based on national strength shows no essential change, but we should note the changes in US public opinion toward China. Unlike China’s pragmatic understanding of the US, the Americans’ attitude toward China has become more “hostile” under the influence of the US media and politicians. Next, in the interaction between China and the US, we should try our best to overcome traditional and emerging problems, so as to finally reach a benign situation of practical cooperation.

Cheng Yawen, a professor at the School of International Relations and Public Affairs of the Shanghai International Studies University: Recently, we often came across the term “Global South” in both domestic and foreign media. In the past, China mainly cooperated with Western countries with the US at the core in terms of foreign trade. But as the US tries to decouple from China by launching the trade war, cooperating more closely with the Global South or third world countries inevitably becomes an alternative.

I think we need a new “three ring” environment. The first ring is China’s neighboring countries including Asean members, neighboring East Asian countries, Central Asian countries, and Russia. The second ring is the majority of third world countries in Asia, Africa and Latin America. The third ring is traditional Western countries.

There was a lot of cooperation between China and the US, especially in the 1970s and 1980s. At that time, China and the US had a common foe: the Soviet Union. Meanwhile, China was not powerful and the US did not think China was able to challenge its core interests. Now the two elements no longer exist. We can only try our best to bring bilateral relations back to the right track, although the outcome may not be positive. We should also try to maintain cooperation with Western countries.

Today, we should continue to open up, not only to the West, but also to Asia, Africa and Latin America. The importance of third world countries to China has been lifted.

This article was first published in the Global Times on April 24, 2023. The Global Times is an English-language Chinese tabloid under the People’s Daily, the flagship newspaper of China’s ruling Communist Party. The views expressed here are the scholars’ and not necessarily those of The Manila Times.