After the world saw what has been characterized as an unprecedented open confrontation between China and the US, many in the business world are turning their eyes to trade in the hope of possible cooperation, as the two biggest economic powers appear to be in a deadlock on major political and security issues, but there remains massive mutual economic interests that could pull the countries from plunging into wider conflict.
Trade has always been a reliable stabilizer in bilateral relations, and it could play the most important role in holding the two countries together when their relations are in a downward spiral, analysts said. While there are still many disputes in trade, including lingering tariffs and the US crackdown on Chinese firms, there is more urgency and hope for both sides to reach breakthroughs in addressing those issues, business leaders and analysts noted.
In a dramatic turn of events, Chinese and US top diplomats exchanged angry remarks at the opening of the meetings in Alaska. After US Secretary of State Antony Blinken listed US grievances against China, Yang Jiechi, director of the Office of the Central Leading Group for Foreign Affairs, fired back, telling the US side that it was not “qualified” to speak to China from a position of strength.
For many, the confrontation marks a historic moment in China-US relations, where there will be slim chance for the two countries to reach any agreement on political and security issues. However, many also point to the massive trade volume between the two countries worth 4.06 trillion yuan as the most important area where the two sides could make some breakthroughs and avert the increasing risk of conflict.
“It has become clear that trade is the [most important] area left where the two countries still hold massive mutual interests and could reach some consensus,” Li Yong, deputy chairman of the Expert Committee of the China Association of International Trade, told the Global Times on Friday, noting that while continuing some of Donald Trump’s trade tactics, US President Joe Biden’s administration is aware of the damage of the trade war and the need to cooperate with China.
Reflecting on the important role of trade in China-US ties, bilateral trade grew by 8.8 percent year-on-year in 2020 and jumped 81.3 percent in the first two months of 2021 in stark contrast to the free fall in diplomatic relations.
And many on both sides want to further raise those figures even as the two countries don’t see each other eye-to-eye on a host of other issues. Since Biden took office, expectations have been building in Chinese and US businesses for the two to address lingering issues, including remaining tariffs and US crackdowns on Chinese businesses, and expand cooperation in areas of mutual benefit.
Greg Gilligan, chairman of the American Chamber of Commerce in China, said at a recent press briefing that the Biden administration would “normalize” ties with China and he remains “optimistic” that the Biden administration would remove some measures or restrictions put in place by the Trump administration and “has reason to do so.”
The Biden administration has said that it would not remove the tariffs before conducting a review and consultation with allies. However, the damage of the tariffs is continuing to build for the US economy which has already been battered by the COVID-19 pandemic. Over 3,500 US firms have filed a lawsuit against the US government over the tariffs.
Analysts said that the two countries have reasons to keep trade stable as they cannot afford a further decoupling in trade. A recent report by the US Chamber of Commerce warned that if tariffs were expanded to all trade, the US GDP could see a $190 billion loss each year by 2025 and $1 trillion in the coming decade.
While sectors related to military and core technologies, including semiconductors, might see further restrictions, there are still many areas in merchandise trade and investment that the two countries could further expand, analysts said. For example, many US businesses, including farms, energy firms and financial institutions, have a huge interest in the Chinese market.
But the two sides must first address the lingering issues, including removing tariffs, easing crackdowns on Chinese firms and the complications around the arrest of Meng Wanzhou, Huawei CFO, by Canadian authorities at the behest of the US, analysts said, noting that the Chinese officials might bring those issues up in Alaska.
Meng’s case is particularly urgent as the Chinese citizen has been detained for over two years and its diplomatic fallout is expanding on relations between China, the US and Canada. Also drawing widespread attention are the cases of two Canadians being tried in China for endangering China’s national security.
“While these trade issues are also complicated and thorny, they are much easier to address compared to the political differences,” Huo Jianguo, a vice president of the China Society for World Trade Organization Studies, told the Global Times. “On politics, it seems that no agreement can be made. But in business, there is always common ground.”
However, even as hopes are rising for trade cooperation, there should be “no illusion” that the US would scale back on its crackdown of Chinese businesses, especially advanced areas that challenges its dominance, He Weiwen, a former economic and commercial counselor at the Chinese consulates general in San Francisco and New York, told the Global Times on Friday.
“The US attempt to strangle supply of core technologies to China will definitely continue,” He said, adding that China must be prepared to counter the US crackdown, including advancing indigenous innovation, expanding foreign sources and maintaining good relations with the US business community.
China has already rolled out a slew of measures to bolster research and development in core technologies, including chips, artificial intelligence and telecommunication. And industries have already moving rapidly to switch to domestic suppliers amid the US crackdown.
That was on display during a major semiconductor trade show in Shanghai that ended on Friday, where shopping for domestically developed components took the main theme.
“China-US disputes in 2020, in tandem with the coronavirus pandemic, gave birth to an increasingly urgent strategic demand for the localization of China’s semiconductor industry chain,” Zhang Xin, senior vice president of operations and engineering at Semiconductor Manufacturing International Corp, which has been blacklisted by the US, told the Global Times.
“While China is committed to dialogue and win-win cooperation, make no mistake that this is ultimately a race of national strength between China and the US,” Huo said.