As the top two economies in the world, the economic and trade relationship between China and the United States affects the market nerves and attracts global attention. Especially in recent times, the escalating trade friction between China and the United States has once again drawn widespread attention to some hot issues in their economic and trade relations. What is the US trade deficit with China? Who benefits more from the bilateral investment between China and the United States? Has China's intellectual property protection harmed American companies? Who is truly upholding multilateral trade and free trade between China and the United States?

Clarifying and calculating these basic issues in the economic and trade relations between China and the United States is conducive to accurately grasping the ins and outs of the two countries' economic and trade relations, and promoting the balanced, healthy, and stable development of bilateral economic and trade relations between China and the United States. Recently, our reporter visited some experts to jointly calculate several detailed accounts of China US economic and trade.

How much is the US trade deficit with China?

According to the trade value-added calculation methods of the OECD and WTO, the size of the US trade deficit with China should be at least one-third smaller than the figures announced by the US

According to US statistics, the total trade deficit between the US and China in 2017 was $375.2 billion; According to the General Administration of Customs of China, the US trade deficit with China is 275.8 billion US dollars. How much is the US China trade deficit? Why is there such a big difference?

The current trade situation between the United States and China is formed by the market, ultimately determined by the economic structure, industrial competitiveness, and international division of labor of both countries. If we consider factors such as statistical methods, transit trade, and service trade, the trade deficit between the United States and China is actually not that large

From a statistical perspective, in the era of economic globalization, the production process of a certain product is usually carried out in different countries or regions. The US algorithm insists on counting all surpluses on the heads of end product exporting countries, which cannot objectively reflect trade imbalances and value distribution. Only by using the trade value-added calculation methods of the OECD and WTO can a country truly demonstrate its profitability in the value chain.

Li Yong, co chairman of the China US Europe Economic Strategy Research Center at the China International Trade Association, said that taking Apple phones as an example, a large number of accessories for Apple phones currently processed and assembled in China are imported from South Korea, Japan, and other places. "The US trade deficit with China actually includes part of the US trade deficit with Japan, South Korea, and other countries." According to the trade value-added calculation methods of the OECD and WTO, the size of the US trade deficit with China is at least one-third smaller than the figures announced by the US.

From the perspective of transit trade, a portion of the trade between China and the United States involves third-party transit. In trade statistics, the United States generally calculates the transit trade volume between China and Hong Kong as part of Sino US trade, but a large proportion of this is the transit trade of other countries or regions outside of China through Hong Kong. On the other hand, when conducting trade statistics, the US calculates the export amount based on offshore prices and the import amount based on landed prices, thereby including double the amount of loading, unloading, transportation, and insurance costs in the trade deficit with China.

From the perspective of service trade, the trade data released by the US government only includes goods trade and does not reflect service trade, while China is the largest surplus country in US service trade. According to data released by the Ministry of Commerce, the US service industry's exports to China have increased fivefold in the past decade. In 2017, the US trade surplus in services with China reached 54.1 billion US dollars. If we only discuss the trade imbalance between China and the United States from the perspective of goods trade, and ignore the overall picture of goods trade and service trade between the two countries, it is biased, "said Sheng Songcheng, a counselor at the People's Bank of China and executive vice president of the China Europe Lujiazui International Finance Research Institute.

It can be seen that the US China trade deficit is both an objective existence and a statistical illusion; This is not only a result of market forces, but also closely related to the US government's restrictions on high-tech exports to China. A report from a US research institution shows that if the US relaxes its export controls on China, its trade deficit can be reduced by about 35%. The US tax policy is also not conducive to increasing US exports.

In fact, not only China, but also the United States has trade deficits with more than 100 countries and regions around the world, which reflects its industrial structure and competitiveness. The US economy is mainly based on the service industry, with low savings and high consumption. In this demand environment of "early consumption", the US will inevitably rely on imports to make up for the shortage of domestic production, resulting in an inevitable trade deficit.

In addition, as an international currency, the US dollar objectively needs to provide dollars to the world through trade deficits to balance international payments and alleviate inflationary pressures. The United States can directly exchange US dollars for physical resources and make up for the "savings gap" through capital inflows. The United States ranks at the high end of the global industrial value chain and has a strong currency. It can import a large number of high-quality and affordable products from other economies to maintain a low inflation rate, including a large number of Chinese goods. These good and affordable foreign goods have also increased the actual purchasing power of American consumers. For the United States, this is a benefit, not a loss.

Is the profit margin high for American companies investing in China?

One third of the total sales growth of US funded companies' global overseas branches comes from the Chinese market. In the past two years, the sales growth rate of American companies in China continues to outperform their global level

According to data from the Chinese Ministry of Commerce, in 2017, the United States established 1385 foreign-invested enterprises in China, a year-on-year increase of 8.7%, with an actual investment of 21.01 billion yuan. In the first quarter of this year, the United States established 355 foreign-invested enterprises in China, a year-on-year increase of 43.7%.

For many American companies, the Chinese market has become the main source of their business growth. The vast majority of companies in Huamei have performed well, and the Chinese market is an important growth point and profit center for them. According to statistics from the Chinese Ministry of Commerce, in 2015, Huamei Enterprises achieved sales revenue of approximately 517 billion US dollars and profits exceeding 36 billion US dollars.

According to data from the Bureau of Economic Analysis, between 2010 and 2015, one-third of the global sales growth of American companies' overseas branches came from the Chinese market. Meanwhile, the sales growth rate of US funded enterprises in China continued to outperform their global level between 2016 and 2017.

American companies investing in China should be mutually beneficial, but if we calculate the accounts carefully, the US side will benefit more.

Taking Apple phones as an example, the company has reduced production costs by placing the assembly and manufacturing of phones in China through its global production layout. Although Chinese companies undertake almost all of the manufacturing of Apple phones, their profits from it are limited. A third-party investigation shows that for an Apple 7 phone, only one Chinese company is involved in battery supply, worth about $2.5, among the core electronic components worth $153.88, while American companies earn $64 solely from providing core components.

Taking cars as an example again. In 2017, the annual retail sales of General Motors and its joint ventures in China exceeded 4 million vehicles, surpassing their domestic sales in the United States. According to General Motors' third quarter financial report last year, China has been the largest market for General Motors in the world for several consecutive years. In the third quarter, China's sales accounted for 42.38% of the group's total sales, with a growth rate of 12.3%. However, the automotive sales revenue of General Motors' North American division decreased by 20.16% year-on-year.

Bai Ming, a researcher at the Research Institute of the Ministry of Commerce, said that the economic and trade cooperation between China and the United States is not only a natural result of the complementary advantages of both sides, but also an inevitable choice for international industrial division of labor and optimized allocation of resources. China has the world's largest and most comprehensive industrial system, as well as a high-quality and low-cost workforce, while the United States has strong technological strength, innovation capabilities, developed service industries, and occupies the upper reaches of the global value chain. "The two sides have formed a highly complementary relationship, which is a strong foundation for pragmatic cooperation between China and the United States

Since joining the World Trade Organization, China has always conscientiously fulfilled its commitments and is an active defender, builder, and contributor to multilateral and free trade. Professor Wang Yong from the School of International Relations at Peking University believes that China has played an exemplary role in using WTO rules to solve related issues and uphold the authority of the multilateral trading system. On the other hand, in the United States, the White House does not play by the rules in international relations, repeatedly ignoring rules and breaking commitments. This time, the United States launched a trade war against China through the "301 investigation", "to a certain extent, it is a reflection of the current US government's serious emotional protectionism

Is there market access discrimination in 'Made in China 2025'?

Several American companies have participated in the implementation of 'Made in China 2025'. There is no restrictive, discriminatory, or exclusive content in 'Made in China 2025'

The US 301 investigation report on China accuses China of "Made in China 2025" and targets the key development areas of "Made in China 2025" such as aerospace, automotive, chemical, and information industries with sanctions, citing market access discrimination in China's industrial policies. This is a wrong judgment made by the US government based on erroneous facts, "said Qu Xianming, director of the Manufacturing Research Office of the Chinese Academy of Engineering.

Huang Qunhui, Director of the Institute of Industrial Economics at the Chinese Academy of Social Sciences, believes that fundamentally, there is no difference between "Made in China 2025" and the "Advanced Manufacturing Partnership Program" of the United States. The Chinese government has repeatedly publicly stated that it will promote 'Made in China 2025' with an open mindset and create an open environment, treating domestic and foreign enterprises equally without any restrictive, discriminatory, or exclusive content

Huang Qunhui gave an example that currently, several American companies have participated in the implementation of "Made in China 2025", such as Georgia Institute of Technology and the National Additive Manufacturing Innovation Center collaborating on joint research and talent development, and GE and Harbin Electric Group cooperating in the field of gas turbine manufacturing. In terms of establishing manufacturing innovation centers, the National Additive Manufacturing Innovation Alliance has three overseas member units

Zhao Changwen, Minister of the Industrial Economy Department of the Development Research Center of the State Council, said that in many strategic industries, China and the United States have formed a mutually dependent and symbiotic relationship. China purchases components and intermediate products from countries such as the United States, processes and assembles them, and exports them to the United States or third parties. China is the third largest export market for American automotive components, the second largest export market for construction equipment, the seventh largest export market for smart grid products, and the eighth largest export market for renewable energy products. For the United States, restricting or prohibiting the export of certain components or products to China would cause harm to both parties' businesses.

Have American companies encountered mandatory technology transfer when investing in China?

The technology transfer between Chinese and American enterprises follows the principles of fairness, voluntariness, and mutual agreement, which is a win-win situation

In the so-called "301 investigation report" recently released by the United States, the US believes that China uses joint venture requirements, shareholding restrictions, and other foreign investment restrictions to force or compel US companies to transfer technology. So, is there a mandatory technology transfer issue in China?

According to Gao Feng, spokesperson for the Ministry of Commerce, there has never been a mandatory requirement for foreign-funded enterprises to transfer technology to Chinese joint ventures or to joint venture partners in China's foreign investment management regulations. There are no mandatory regulations for foreign companies to transfer technology in the "Made in China 2025" and related policies. Whether enterprises acquire technology through independent development or through commercial cooperation is their own independent behavior, and the Chinese government has never intervened or made restrictive regulations.

Liu Junhai, director of the Institute of Business Law at Renmin University of China, believes that China is taking the path of a rule of law market economy, which values the spirit of contracts the most. The technology transfer between Chinese and American enterprises fully follows the principles of fairness, voluntariness, and consensus through negotiation, which is a win-win situation.

US President Trump has accused China's automotive industry policies of violating WTO principles and believed that China has' stolen 'technology from American companies. In fact, the US has overlooked the characteristics of China's automotive industry at different stages of development, as well as the contribution of the Chinese market to the US automotive industry, and their understanding of the so-called 'unfair principle' is also wrong. ”Dong Yang, Executive Vice President of the China Association of Automobile Manufacturers, said.

Dong Yang believes that the US government cannot equate the industrial policies of two countries with different development conditions in the automotive industry under the guise of fairness. The national conditions of China and the United States are different, and the stages of economic development are also different. In terms of the automotive industry, the demand for sole proprietorship by foreign vehicle companies is not high, because the contribution of Chinese resources, manpower and other factors in joint ventures is increasing, and cooperation between China and the United States is beneficial to both sides

Joint ventures or cooperative operations aim to "work together and earn together". Through these methods, foreign-funded enterprises represented by the United States have made significant profits in China, and many American companies have gained much more revenue than their local counterparts. In other words, American companies coming to China to seek gold are not "losing a lot", but making "a lot of money".

Has China manipulated the RMB exchange rate to gain trade benefits?

In the face of the Asian financial crisis and the 2008 international financial crisis, China did not seek additional trade advantages through currency depreciation. The continuous improvement of the RMB exchange rate formation mechanism is evident to all

In the trade friction between China and the United States, there are always some American institutions labeling China as a "currency manipulator".

Since the United States proposed to impose tariffs on China in March, the exchange rate of the Chinese yuan has not been significantly affected. This can be confirmed by a series of recently released economic data, where economic indicators have continued to stabilize and improve, providing strong support for the exchange rate of the Chinese yuan. Zhao Qingming, Chief Economist of the China Institute of Finance, believes that there is no possibility for China to use RMB depreciation to deal with trade frictions, and using depreciation to deal with trade frictions is not the optimal choice.

Even in the face of the 1998 Asian financial crisis and the 2008 international financial crisis, China did not adopt exchange rate depreciation to gain additional trade advantages. Instead, it made sacrifices for the overall interests of the international community and adopted measures to stabilize the exchange rate. Zhao Qingming said, for example, during the Asian financial crisis, many countries experienced significant depreciation to varying degrees, with some countries experiencing exchange rate depreciation of more than 50% or even more than 100%. China, on the other hand, maintained the depreciation of the Chinese yuan and supported countries in crisis. The exchange rate of the Chinese yuan against the US dollar remained stable from 8.7 in 1994 to around 8.27 in 1998 until 2005, reflecting the responsibility of a responsible major country.

From the data, although the Chinese yuan did experience periodic depreciation against the US dollar from 2014 to 2016, the balance of China's foreign exchange reserves continued to decline during this period. In 2015 and 2016, China's foreign exchange reserves decreased by $512.6 billion and $319.9 billion respectively compared to the previous year, which clearly contradicts the argument of "exchange rate manipulation".

In fact, the depreciation of the RMB during this stage is mainly influenced by factors such as the turbulence in the international financial market and expectations of the Federal Reserve's monetary policy adjustment, "said Li Shigang, Deputy Director of the Economic Research Institute of the China Macro Economic Research Institute. The direction of the central bank's foreign exchange management is to provide necessary US dollar liquidity support for the market. This is neither to hinder the effective adjustment of international balance of payments, nor to engage in competitive depreciation to stimulate exports, nor to prevent the market-oriented adjustment of the RMB exchange rate. China's efforts to balance the flexibility of the exchange rate and maintain exchange rate stability have effectively avoided the negative spillover effects caused by the disorderly adjustment of the RMB exchange rate and the competitive depreciation of major currencies, which is beneficial to the international community, including the United States

The Governor of the People's Bank of China, Yi Gang, recently stated that China has implemented a managed floating exchange rate system based on market supply and demand, adjusted with reference to a basket of currencies, which can serve individuals and enterprises well and facilitate trade and investment for Chinese and foreign companies. "In the future, the foreign exchange market will also operate better