Interviewed scholar: member of the Chinese Academy of Social Sciences, former director of the Institute of World Economics and Politics Yu Yongding
interviewer: Beijing News think tank chief researcher Ke Rui
The US general election is almost settled. However, uncertainty still exists and its impact has not yet fully manifested.
What are the underlying reasons for the Sino-US economic and trade conflict? What impact will the results of the US election have on Sino-US relations? In this regard, the Beijing News Think Tank interviewed Yu Yongding, member of the Chinese Academy of Social Sciences and former director of the Institute of World Economics and Politics.
Yu Yongding is a well-known economist. His main research areas are international finance, China's economic growth and China's macroeconomic stability.
Yu Yongding believes that if Biden is in power, the possibility of irreversible catastrophic conflicts between China and the United States will be reduced, and his foreign policy will return to the traditional line of the United States. We should not give up any opportunity to improve Sino-US relations.
The deep-seated reasons for the Sino-US economic and trade conflicts are geopolitical conflicts
Beijing News Think Tank: What are the deep-seated reasons for the Sino-US economic and trade conflicts in recent years? Some people use the "Thucydides trap" to describe the Sino-US conflict. What do you think?
Yu Yongding : This matter is very important and it is worth sorting out.
On March 8, 2018, Tromp announced to impose 25% and 10% tariffs on steel and aluminum products respectively, starting the outpost of the Sino-US trade war. On March 22, 2018, the United States Trade Representative (USTR) announced the "Section 301 Investigation of China’s Trade Practices", which determined that the Chinese government’s actions, policies, and practices related to technology transfer, intellectual property, and innovation were “unreasonable or discriminatory , Impose a burden or restriction on American commerce."
On July 6, 2018, the United States imposed an additional 25% tariff on US$34 billion products from China. The Sino-US trade war has officially started.
On January 15, 2020, China and the United States signed the first phase of the economic and trade agreement. The United States issued an announcement that starting from February 14, the additional tariffs on US$120 billion of goods that have been imposed 15% tariffs on September 1, 2019 will be adjusted from 15% to 7.5%.
▲Image source: Beijing News.com
In addition to the tariff war in the trade area, China and the United States are investing (allowing American companies to withdraw from China and banning Chinese companies from entering the US high-tech field), technology (sanctions against Chinese high-tech companies , Kicking China out of the global value chain), exchange rate (threatening to designate China as a currency manipulator and imposing tariff penalties), finance (imposing financial sanctions on Chinese companies) and other fields have been conflicting.
The United States is not only challenging China in the economic field, but also in other fields, including the military field. Some political madmen in the United States openly advocated military action against China in the South China Sea. The outbreak of the new crown epidemic has provided a rare opportunity for China and the United States to repair relations. However, instead of accepting the goodwill released by China, the Trump administration has instead dumped China and introduced a series of sanctions against China. Some American politicians even issued military threats to China. Sino-US relations are deteriorating.
Facts have proved that the deep-seated cause of the Sino-US economic and trade conflict is the geopolitical conflict between China and the United States.
The US’s nameless fear of China can be explained by Professor Graham’s "Thucydides Trap".
In a previous article, I envisioned three paths to avoid the Thucydides trap: The first path is China and the United States through deep economic integration to establish a community of shared future. However, due to resistance from the United States, this rule has not worked. The second way is for one party to try to weaken the other, to win without fighting or to win by fighting. This road is extremely dangerous, and no one knows what the final result will be. The third way is to rebuild mutual trust by focusing on common interests and resisting common enemies.
If Biden is in power, it will reduce the possibility of catastrophic conflicts between China and the United States
Beijing News Think Tank: If Biden is in power, what impact will Biden have on the US economy and Sino-US relations?
Yu Yongding : First of all, in terms of personal qualities, Biden is a member of Washington's traditional political elite, with extremely rich diplomatic experience, including experience in dealing with China. Regardless of his China policy, at least he will not be as capricious and unpredictable as Trump. Biden's ruling will reduce the possibility of irreversible catastrophic conflicts between China and the United States.
Secondly, if Biden is in power, foreign policy will return to the traditional line of the United States. Judging from the statements made by Biden and his campaign team, the main points include the following.
First, repair and strengthen the relationship between the allies and return to important international organizations, international treaties and agreements.
Second, return to the moral high ground of "democracy, freedom, and human rights."
Third, emphasize the importance of diplomatic efforts.
Fourth, the sole purpose of possessing nuclear weapons is to deter or retaliate against nuclear attacks by other countries.
Fifth, confirm the global challenges facing the United States: climate change, nuclear non-proliferation, 5G and artificial intelligence.
Sixth, although China is not the primary enemy, it is the primary competitor (competitor) and will adopt a strong attitude towards China. While seeking cooperation with China in responding to global challenges, it also unites allies and partners to establish a united front against China.
If Biden is in power, his domestic economic policies will be significantly adjusted compared to the Trump era.
First, foster manufacturing and high-tech industries. The US government will invest 700 billion US dollars in the next four years for clean energy, quantum computing, artificial intelligence, 5G, high-speed rail, and cancer treatment. Of this, $300 billion is used for research and development.
Second, improve the domestic supply chain in the United States. The United States will count the loopholes in the domestic supply chain and fill them immediately. Establish stronger and more resilient domestic supply chains in many fields including energy, network technology, semiconductors, key electronics, telecommunications infrastructure and key raw materials.
Third, increase the domestic manufacturing capacity of designated key materials through federal government purchases. At the same time, it will promote the production of key materials back to the United States.
Fourth, launch a large-scale infrastructure investment plan. The 10-year plan to invest 1.3 trillion US dollars in various infrastructure (bridges, roads, high-speed rail, etc.). If Biden is in power, the US government's first term (4 years) will invest as much as 2 trillion US dollars to solve the climate problem.
Fifth, to partially overturn Trump's tax cut policy. If Biden is in power, the U.S. government will implement tax increases to raise funds for the government to increase federal expenditures (mainly to reduce carbon dioxide emissions) and narrow the income distribution gap. The plan is to increase federal revenue by $3.3 trillion within 10 years. To this end, the corporate income tax rate will be raised from 21% at the time of Trump to 28%; the tax will be increased for the wealthy with incomes of more than $400,000; and the tax rate will be more progressive.
▲ Image source: Beijing News Network
To reduce the income distribution gap, the federal minimum wage will be raised from US$7.5 to US$15 per hour. In order to alleviate the economic crisis brought about by the new crown epidemic, we will continue to provide loans to small and medium-sized enterprises and directly issue temporary assistance payments to each family, including an additional monthly social security fund of 200 US dollars.
Sixth, implement expansionary finance. The independence of the Fed will be more respected. If Biden is in power, according to Moody's estimates, within ten years, federal spending will be as high as 7.3 trillion U.S. dollars and the federal fiscal deficit will be as high as 3.2 trillion U.S. dollars. The fiscal deficit to GDP ratio will remain at around 5% in the next ten years.
Seventh, according to the analysis of public information, if Biden is in power, compared with fiscal policy, monetary policy will not take priority in his policy. On the one hand, the Fed has launched a very expansionary monetary policy. On the other hand, Biden will not interfere with the Fed’s policy stance like Trump. Many emergency loan facilities introduced during the epidemic will expire at the end of the year. The Fed has not yet made a decision on whether to continue to provide such facilities.
Eighth, if Biden is in power, he is expected to implement a more traditional trade policy, emphasizing fair competition, opposing trade barriers, and regaining the leadership in formulating trade rules; however, Biden said that he does not rush to sign a new trade agreement. Most observers believe that Biden will not escalate the Sino-US trade war. The damage to the U.S. economy caused by tariff increases may prompt Biden to negotiate with China to reduce tariffs. Like Trump, Biden views China as a major threat to American industry. He will continue to pressure China on issues such as government subsidies, dumping, exchange rate, intellectual property protection, and forced technology transfer.
Ninth, if Biden is in power, will he continue to implement the policy of kicking China out of the high-tech industry chain? The existing global value chain and the layout of the international production network would have been beneficial to American companies. To kick China out of the global industrial chain can only be"Kill the enemy a thousand, hurt yourself eight hundred." Biden emphasized that the United States should not rely too much on external supply, and the focus is to fill the loopholes in the US supply chain. During the Trump era, the situation of frequently including Chinese companies on the list of entities and imposing embargoes on Chinese companies may change.
The degree of attention to China’s issues will temporarily decline
Beijing News think tank : If Biden is in power, how will his priorities be sorted? Are China and the Asia-Pacific region the focus of attention?
Yu Yongding : Based on what we have so far, we can infer that:
is the first. For Biden, the top priority is how to control the epidemic. The second is to restore economic growth, reduce unemployment, and bridge the serious divisions in American society. Attention to China's issues will temporarily decline. In the next four years, although it is difficult to fundamentally improve Sino-US relations, the probability of misfire will decrease significantly.
Second, if Biden is in power, Sino-US economic and trade relations should not deteriorate further in the early days of his administration. However, the United States will increase its tone of criticism of China's internal affairs.
Third, Biden may adjust the position of Sino-US trade negotiations. The two sides have room for negotiation (or exclusion) to reduce the tariff rates imposed since 2018.
Fourth, it is possible for China and the United States to reach certain agreements in accordance with WTO guidelines on issues such as government subsidies, dumping, exchange rates, intellectual property protection, and technology transfer.
Fifth, the new crown pneumonia epidemic is currently the common enemy of mankind. The fight against COVID-19 provides a historic opportunity for Sino-US cooperation. Preventing further climate warming is a common challenge faced by mankind in the medium and long term. In this regard, China and the United States should be able to find opportunities for cooperation. By responding to the common challenges facing mankind, it is possible for China and the United States to overcome the so-called "Thucydides trap." The signing of
RCEP is of special significance
Beijing News Think Tank: On November 15, China and 14 countries signed RCEP, the world’s largest free trade agreement was reached, and the United States seemed to have become an “outsider”. Will the signing of RCEP affect the US economic and trade strategy?
Yu Yongding: Although RCEP (Regional Comprehensive Economic Partnership Agreement) is a relatively low-standard regional liberalization agreement, it is of great significance and has released a very positive signal.
China has always advocated promoting trade liberalization and defending and strengthening the role of multilateralism in world trade. On the basis of RCEP, China, Japan, and South Korea are still striving to sign a tripartite free trade agreement. During the Trump administration, the United States unilaterally withdrew from the TPP (Trans-Pacific Partnership Agreement), paralyzed the WTO, and withdrew from other international organizations and international treaties. Trade liberalization and multilateralism have been severely hit. In this case, the signing of RCEP has a special significance.
Even if Trump steps down, the impact will still be huge. The wave of anti-trade liberalization and multilateralism in the United States has not receded. It is not easy for the United States to restart TPP. Although RCEP will stimulate it, it is estimated that they will not make any major moves in the near future.
In any case, China should seize the window period that may appear after the US general election to deepen reforms, complete development strategy adjustments, and further narrow the economic gap with developed countries.
In short, we should not have unrealistic illusions about the improvement of Sino-US relations, but we should not give up any opportunity to improve Sino-US relations.
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Editor: Ke Rui Proofreading: Wei Zhuo
