Mutually-beneficial and win-win cooperation between
Since the establishment of diplomatic ties, economic and trade relations between China and the US have steadily progressed, yielding significant trade and investment outcomes Both nations benefit from this strong synergy, with China gaining notably while the US enjoys extensive economic advantages from China's growth A robust economic and trade relationship is crucial for both countries, as cooperation aligns with their interests, whereas conflict would only be detrimental to both sides.
1 China and the US are important partners for each other in trade in goods.
In 2017, two-way trade in goods between China and the US reached an impressive US$583.7 billion, marking a 233-fold increase since the establishment of diplomatic ties in 1979 and a seven-fold rise since China's accession to the World Trade Organization in 2001 The US is now China's largest export market, accounting for 19% of China's exports, while also being the sixth largest source of imports, contributing 8% to China's import figures Additionally, China has emerged as the fastest growing export market for US goods, with 8% of US exports directed to China in 2017.
US exports to China have experienced remarkable growth, significantly outpacing the global average since China's entry into the WTO In 2017, US goods exports to China reached $129.89 billion, representing a staggering 577% increase from $19.18 billion in 2001, compared to an overall growth rate of 112% for US exports.
Chart 1: US Exports to China Grow Faster than its Global Export Trade (%)
China is a crucial import market for U.S goods, ranking as the top destination for U.S airplanes and soybeans, and the second largest for automobiles, integrated circuits, and cotton In 2017, China accounted for 57% of U.S soybean exports, 25% of Boeing aircraft, 20% of automobiles, 14% of integrated circuits, and 17% of cotton exports.
China and the United States exhibit significant complementarity in their bilateral trade, with the US positioned in the mid-to-high end of global value chains, exporting capital and intermediary goods to China Conversely, China, situated at the mid-to-low end of these chains, primarily exports consumer goods and finished products to the US This dynamic allows both countries to leverage their comparative advantages, fostering a mutually beneficial trade relationship.
1 United Nations Commodity Trade Statistics Database.
US Export to China US Global Export trade is highly complementary In 2017, the top three categories of Chinese exports to the US were:
1 electric machines/electrical products/equipment and components,
2 mechanical apparatus and components, and
3 furniture/bedding/lamps, which accounted for 53.5% of its total exports to the US The top three categories of products that China imported from the US were：
1 machinery/electric equipment/ components and accessories,
2 mechanical apparatus and components, and
Automobiles, components, and accessories represent 31.8% of total imports from the US, highlighting the significant role of machinery and electronic products in bilateral trade This trade exhibits a strong tendency towards intra-industry exchanges Notably, while China exports a variety of high-tech products to the US, the majority of production involves labor-intensive processes that rely heavily on the import of essential components and intermediary goods, underscoring the international transfer of value in this trade relationship.
Table 1: Major China’s imports from and exports to the US (HS 2-digit)
Share in imports from the
Share in exports to the US (%)
Chapter 85 electric motor, electric products, audio-visual equipment and components and accessories
Chapter 85 electric motor, electric products, audio-visual equipment and components and accessories
Chapter 84 nuclear reactors, furnaces, mechanical apparatus
10.7 Chapter 84 nuclear reactor, furnace, mechanical apparatus
Chapter 87 automobiles and components and accessories, excluding railway cars
Chapter 94 furniture, bedding, lamps and trailer coach
Chapter 12 oilseeds, kernels, plants for industrial or pharmaceutical purposes, animal feed
Chapter 95 toys, game or sport articles and components and accessories
Chapter 88 aircraft, spacecraft and components
Chapter 61 knitwear, crocheted apparel and accessories
Chapter 90 optical, photographic and medical devices and components and accessories
Chapter 39 plastics and plastic articles
Chapter27 mineral fuels, mineral oil and products, asphalt, etc.
Chapter 87 automobiles and components and accessories, excluding railway cars
Chapter 39 plastics and plastic articles
Chapter 62 non-knit wear, non- crocheted apparels and accessories
2 Bilateral trade in services is developing quickly.
The US boasts a highly competitive and advanced service industry that plays a significant role in the international market As China's economy continues to grow and living standards improve, there is a notable increase in demand for services, leading to a rapid expansion in bilateral services trade From 2007 to 2017, two-way trade in services surged from $24.94 billion to $75.05 billion The US ranks as China's second-largest services trade partner, while China stands as the third-largest market for US service exports, highlighting the dynamic nature of this trade relationship.
The United States is the largest contributor to China's growing services trade deficit, which has surged significantly in recent years Between 2007 and 2017, U.S service exports to China skyrocketed by 340%, rising from $13.14 billion to $57.63 billion, while exports to other countries increased by 180% during the same period Consequently, the U.S surplus in services with China has expanded dramatically, multiplying by a factor of 30.
The United States accounts for approximately 20% of China's total services trade deficit, amounting to $40.2 billion This deficit primarily stems from three key sectors: travel, transportation, and intellectual property royalties, making the US the largest contributor to China's services trade shortfall.
Chart 2: US Services Imports from and Exports to China (unit: US$100 mn)
China’s trade deficit with the US in tourism continues to widen. According to the DOC, by 2016 the number of Chinese mainland visitors to the
US had been increasing for 13 consecutive years, with double-digit growth in
In 2017, Chinese visitors to the US spent a remarkable US$51 billion, with 3 million tourists contributing US$33 billion to the economy The US remains the top destination for Chinese students, with approximately 420,000 enrolled in 2017, generating around US$18 billion in local revenues Notably, China's trade deficit in tourism with the US surged from US$430 million in 2006 to US$26.2 billion in 2016, reflecting an impressive average annual growth of 50.8%.
China's payments for U.S intellectual property have significantly increased, with statistics showing that the U.S is the largest source of intellectual property imports to China Between 2012 and 2016, China imported nearly 28,000 items of intellectual property from the U.S Furthermore, payments for U.S intellectual property soared from $3.46 billion in 2011 to $7.2 billion in 2017, effectively doubling within six years Notably, these payments to the U.S represented a quarter of China's total intellectual property expenditures to foreign countries.
Chart 3: China’s Payment for the Use of US Intellectual Property
3 China and the US are important investment partners
The United States plays a pivotal role as a source of foreign investment in China, with around 68,000 US-funded enterprises operating in the country and over US$83 billion in actualized investment by the end of 2017, according to MOFCOM Concurrently, Chinese enterprises have increasingly turned to the US as a key investment destination, with direct investment soaring from US$65 million in 2003 to US$16.98 billion in 2016 By the end of 2017, the stock of Chinese direct investment in the US reached approximately US$67 billion Additionally, China has made substantial financial investments in the US, holding US$1.18 trillion in US treasury bills as reported by the US Treasury Department by the end of May 2018.
4 China and the US have both benefited markedly from trade and economic cooperation
China and the US have both reaped enormous benefits and created win-win results from trade and economic cooperation
China's trade and economic cooperation with the US has significantly contributed to its economic development and improved overall wellbeing In the context of economic globalization, enhanced trade and investment partnerships have enabled Chinese enterprises to integrate into global industrial and value chains, creating vast external markets for growth Over the past 40 years of reform and opening up, China emerged as the world's largest trader in goods by 2017, with total merchandise trade reaching US$4.1 trillion, and the second largest in services, totaling US$695.68 billion Additionally, it became the second largest recipient of foreign direct investment (FDI), attracting US$136 billion American companies have set a benchmark for Chinese firms, particularly in technological innovation, marketing management, and institutional advancement.
China has enhanced market competition and industry efficiency, driving local firms to upgrade their technology and management practices By importing significant quantities of mechanical, electrical, and agricultural products from the United States, China has addressed its supply shortages and met high-end consumer demand across various sectors, providing a wider range of choices for consumers.
The US has leveraged diverse business opportunities, including cross-border investments and market entry into China, significantly contributing to economic growth, enhancing consumer welfare, and modernizing its economic structure.
Clarifications of the facts about China-US trade and
Economic cooperation and trade between the two countries are extensive and involve numerous stakeholders, making it natural for some differences and tensions to arise Both nations should adopt a comprehensive approach, considering their strategic interests and the international order, while focusing on finding common ground and setting aside differences It is crucial to take practical steps to address these tensions However, the current US administration, through its Section 301 report and other means, has labeled China as engaging in "economic aggression."
The portrayal of "unfair trade," "IPR theft," and "national capitalism" in the context of China-US trade relations misrepresents the significant advancements made through China's reform and opening-up, as well as the efforts of the Chinese people Such narratives disrespect both the Chinese government and its citizens while failing to align with the genuine interests of the American populace Ultimately, this distortion is likely to exacerbate tensions and differences, undermining the core interests of both nations.
1 The gap in trade in goods alone is not a good indicator of China-US trade and economic cooperation.
A thorough analysis of the China-US trade balance requires a detailed examination beyond merely observing the trade deficit in goods China's goal is not to maintain a trade surplus; in fact, the ratio of China's current account surplus to its GDP has decreased from 11.3%.
2007 to 1.3% in 2017 The imbalance of trade in goods between China and the
The economic relationship between the United States and China is shaped by voluntary choices made by the US, reflecting its comparative strengths To address the trade imbalance, both nations must collaborate on restructuring their economic frameworks However, the US often overlooks various factors in its trade dealings, focusing solely on the trade deficit in goods and unfairly attributing the imbalance to China.
China-US trade and economic cooperation generally yields balanced benefits, although the trade in goods has experienced significant shifts over time In the 1980s and early 1990s, the US enjoyed a trade surplus with China; however, starting in 1992, China began to achieve a trade surplus, which has steadily increased since then.
In today's globalized economy, bilateral trade and economic cooperation extend beyond mere goods, encompassing trade in services and local sales from subsidiaries in host countries By considering these three factors—trade in goods, trade in services, and local subsidiary sales—it's evident that trade and economic cooperation generally provides balanced benefits for both China and the United States, with the U.S enjoying greater net advantages Notably, in 2017, the U.S achieved a significant surplus of $54.1 billion in trade in services, highlighting its competitive strength in this sector.
Economic Analysis (BEA), the sales of US companies in China reached
US$481.4 billion in 2015, way higher than the US$25.6 billion sales of
Chinese companies in the US, an advantage of US$455.8 billion US companies enjoy an even bigger advantage in cross-border operations In June
In a 2018 report, Deutsche Bank analyzed the economic interests between the US and its major trading partners, concluding that the US has derived greater commercial net benefits from bilateral trade with China than vice versa The report emphasized that the global operations of multinational corporations significantly influence this trade dynamic After excluding contributions from third-country subsidiaries, it was found that the US continues to experience substantial net benefits from its trade relationships.
Chart 4: China-US Trade and Economic Cooperation Delivers Balanced
Benefits in General (2009-2015, unit: US$1 billion)
12 Deutsche Bank, “Calculating the Economic Interests of the US and its Major Trading Partners”, June 2018
货物贸易差额 服务贸易差额 分支机构收入差额
Gap in Trade in Goods
Gap in Trade in Services
Gap in Income by Subsidiaries
Source: Bureau of Economic Analysis (BEA), USDOC.
The ongoing trade gap in goods between China and the US is primarily a reflection of the US economic structure and the comparative strengths of both nations, shaped by the international division of labor This widening trade deficit is influenced by various factors, rather than being solely attributed to China's intentions.
The low savings rate in the US, which reached just 1.8% in the first quarter of 2018, is a natural outcome of the country's economic structure characterized by high consumption and lower savings compared to investment This imbalance highlights the relationship between savings and investment as a key factor influencing the current account balance in national accounts, emphasizing the need for adjustments to stabilize the domestic economy.
The United States has consistently attracted significant foreign savings due to its trade deficit, a trend that began in 1971 and has resulted in deficits with 102 countries by 2017 This trade deficit is a structural and enduring economic phenomenon, characterized by its endogenous nature Currently, the majority of the US trade deficit is concentrated with China, reflecting the shifting dynamics among its trading partners.
The trade dynamics between China and the US highlight the complementary strengths of their industries China's trade surplus with the US primarily arises from labor-intensive and manufactured goods, while its deficits are evident in capital- and technology-intensive sectors, including aircraft, integrated circuits, and automobiles, as well as agricultural products Notably, in 2017, China experienced a trade deficit of $16.4 billion in agricultural products, making up 33% of its total agricultural trade deficit, and a $12.75 billion deficit in aircraft, which accounted for 60% of its total in that sector Additionally, there was an $11.7 billion deficit in automobile trade This trade imbalance reflects the voluntary market choices of both nations, showcasing their respective industrial competitive advantages.
The international division of labor and the evolving production strategies of multinational companies have significantly impacted global trade dynamics, particularly in relation to China Due to its low production costs, robust auxiliary production capabilities, and reliable infrastructure, China has become a key hub for multinational firms to assemble and manufacture products for the US and global markets In 2017, foreign-invested enterprises in China accounted for 59% of the trade surplus with the US, highlighting China's pivotal role in international trade As China has integrated into the Asia-Pacific industrial network, it has largely absorbed the trade surpluses previously held by Japan, South Korea, and other East Asian economies with the US Consequently, the share of these economies in the total US trade deficit has dropped from 53.3% in 1990 to 11% in 2017, while China's trade surplus with the US has surged from 9.4% to 46.3% during the same timeframe.
Chart 5: How the Regional Components of US Foreign Trade Deficit Changed (1990-2017)
Source: UN COMTRADEdatabase, Bureau of Economic Analysis, USDOC.
US export controls on high-tech products to China, driven by a Cold War mentality, significantly hinder the country's competitive edge in high-tech trade These restrictions not only limit potential exports but also exacerbate the trade deficit with China A 2017 Carnegie Endowment for International Peace report highlights that relaxing these controls to match those imposed on Brazil could reduce the US trade deficit by 24%, and by 35% if aligned with France This indicates a substantial untapped potential for high-tech exports to China, suggesting that easing these restrictions could lead to a notable decrease in the trade deficit.
13 Carnegie Endowment for International Peace, “Political Barriers in US Exports to China and US-China Trade Deficit”, April 10, 2017.
美国对中国逆差 美国对东亚其他地区逆差 美国对其他国家逆差
US Deficit with China US Deficit with Other Regions in
US Deficit with Other Countries
The dominance of the US dollar as a major global currency stems from the Bretton Woods system established post-WWII This "exorbitant privilege" allows the US to benefit from seigniorage, as it incurs minimal costs for printing currency while other nations must exchange tangible goods and services for it Additionally, the US dollar facilitates global trade settlements, with the US maintaining a trade deficit to supply dollars worldwide Thus, the underlying dynamics of the US trade deficit reveal significant economic implications.
US interests and the very root of the international currency system.
US statistics significantly overstate the trade deficit with China, with a notable discrepancy between the two countries' reported figures In 2017, China reported a surplus of $275.8 billion, while the US indicated a deficit of $395.8 billion, creating a gap of around $100 billion An annual review by experts from the USDOC and MOFCOM suggests that the US trade deficit with China is exaggerated by approximately 20% each year Over the past decade, the trends and discrepancies in these statistics have remained consistent, attributed to factors such as differences in CIF and FOB pricing, value-added from transit trade, direct trade markup, geographical jurisdiction, and delays in shipping time.
Chart 6：Bilateral Goods Deficit: China and US Statistics (US$100 million)
14 Barry Eichengreen, 2011, Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the
International Monetary System, Oxford University Press.
Source: China Customs, Bureau of Economic Analysis, USDOC
The trade protectionist practices of the US administration
The investment and trade restriction policies implemented by the US disrupt market competition and hinder fair trade, resulting in significant disruptions to global industrial chains These actions undermine the rules-based multilateral trading system and have a profound negative impact on the normal progression of economic and trade relations between China and the US.
American regulatory policies often prioritize self-interest and protectionism, undermining fair competition and discriminating against foreign products Legislation in the US imposes direct or indirect restrictions on foreign purchases, resulting in unfair treatment for international companies, particularly affecting Chinese firms.
The US product market lags behind many developed and some developing countries regarding fair competition This is highlighted by the OECD's release of the Indicators of Product Market Regulation 30, which reveals significant disparities in market practices.
2013, the Netherlands, the UK and Australia were the top three among 35 OECD countries, while the US ranked only 27th, pointing to the many
The 30 Indicators of Product Market Regulation assess how policy settings influence competition within product markets, with higher scores indicating greater obstacles to competition These indicators are derived from three key areas: state control, barriers to entrepreneurship, and barriers to trade and investment, and have been updated every five years since 1998 Data, gathered through surveys from officials across 35 OECD and 12 non-OECD countries, reveal that the US ranks 30th among 47 countries, highlighting significant challenges to fair competition in its product market compared to non-OECD nations like Lithuania, Bulgaria, and Malta.
The United States exhibits a higher level of discrimination against foreign products compared to most developed and some developing nations In a 2013 ranking of 35 OECD countries regarding the Differential Treatment of Foreign Suppliers, the US placed 32nd, highlighting significant bias in its product market When including 12 non-OECD countries, the US dropped to 39th out of 47, demonstrating greater discrimination than non-OECD nations like Brazil, Bulgaria, Cyprus, India, Indonesia, and Romania.
Chart 7: The Extent to Which US Market Regulatory Policies Inhibit
Fair Competition in the Product Market
Source: OECD, Indicators of Product Market Regulation, 2013
The United States enforces stringent legislation requiring government departments to prioritize "Buy American" policies, which include discriminatory purchasing practices against foreign goods A key component of this legislation is the Buy American Act, which mandates that federal agencies exclusively procure manufactured products produced in the U.S and unmanufactured items that have been mined or produced domestically.
The 31 Differential Treatment of Foreign Suppliers serves as a secondary indicator of trade and investment barriers within product market regulation This measure evaluates restrictions across various transport modes, foreign professional access, appeals by foreign entities, anti-competitive practices, regulatory policy barriers, and trade facilitation measures It highlights the level of market discrimination against foreign products, with a higher score indicating increased discrimination.
32 OECD (http://www.oecd.org).
Product Market Regulation Differential Treatment of Foreign Suppliers
US Average of All Sampled Countries
In the United States, federal and state funding for public transport projects is contingent upon the use of domestically produced steel, iron, and manufactured goods Additionally, the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act restricts the use of funds for school meal programs from procuring poultry products imported from China Furthermore, the National Defense Authorization Act prohibits the federal government from acquiring telecommunications equipment and services from Chinese companies due to national security concerns.
2 Abuse of “National Security Review” as a way to obstruct the normal investment activities of Chinese companies in the US
The United States leads globally in conducting security reviews of foreign investments, with the establishment of the Committee on Foreign Investment in the United States (CFIUS) in 1975 to oversee their impact The Exon-Florio Amendment, introduced in 1988, further refined these regulations to enhance national security considerations regarding foreign investments.
The 1950 Defense Production Act empowered the US President to oversee foreign takeovers, while the Foreign Investment and National Security Act of 2007 further expanded the Committee on Foreign Investment in the United States (CFIUS) and its review scope Over the past five decades, US legislation has increasingly tightened laws and regulations regarding foreign investment, enhanced regulatory teams, and broadened review processes, particularly intensifying scrutiny and restrictions concerning China.
The US national security review process for foreign investments has become increasingly stringent, often relying on weak evidence From 2005 to 2008, the Committee on Foreign Investment in the United States (CFIUS) reviewed 468 transactions, with only 8 percent entering the investigation stage However, after the 2008 issuance of new regulations, the number of cases reviewed from 2009 to 2015 rose significantly, with 40 percent leading to investigations Notably, by 2015, this percentage increased to 46 percent, indicating a marked escalation in scrutiny of foreign investments.
33 The White House (http://uscode.house.gov), Buy American Act The act has also made additional stipulations for waivers.
34 The White House (http://uscode.house.gov), Buy American Act The act has also made additional stipulations for waivers.
35 The US Congress (https://www.congress.gov), Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act.
36 The US Congress (https://www.congress.gov), National Defense Authorization Act.
37 The US Congress (https://www.congress.gov), Foreign Investment and National Security Act of 2007.
38 Based on CFIUS’ annual reports to Congress (https://www.treasury.gov)
39 The US Department of the Treasury, November 21, 2008.
Chart 8 Statistics on Cases Reviewed and Investigated by CFIUS
Source: Annual Reports Released by CFIUS
Chinese companies are increasingly facing scrutiny under U.S national security reviews, particularly through the Committee on Foreign Investment in the United States (CFIUS) Since its inception, U.S Presidents have vetoed four transactions recommended by CFIUS, all of which involved Chinese firms or their affiliates Between 2013 and 2015, CFIUS conducted a comprehensive review of numerous transactions, highlighting the growing tensions between U.S and Chinese businesses.
In a recent analysis of 387 transactions across 39 economies, Chinese companies led with 74 investment transactions, representing 19% of the total and maintaining the largest share for three consecutive years However, data indicates that Chinese corporate investments are increasingly being blocked by the US, particularly through the Committee on Foreign Investment in the United States (CFIUS), which has expanded its scrutiny beyond semiconductors and finance to include sectors like food processing and swine feed This review process is criticized for its lack of transparency, excessive discretionary power, and insufficient explanations for investment vetoes, raising concerns that legitimate transactions are being hindered under the guise of national security.
Table 4: Overseas Acquisition Transactions with Chinese Investment
Vetoed by the US from 1990 to 2018
MAMCO (Manufacturer of Aircraft Parts) Manufacturing
Group Wind Farm in Oregon Energy
Aixtron (American Subsidiary of a German Chip Maker)
Table 5: Chinese Companies’ Overseas Acquisitions Revoked as a Result of CFIUS Reviews from 2005 to 2018
Company Ltd Firstgold Corp Energy
Lumileds (US operations included) Manufacturing
2017 NavInfo, Tencent and GIC Dutch mapping data provider HERE (US operations included) Mapping
2018 Da BeiNong Group Waldo Genetics Agriculture
2018 HNA Group Skybridge Capital Finance
The United States is advancing new legislation to enhance the security review of foreign investments, highlighted by the President's signing of the National Defense Authorization Act for Fiscal Year 2019, which includes the Foreign Investment Risk Review Modernization Act (FIRRMA) This act empowers the Committee on Foreign Investment in the United States (CFIUS) by broadening the scope of transactions under review, increasing staffing, and introducing the designation of "countries of special concern." Additionally, it mandates the Department of Commerce to provide a biennial analysis of Chinese investments in the U.S before 2026, indicating a significant trend towards more stringent investment scrutiny.
3 Large subsidies that distort market competition
The US government, at both federal and state levels, significantly subsidizes certain sectors and companies through bailout assistance and concessional loans, which undermines fair market competition Good Jobs First, an organization that monitors subsidies, highlights that between 2000 and recent years, these financial interventions have had a considerable impact on market dynamics.
2015, the federal government provided at least US$68 billion in grants and special tax credits to businesses, with 582 large companies receiving 67 percent