China-U.S. trade shifts towards balance, sustainability

BEIJING, Sept. 20 -- Economy and trade are perhaps the area where China and the United States have most of their converging interests and where they have achieved substantial and mutually beneficial gains through cooperation and management of differences.

It is worth mentioning that, with the rise of China's middle class and market entry made easier by such means as e-commerce and such mechanisms as a bilateral investment treaty (BIT) in the future, the China-U.S. trade structure is becoming more balanced and sustainable.

There are high hopes that Chinese President Xi Jinping's upcoming state visit to the United States slated for Sept. 22-25 will lead to a breakthrough in the BIT negotiations.

SHIFTING FROM WORLD'S FACTORY TO WORLD'S MARKET

In November last year, more than 200 tons of dried cranberries were sold on a single promotion day by American giant retailer Costco during its first foray into the Chinese market.

In the promotion, Costco's bonded warehouse in Wuhan in central China, was also almost emptied of its mixed nuts, another popular American snack in China.

The shopping spree was ignited by Chinese e-commerce giant Alibaba. Realizing the rising purchasing power of the Chinese middle class, Alibaba launched the Tmall Global online platform early last year, gathering a spate of overseas brands of food, apparel, cosmetics, baby care products and others.

According to Alibaba's figures, sales revenue of some major overseas retailers, including U.S. Costco and Nature's Bounty, surpassed 10 million yuan (1.6 million U.S. dollars) each in merely nine months since the Tmall Global's launch.

Alibaba is not alone. Cross-border e-commerce further boomed after the Chinese government announced supportive policies to make buying online from abroad faster, easier and cheaper.

China's second largest e-commerce company JD is mulling the construction of overseas warehouses to further cut cost and speed up delivery.

"The Chinese economy is undeniably undergoing structural adjustments. But there is no problem with the consumer market," JD CEO Liu Qiangdong has said.

China is now the third largest U.S. export destination after Canada and Mexico. U.S. exports to China have increased 198 percent over the past 10 years, higher than its such growth to any other country, said the U.S.-China Business Council in its 2015 annual report.

Moreover, as it shifts towards a consumer-driven growth model, China, the world's factory of today, will become the world's largest importer and the world's market, according to a joint study on China-U.S. trade relations in the next decade.

U.S. enterprises, large or small, are tapping the Chinese market via multiple channels.

"We want to help our American partners test the waters of the Chinese market by opening online stores first," Wu Qian, a senior director of Alibaba's international business, told Xinhua.

TRUTH BEHIND TRADE IMBALANCE

Despite a growing appetite for American goods, China remains the U.S. biggest source of imports. Its goods surplus with the United States topped 237 billion U.S. dollars in 2014, compared with the bilateral trade volume of 555 billion dollars, according to China' s customs administration.

The big U.S. trade deficit with China has often been labelled as a cause of U.S. unemployment, with some Americans even viewing China as one of the country's primary economic threats.

But economists warn that, for one thing, the U.S. trade deficit statistics are vastly misleading and deeply distort our perception of the economic reality.

Take the iPhone for example. They are assembled in China and then exported to the United States, but more than a dozen companies from at least five countries supply parts for them.

According to the "rules of origin" established by the World Trade Organization, the iPhones are recorded as Chinese exports because they underwent their last "substantial transformation" in China.

Hence, every iPhone that Apple sells in the United States adds roughly 200 dollars to the U.S.-Chinese trade deficit, but the actual added-value in the Chinese factories is as little as 10 dollars, according to a study by three economists in 2011.

The same holds true with a number of U.S. brands ranging from Nike shoes to Disney toys. The flaws in conventional trade accounting greatly inflate the U.S. deficit with China.

In addition, Chinese official figures show that more than half of Chinese exports are processing trade. In those days when Japan and South Korea were regarded as the world's factories, they also had large trade surpluses with the United States. Now as Chinese labor becomes more expensive, American manufacturers are moving their factories to Southeast Asia. These countries will have the same problem.

In fact, China's trade surplus dropped to about 3 percent of its GDP in 2013 from the previous 6 percent. "It is now at a reasonable level based on international standards," said Tao Wenzhao, a senior research fellow of the Institute of American Studies at the Chinese Academy of Social Sciences.

Speaking of impact of China's trade surplus on U.S. employment, Tao pointed out "for the American people, China's effort (in reducing its trade surplus) will nevertheless bring no jobs back to the United States."

Tao's view is echoed by Robert Lawrence, a professor of trade and investment at the John F. Kennedy School of Government at Harvard University, who said Americans blaming China for job losses "are fighting a yesterday's war."

"I think it is much less likely, looking to the future, that we are going to see the same kind of concerns about competition with low-wage Chinese workers. But I don't believe that jobs will come back to the United States," Lawrence said. "Those jobs will go to other countries in Asia like Cambodia, Myanmar and Vietnam."

Virtually, the recurrent accusations against China's trade surplus are also a byproduct of American politics as high unemployment since the outbreak of the international financial crisis in 2008 has prompted many American politicians, especially the Democrats, to blame China to divert domestic pressure, said Tao.

For Washington, one of the right things to do now to reduce its trade deficit with China is to lift its restriction on high-tech exports, which has forced China to shop elsewhere and has thus cost American high-tech companies' opportunities to profit.

From 2001 to 2011, China's high-tech imports jumped from 56 billion dollars to 463 billion dollars, up 23.5 percent annually, according to Chinese official figures.

Yet in the same period, the share of U.S. high-tech products in China's total such imports dropped from 16.7 percent to 6.3 percent, the figures showed.

Unfortunately, progress has been slow in relaxing U.S. exports control. According to China's Ministry of Commerce, more than 2,000 products are still on the list of restricted U.S. exports to China.

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