Workers assemble Chevrolet's new generation of Cruze at the factory of a Sino-U.S. joint venture in Shenyang, northeast China's Liaoning Province (XINHUA)
On May 19, China and the United States released a joint statement regarding their economic and trade relations, promising that neither side would resort to higher tariffs as an act of revenge, which brought to an end two months of trade disputes.
The joint statement, though not the best outcome, has managed to defend China's bottom line. China will actively expand imports, instead of reducing exports, to alleviate the trade imbalance. No mandatory plan was created for the unreasonable demand initially proposed by the United States requiring China to cut trade surplus by $200 billion. In addition, the Made in China 2025 initiative will be safeguarded rather than undermined.
Since the United States makes up an important part of China's overseas market, a more balanced economic structure in the United States will enable China to better tap into opportunities there.
China chose to expand imports to help the United States achieve a more balanced trade structure. This will maintain and strengthen the purchasing power of the Chinese market and create more jobs and business opportunities for U.S. workers and companies.
Reducing exports, on the other hand, would have undermined China's purchasing capacity and thus would have resulted in shrinking development space for U.S. industries and dwindling employment for the U.S. workforce.
Although a consensus was reached to resolve the bilateral trade imbalance by expanding U.S. exports, frictions and disputes may arise during its implementation. Issues which are not mentioned in the joint statement are still awaiting solutions. Therefore, Sino-U.S. trade disputes are still far from a complete resolution.
In the foreseeable future, trade disputes may inevitably break out between China and other countries, including the United States, over the course of more intense trade interactions. China should get used to and ready for this.
A staff member sells beef imported from the United States in a supermarket in Shanghai (XINHUA)
Enlarging oil and gas imports
According to the joint statement, China will further enlarge its agricultural and energy imports from the United States, which will bring about benefits for both countries in the long term.
As the largest energy importer in the world, China will benefit from more stable and cheaper petroleum and gas imports. Narrowing and removing the energy price gap between China and other major industrial countries will reduce production costs for Chinese companies and shore up their competitiveness in an open economic environment.
As one of the major oil and gas producers and one of the largest consuming countries in the world, the United States needs to ensure that oil and gas prices are both high enough for producing companies to sustain operations, and kept at a reasonable range for downstream companies and customers, which is more likely to be achieved if China purchases more oil and gas from it.
Since oil and gas reserves in China lag behind major producing countries in terms of quality, quantity and exploration costs, an overemphasis on self-sufficiency would only result in rising costs for downstream manufacturers and perhaps for the entire national economy. Moreover, domestic gas output can by no means grow in step with consumption.
As a result of these factors, expanding oil and gas imports of higher quality at a lower cost is an inevitable option. In 2017, China imported 420 million tons of crude oil, 2.2 times as much as the country's domestic output, up 10.2 percent year on year, with the total reaching $162.33 billion, up 39.1 percent year on year. This signifies that China has become the world's largest crude oil importer. The country also witnessed a 26.9-percent increase in its natural gas imports, hitting $23.28 billion, up 41.2 percent year on year, making it more likely that in the near future, China will replace Japan as the world's largest natural gas importer.
Will the increase of oil and gas imports from the United States impair China's energy security? The answer is an emphatic no. On the contrary, it is conducive to China's energy security.
To strengthen its voice in negotiations for energy trade, China needs to push for the diversification of import sources and forms. A country with China's energy import volume can manage to both increase import volume and make import sources and forms more extensive. Therefore, it is a reasonable decision to include the United States on the list of oil and gas suppliers to restrain unreasonable prices from traditional suppliers.
Will increased exports to China harm the interests of the United States? Of course not. In fact, U.S. business leaders have held high hopes for a dramatic increase in earnings from an import surge. Several years ago, the former U.S. Treasury Secretary Lawrence Summers asserted that the shale revolution would propel oil and gas exports into a new growth driver behind the U.S. economy. Without a foothold in the Chinese market, the country's prospects for remarkable growth in oil and gas exports would be slim.
In fact, opening up the huge Chinese market will help the United States' oil and gas industries lower production costs and intensify its international competitiveness and profitability, which is of great significance to these capital-intensive industries.
The author is an op-ed contributor to Beijing Review and a researcher with the Chinese Academy of International Trade and Economic Cooperation
Sino-U.S. Joint Statement On Economic and Trade Consultations
The two countries agreed to take effective measures to substantially decrease the U.S. trade deficit in goods with China. China will significantly increase its purchase of U.S. goods and services to meet the consumption needs of the Chinese people and propel high-quality economic development of China, which also helps support U.S. economic development and employment.
The two nations agreed to meaningfully increase the export of U.S. agriculture and energy products. The U.S. will send a delegation to China for further consultations.
The two sides also talked about the expansion of trade in manufactured goods and services, and have reached consensuses on creating favorable conditions to increase trade in those areas.
Both countries highly value intellectual property protection and agreed to promote cooperation in this area, and China will promote the revision of related laws and regulations including its Patent Law.
Both sides agreed to encourage two-way investment and committed to creating a business environment for fair competition.
The two nations agreed to maintain high-level contact and actively seek to resolve their economic and trade concerns.
(Source: Xinhua News Agency)
Copyedited by Rebeca Toledo
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