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Spotlight: Trade, investment serve as ballast in China-US relations

Updated: Nov 21,2016 11:22 AM     Xinhua

WASHINGTON — With preparations well under way here for the 27th session of the China-US Joint Commission on Commerce and Trade, the rapidly growing economic ties between the world’s two largest economies are capturing global media headlines again.

During the meeting, scheduled for Nov 21-23, the two sides are expected to discuss the implementation of consensus of their leaders, have an in-depth exchange of ideas over trade issues, and explore new ways to expand their win-win cooperation.

Over the past decades, China and the United States have witnessed closer ties in trade and investment, which have served as the ballast in bilateral relations.

The United States is the second-largest trade partner of China and China the first for the United States. In 2015, their two-way trade amounted to 558.4 billion US dollars.

Mutual investment between the two leading economies has also expanded rapidly, with accumulated two-way investment surpassing 160 billion dollars.

China’s economic rebalancing draws US interest

China is a major trade partner with Portland, the largest city in Oregon, Derrick Olsen, president of the World Affairs Council of Oregon, told Xinhua.

Hit hard by the recession, Portland began to explore ways to reinvigorate its economy, which included pursuing export opportunities for its electronics manufacturing and green businesses sectors.

Chinese cities offered Portland great business potential.

First Stop Portland, an organization which promotes exports of Portland’s sustainability expertise, has accommodated hundreds of delegates from China since 2009 and helped them tap into Portland’s experience in sustainability.

After a delegation from Chengdu, a large city in southwest China, visited Portland, partnerships were forged earlier this year on green district design, Nancy Hales, head of First Stop Portland, told Xinhua.

In 2014, Portland and Changsha, a city in central China, signed a deal that connects Portland’s cluster of sustainability-focused firms with the fast-growing Chinese market for environmentally conscious urban development.

The relationship, unlike the traditional sister city connections or cultural exchanges, helped build a trade and investment platform for Changsha and Portland and helped remove obstacles for companies from both cities, according to Brookings experts Owen Washburn and Amy Liu.

With China shifting its economy to a consumption-led model, many U.S. companies are finding opportunities in China.

More Chinese investment in US

China’s economic rebalancing is also reshaping its investment in the United States. Chinese investment in the country has gone beyond real estate, Shau Zhang, a partner at Ernst & Young America, told Xinhua.

The top six industry sectors in the United States favored by Chinese investors are IT services, electronics, industry machinery, communications, business services, and auto components, according to data from the consulting firm fDi Markets.

Rising Chinese domestic demand has already been felt by local U.S. economic development organizations. “Chinese companies have strong interest in our fresh water treatment technology and dairy projects,” Katy Sinnott, vice president of Wisconsin Economic Development Corporation, told Xinhua.

As a sister state, Wisconsin has extensive exchanges with China’s Heilongjiang province in agriculture and clean technology, said Sinnott.

With more and more Chinese tourists traveling overseas, Chinese companies are investing in hotels and logistics operations in the United States to cater to Chinese tourists. The U.S. Department of Commerce projects Chinese tourist arrivals will exceed 5 million by 2020.

The growing Chinese interest in the U.S. entertainment industry is another development that illustrates the role that foreign direct investment can play in establishing linkages, said a report released by the National Committee on U.S.-China Relations (NCUSCR).

The NCUSCR report showed that Chinese investment in the United States exceeded 15 billion dollars in 2015, a record high. It expected that Chinese investment is likely to hit another record in 2016, with over 30 billion dollars of pending deals and projects.

In 2015, the number of Americans employed by Chinese-affiliated companies rose by 12 percent to 90,000, a threefold increase in just three years. Data showed that Chinese companies tended to expand local employment after their acquisition of American companies, rather than laying off workers as some had feared, said the report.

The report suggested that the U.S. regulators and members of the U.S. Congress need to ensure that political rhetoric will not needlessly impede job-creating investment inflows.

“The progress and further potential for two-way U.S.-China direct investment flows to grow is one of the most notable bright spots in the bilateral relationship. Not only can these investment links strengthen a new generation of commercial and people-to-people ties to serve as the ballast in relations between the world’s two largest economies, but they can signal to the businesses and governments elsewhere that economic welfare retains the power to determine outcomes in the international arena,” said the report.

Open trade remains crucial

Following the election of Donald Trump as the next U.S. president, whether Washington will move backward on trade has become a concern not only for U.S. business circles, but also for its trading partners, including China.

During his campaign trail, Trump has promised to bring back lost manufacturing jobs by renegotiating free trade deals and levying hefty tariffs on its trade partners.

Trade and investment restrictions will be either ineffective or counterproductive, said David Dollar, a senior fellow at the Brookings Institution. “The idea of proposing a 45-percent tariff on imports from China will certainly backfire. Such tariffs would violate our commitments to the World Trade Organization, which the United States should not take lightly,” said the expert.

Dollar said China could find other exporting avenues to keep its economy growing, as exports to the United States are not that important to the Chinese economy any more.

It’s still too early to estimate the consequences from the Trump administration’s policy direction, as the unknowns are bigger than the knowns, said Edward Alden, a senior fellow at the Council on Foreign Relations.

Alden said that if Trump delivers on his campaign promises, it might induce a trade war with major trade partners, and might give a boost to the Chinese-led Regional Comprehensive Economic Partnership (RCEP) in Asia.

It has been widely agreed that, over the past decades, trade has contributed to productivity increases worldwide, and helped reduce by half the proportion of the global population living in extreme poverty and to create millions of new jobs with higher wages.

“(Trump’s) goals of expanded market access in China, greater burden sharing among allies ... are reasonable, but success will not be achieved by blindly riding roughshod over China and U.S. friends and allies or by dismissing the U.S. existing regional and global commitments,” said Scott Kennedy, an expert with the Center for Strategic and International Studies.

U.S. industry, workers and consumers have benefited and still benefit immensely from the post-World War II international architecture and from the U.S. relationships with China, Japan and others in the Asia-Pacific region, Kennedy added.