The agreement between China and the US to end a trade confrontation sent ripples of relief across the world and is a valuable opportunity for ties to take a new direction.
In 2017, China and the US together accounted for 40 percent of the global economy and over half of global growth, a testimony to the importance of ending a trade crisis and looking ahead.
Given the importance of the May 19 agreement, both sides have a responsibility to seize the opportunity and take proactive steps to foster new areas of cooperation. Thus, economics and trade can again become the bedrock of bilateral ties, rather than a point of friction.
To meet the growing needs of Chinese consumers and support quality development, China has committed to increasing purchase of US goods, particularly agricultural products, energy and other quality products and services. Both sides will also explore ways to encourage bilateral investment. Drawing on in-depth research on Sino-US economic relations by the Center for China and Globalization (CCG), this article outlines four promising areas based on the consensus achieved in Washington.
First, services. Services play an important role in balancing Sino-US economic relations. New WTO data show that the US ran a surplus of $54 billion in trade in services with China in 2016, a 33-fold rise over the preceding decade. Given rising incomes and demand for quality services in China, there is considerable room for further growth in Sino-US trade in services, particularly in tourism, education, and cultural products.
Take tourism, which accounts for over half of US service exports to China. A recent report by CCG found that in 2016, the number of visits to the US by Chinese tourists grew 15 percent to almost 3 million, with associated spending in the US up 9 percent to around $33 billion. Deeper bilateral cooperation on services trade will not only help reduce the trade deficit, but also increase opportunities for exchange and mutual understanding.
Second, e-commerce. The rising spending power and evolving preferences of China’s 400 million-strong middle class present major opportunities for US exporters. Online shopping is the most striking reflection of this growing market.
Spending by Chinese consumers during last year’s annual November 11 online shopping spree reached $40.5 billion in a single day, and trade via China’s cross-border e-commerce (CBEC) platforms has grown at over 50 percent annually for the last three years.
Both sides can help unlock the CBEC potential to connect this growing market with US companies both large and small, by pursuing a bilateral CBEC agreement that allows for coordination on relevant standards and trade facilitation measures. This would give Chinese consumers access to a wide range of quality products while helping reduce the trade deficit and creating opportunities for employment, innovation and investment in both countries.
Third, energy. Current trends are conducive to growing energy trade between China and the US in the coming years and decades. It is only a matter of time before China surpasses the US to become the world’s largest energy consumer and imports account for over half of China’s energy use. Beijing’s efforts to tackle air pollution and shift to cleaner fuels will drive demand for gas imports in particular.
Meanwhile, the shale revolution means that the US is expected to become a net energy exporter by 2022. This represents a major shift in the global energy sector and China is the ideal market to absorb rising US exports. In 2017, China was importing 220,000 barrels of crude oil per day from the US. There is potential for US energy exports to China to rise significantly in the coming years. Chinese capital can also help resolve midstream infrastructure bottlenecks in the US that currently limit the growth of energy exports.
Fourth, infrastructure cooperation. There are many other opportunities for Sino-US collaboration in infrastructure. President Trump’s $1 trillion infrastructure initiative calls for major investment in transport networks, water supply, communications and power grids. China’s accumulated capital and infrastructure knowhow can contribute to this program.
To achieve this, Sino-US dialogue spanning policy, finance and industry will be needed to devise innovative models for collaboration that can help overcome potential political resistance and meet requirements to use US homegrown products. Leveraging Sino-US synergies in infrastructure cooperation will not only create jobs and help boost US exports, but can also build momentum for cooperation in other areas.
The recent bilateral agreement has opened new vistas for mutually-beneficial cooperation between China and the US. To take full advantage of this opportunity, fresh ideas and deeper bilateral exchange are needed to forge new modes of cooperation. In addition to high-level government-to-government dialogue, businesses, think tanks and citizens of both countries also have an important role to play in this process. As an independent Chinese think tank, the CCG strives to play a role in Sino-US relations by providing a platform for people-to-people diplomacy and exchange of ideas.
We hope that Chinese and US policymakers will fulfill their responsibility to the citizens of both countries and the rest of the world by avoiding the trap of zero-sum thinking and working to nurture shared interests and mutual trust. This will provide a foundation for stability and prosperity as we open a new chapter for Sino-US relations.
The author is founder and president of the Beijing-based independent think tank Center for China and Globalization and vice chairman of Western Returned Scholars Association. firstname.lastname@example.org
Source: Global Times