Prof. ST Hsieh
Director, US-China Energy Industry Forum
May 7, 2022
US-China relation is not good, and it should be reset. It was unfortunate that US Secretary of State, Blinken, contracted COVID-19 with mild syndrome but he had to cancel his speech engagement on May 5th where he planned to reveal the long-awaited US China Strategy. We wish Secretary Blinken recovers and present US China Strategy soon.
Ambassador Qin’s interview with Forbes was focused on economic and trade ties. Ambassador’s point that: We are natural partners, because our economies are highly complementary. It is well said, but today’s economy is severely challenged by the COVID-19 global pandemic as well as the on-going Ukraine war. The risk of a global recession is very real, so a stable US and China trade relation is imperative for the world. Although Ambassador Qin is “very optimistic about the potential and opportunities between our two countries” the downside risk cannot be overlooked. Further, US-China trade is not as resilient as Ambassador Qin wished. His inference of a “political virus” is poisoning US-China relation is worse than COVID-19 because there is no vaccine that can immunize this “political virus.” There is also no cure for those who are infected by this “political virus!”
US and China must keep the trades going and improving, the status-quo Trump’s tariff war is not sustainable. If there is no compromise, US-China trade will only get worse than better. Along with the pandemic and Ukraine war, a global recession is inevitable: there is no winner but who suffers less!
It is very true as Ambassador Qin called: We need to talk with each other, to learn from each other, to respect each other. For all practical purposes, governments should set clear policy objectives with stable leadership to consistently execute the policy. Otherwise, any bilateral relationship without curators will NOT be successful.
US and China are the world’s two leading economies, both have the responsibilities to keep the global economy move forward.
On April 29, Ambassador Qin Gang took an interview with Forbes journalist Russell Flannery, and answered questions about China-US economic and trade ties. The transcript of the interview is as follows:
Flannery: Thank you for joining us. There’s been a lot of discussion about the geopolitical relations between the US and China of late, but not so much conversation about the business side and the economic side. How do you size up the business and economic relationship between the US and China now?
Ambassador Qin: Thank you for having me. China and the United States are two biggest economies. Our interests are so intertwined. The two countries are interdependent over the past decades since the establishment of diplomatic relations between our two countries. Our trade and business relations have made remarkable achievements, benefiting the two countries and benefiting the world. We are natural partners, because our economies are highly complementary. Last year, the COVID has caused great difficulties to the world economy. But China-US trade performed well. Just give you a few figures on bilateral trade. The US-China bilateral trade reached a record high of 750 billion US dollars, a 28.7% increase over the previous year. And on investment, the US investment FDI has approached 100 billion US dollars. From the other direction, China’s non-financial direct investment in the United States has surpassed 70 billion US dollars. And so far, more than 70,000 American companies are investing in China, 97% of them are making profits. Look at these figures, they are good. We are trying to buy more. According to the statistics of the US-China business Council, last year China’s import from the United States increased by 21%. This is another record high year. So we are very optimistic about the potential and opportunities between our two countries.
But at the same time, we are mindful of more difficulties and challenges in our trade and business relations. These uncertainties and instabilities, many are from the US side. You know the Section 301 tariffs imposed by the Trump Administration are still going on. And the United States is now defining China-US relations as intense competition. Under such circumstances, business and trade are being politicized. So Chinese companies, more and more are being restricted and even suppressed by the overstretching of the concept of national security and by the false claiming of forced labor in Xinjiang. Now we have more difficulties and uncertainties.
So we hope that the United States should stop politicizing our business cooperation and stop using trade as a tool, so that we could provide more stability and predictability to investors. Because if this situation goes from bad to worse, it is in nobody’s interest. Looking around, we have COVID rampant in the world, and we have the Ukraine crisis in Europe. They have caused great difficulties to the world economy, and more countries are suffering from energy and food shortages. Global supply chains are being disrupted badly. China and the United States, as two big countries, as the two largest economies, they need to coordinate and collaborate and to take a leading role to make the world economy recover as soon as possible. But it needs a good environment. Thank you.
Flannery: So let’s zero in, if we could, on investment. Chinese investment used to be a lot bigger, not too long ago, than it is today. We do see successful companies like Fuyao Boli which is in the Midwest and there are some Chinese pharmaceutical companies also investing in that area. What beyond the general environment that you just mentioned, do you think, could be done to get investment back up to where it was, or even higher?
Ambassador Qin: Over the past decades, we have seen many Chinese companies investing in the United States. They have created almost 1 million jobs to American people. So they are good for American consumers. They are good for American families. But as you have noticed, in the recent years, the Chinese investors, they are facing more difficulties and challenges, mainly because of two viruses.
The first is COVID. The pandemic has caused great difficulties to the business operation of Chinese companies in the United States. According to a survey conducted by the Chinese Chamber of Commerce in the United States, 35% of the Chinese companies being asked reply that they are seriously impacted by the pandemic.
And secondly, and the most importantly, it’s the political virus, as I mentioned earlier. Trade and business are being politicized in the United States. The so-called national security concept is being abused and overstretched. You know how many Chinese companies are being sanctioned or restricted? More than 1,000. They are put on various list of entities and sanctions, and the lists are getting longer and longer day by day. Take telecommunication business for example. A number of Chinese telecommunication companies, they have been deprived of their licenses for operating in the United States.
So the picture is not very encouraging. We urge the US side to take common sense, to be reasonable and provide a fair and predictable environment for the Chinese investors, so that they can still have confidence in the US market, because the Chinese investors, they are doing business in the United States, and they help create jobs, and they help to provide good-quality products at reasonable costs to American industries, to American families. As you mentioned, Fuyao Glass company, half of the total consumption of glass in the vehicle industry in the United States is from Fuyao Glass Company. They provide more than 2,000 jobs locally.
If I want to say something to the Chinese companies investing in the United States, I want to deliver a similar message. Although we have lots of challenges and complexities in China-US relations, don’t lose confidence in the US market, because China-US economic and trade relations are win-win and resilient. At the same time, they should be aware of the difficulties and challenges. They should get to know more about the US policies, rules and regulations and to readjust their businesses so that they could avoid risks. And they should also learn how to use laws to protect their legitimate rights and interests.
Flannery: You mentioned that US exports to China have increased. Recently. you were out in the Midwest and had an interesting time. I was reading some reports from your trip. What is your sense of the folks that you talked to in that part of the US about the outlook for their business with China?
Ambassador Qin: Most recently, I visited the Heartland of the United States, three states I visited — Illinois, Iowa and Minnesota. And during the whole visit, I met many business people, and I went to the farmland and went to factory workshops. And I talked to not only the CEOs, but farmers and workers. I have a very strong feeling that the sound and healthy China-US trade and economic relations are in the fundamental interests of our two peoples. Take agriculture for example. Last year, China’s import of US agricultural products increased by a remarkable 68% over the previous year, making the volume total at more than 38 billion US dollars. This is a bulk in the share of the US export to China. We had a senior-level agricultural dialogue held in Iowa. It was well attended by central and local governments and by business and agricultural associations and by individuals. The repercussion was overwhelming. During the symposium two big deals were announced. Two Chinese companies announced to buy more American agricultural products.
American farmers, they told me their lives very much depend on their exports to China. And I was very impressed with their way of doing modern agriculture. They are hardworking, but hardworking in modern agriculture is not enough. It involves technology and is knowledge-based. I was very impressed with the farmers using modern, advanced technology to capture and store carbon on their farms. They are very climate-aware. I was also very impressed with the modernization and automation of American agriculture. So as I said to people in Iowa, our agricultural cooperation shouldn’t be limited to only “you sell more and I buy more”. We should expand to the area of sustainable agriculture, how two countries can learn from each other and help each other to achieve the green and low-carbon transformation in agriculture. And also I met many businessmen in many areas. They are all positive about China-US business relations. They are all against tariffs, and nobody wants to leave China. That’s what they told me. They are all optimistic about the opportunities of China’s development.
Flannery: So as the US exports increased last year, US Trade Chief Katherine Tai said recently that the US has repeatedly sought and obtained commitments from China, only to find that a follow-through or real change remains elusive. What do you say to that?
Ambassador Qin: China has a good record of keeping promises. We honor our words with actions. This year marks the 20th anniversary of China’s entry into WTO. In the past 20 years, China has fulfilled all the commitments of entry. Take the tariffs for example, the tariff level has dropped from 15% to about 7%. We have been improving the market economy and putting a sound legal system in place. And we have made great efforts on IPR protection. So we have a good record of honoring our commitments.
And secondly, talking about the phase one (trade deal), China has fulfilled all its obligations with time deadlines. And remarkable progress has been made in IPR protection, the market access for American agricultural products and financial services. We have been buying more from the United States. And we have also adopted a market-based process of exclusion to our countermeasures to the US additional tariffs imposed on us. So that’s why last year, people saw that there’s a remarkable increase of the US export to China. We have done so much.
We have differences, but we don’t believe tariffs, trade wars are the choice. The best choice is to have a dialogue and negotiations to find mutually acceptable solution based on the principle of mutual respect and mutual accommodation. One side shouldn’t impose its own interest and its own thinking on the other side. We need to talk with each other, to learn from each other, to respect each other. And the tariffs are bad. It hurts China and it hurts the US. Just give you some figures, the tariff war so far hasn’t reduced the trade deficit of the United States. On the contrary, it brings more costs to American companies and American consumers. It cost American companies 1.7 trillion US dollars. And it cost American household 1,300 US dollars each year since the tariffs were taken into effect. Since 2018 when the tariff war was launched, in the first 3 years — the years 2018, 2019, 2020 — US export to China of each year in the 3 years was below the level of the year 2017, a year before the trade war was launched. So it cost how many jobs? More than 240,000 jobs in the United States. The tariff war does nobody’s good. I think it’s time for the US administration to reconsider and to cancel it as early as possible. Well, if the US side still wants to continue, I don’t know if they are prepared for more losses. If they will continue, we have to live up to it.
Flannery: I think even without the tariffs and going back further, many American companies, especially small and medium sized companies, are historically distant from China, may not have family in China and are not so close to the culture of China, whether it’s business or anything else. You’ve been in the US and you’ve gotten a chance to meet a lot of different Americans. Any suggestions that you could offer to American companies that are not in China but doing business in China today about how to approach the market?
Ambassador Qin: I have met many American people from small and medium sized businesses. Most of them showed great interest in doing business with China. Some of them didn’t know how to do better. I told them that China continues to pursue opening-up policy. Our door won’t be shut. Instead, our door will be kept wider and wider to the rest of the world. Actually, there are many small, medium and even micro foreign enterprises that have already been operating in China. Among all the foreign companies investing in China, more than 90% are small and medium sized companies. China, as I said, will continue to pursue opening-up policy. This will remain unchanged. We will do our best to provide a better business environment for them. So I do encourage small businesses of the United States to look at the future of China’s market which is huge. China has a population of 1.4 billion. Among them, 400 million are middle incomers, and this number will be growing. There will be great opportunities for investors across the world, big or small. We welcome and will treat all investors (as equals), domestic or foreign, big or small. We’ll try our best to provide a level play field for them.
If there is any suggestion I want to give to small businesses. First, stay positive, stay confident in China’s huge market. Second, be more careful about China’s policies, plannings, and development strategies. They are all open and transparent. They are on Chinese newspapers. They are on Chinese websites. So do some good homework and find out where the key priority areas are and where the good opportunities lie. Also they need to get familiar with the Chinese laws and regulations, so that they can better adapt to the business environment and culture in China and the Chinese society.
Flannery: It’s just coming back to foreign businesses, but I think also Chinese businesses. One big obstacle to business in the last couple of years has been the reduction in the number of flights between the US and China. So whether you’re the CEO and you’re going over and looking at a big project that needs parent company support, or whether you’re a small businessman looking for a partner or somebody that’s gonna help you, I think on both sides, the lack of flights has been cited by business people as really an obstacle to commerce. Any hope for improvement in that?
Ambassador Qin: The ongoing pandemic has caused great difficulties to business and travel. We have seen a new round of resurgences in the world, and also we are seeing more outbreaks in China. The Chinese government puts people’s lives and health as a top priority. So we have to take very strict and resolute measures to counter the spread of the pandemic. We call it “zero-Covid policy”. We work so hard to prevent the import of the virus from abroad. International flights are getting fewer and fewer. And people’s traveling is not convenient, even impossible, but it is temporary. And many American companies told me that their motto of being in China is that “in China, for China”. I think it’s an important time for foreign companies to stay together with Chinese people to get through this difficult time. Sooner or later, COVID will get relaxed or over. I hope that traveling will come back, but we fully understand the situation of foreign companies in China. So that’s why Chinese governments, at the central level or at the local level, are more closely engaged with foreign companies, listening to their requirements and difficulties. And they are more responsive.
Flannery: For the last couple of years, I’ve taken the lead in organizing a conference that brings together cancer experts from China and the US. And the goal is to identify kind of people-to-people exchange that advances trials for new drugs. For this type of program, the IP is all on the table. International collaboration can accelerate the timeframe for getting new drugs onto the market. It seems to me this is an interesting, worthwhile area for collaboration between the US and China. China has, of course, many of the world’s cancer patients and the US does also. Do you see any areas that are similar to that where people-to-people collaboration that brings about shared benefits can help the relationship between the two countries?
Ambassador Qin: People’s friendship is the key to state-to-state relations. What we are doing every day is to benefit our people and benefit people of the world. Over the past decades, people-to-people contacts between China and the United States have been so close. Before COVID, every year there were 5 million mutual visits going between two countries. And we have 234 pairs of sister cities. People-to-people friendship lays the foundation of China-US relations. And I think the passion and interest between our two peoples for a good relationship, for a more cooperative relationship are still here.
Recently, I visited the Heartland of the United States, and I was so impressed, I was so touched by American people’s warm, hardworking attitude and friendship towards Chinese people. I went to the farmland to learn how they do their modern agriculture and to learn from them how important their exports to China are for their families. I went to classrooms to learn how students share their love for Chinese language and their understanding of Chinese culture. And I went to universities, talking with their presidents. They all told me that the Chinese students are good students and the Chinese students set a high bar for all the students. And I talked to them. In New York, I went to the Juilliard School. It’s a well-known music school and they told me that they opened a school campus in Tianjin, China, attracting international students, training music talents. And it’s going well. These are very positive developments and give us hope for the future of China-US relations.
But at the same time, we are worried that there are some negative factors in the people-to-people relations. For example, in the United States, the Asian Hate sentiments are on the rise. We have seen more crimes targeting at the Chinese people. And there are Chinese profiling that makes many Chinese students and scientists, scholars of Chinese descent fear, and feel the chilling effect. Nothing should cut off the people-to-people contacts and friendship. We shouldn’t let disinformation, lies, prejudice to stand in the way of our people-to-people relations, and shouldn’t let them create isolation and division between our two peoples.
So my role here, as the Ambassador, is to do my best to promote the good mutual understanding and friendship between Chinese and American people. We can do more in many areas. For example, climate change, culture, education, and medicine. Just now you mentioned cancer. Over the past 40 years, the China-US collaboration on cancer is going on very well. They are still the one of the highlights of our people-to-people relations. So we are very happy to see that with the sponsorship of Forbes magazine in the past two years, each year there was an academic symposium attracting experts of both countries to discuss the cancer, clinical trial. This is very important because we have many cancer patients in China. Every minute China has eight new cancer patients. And in the United States, cancer also is one of the major diseases. And the US has advanced technologies and drugs. And in China we have many patients and also we have our advantages in diagnosis and treatment of cancer by using traditional Chinese medicine. So experts and doctors of both countries, they come together to talk to each other and have joint researches. This is very meaningful and can benefit the two peoples. I do hope this kind of collaboration will go on as other cooperation in people’s areas.
Flannery: Even though you were able to meet a group of Midwesterners upbeat about the relationship with China, and people like ourselves have been working to bridge the two countries for a long time. I have to point to a survey that came out yesterday by the Pew Research Center, which pointed out that a majority of Americans at the moment do have an unfavorable view of China. That’s increased a little bit from a year earlier. Did you happen to see that survey? And what do you make of that?
Ambassador Qin: I think the result of that survey failed to give people a whole picture of China-US relations, particularly people-to-people relations. It’s not objective. As I said earlier, here in the United States I’ve met people of different communities. I went to the subnational (level) and talked to businessmen, farmers, students, teachers, workers. Nobody told me that they don’t like China. Most of them told me that they were interested in China. They wished China-US relations well. They wanted to do business with China. They wanted to learn Chinese. They wanted to go to China. Everybody asked me when the COVID restrictions will be lifted, we want to go, we want to go tomorrow. The foundation is still there. But if there is something negative, I think this is because of the disinformation, rumors and even lies fabricated and spread by some anti-China politicians. And they are being played up by some media. But it’s not the whole picture.
Flannery: I hope you can continue to get out and visit different groups in America. I hope perhaps to see you in New York at some point, and maybe up in Vermont. Thank you very much for being with us today.
Ambassador Qin: Thank you for coming and thank you for your questions.
China’s US ambassador decries ‘political virus’ hurting bilateral economic ties between ‘natural partners’
SCMP: Fri, May 6, 2022, 2:30 AM
China’s top diplomat in the United States has called on Washington to stop politicising trade issues, and to remove punitive tariffs imposed on Chinese products.
In response, analysts suggested that a partial removal of tariffs may be likely, but any such actions would be primarily in the US’ domestic interests. And they also cautioned against expecting a substantial improvement in overall bilateral ties.
In an interview with Forbes published on Thursday, ambassador Qin Gang said a “political virus” in the US, such as abuses of national security, is hurting bilateral economic ties, as more than 1,000 Chinese companies have been put on lists of trade restrictions and sanctions by the US.
“The lists are getting longer and longer, and day by day,” said Qin, who became China’s envoy in the US last summer.
But he also played up the prospects of trade cooperation between the two countries, which have seen heightened rivalry on almost all fronts, including hi-tech, security, space and ideology, in recent years.
He said that both countries have made “remarkable achievements” in trade over the past few decades, and that trade between the two countries “performed well” last year, despite the pandemic.
“We are natural partners because our economies are highly complementary,” he said.
“We are very optimistic about the potentials and opportunities between our two countries, but at the same time, we are mindful of more difficulties and challenges in our trade and business relations.”
His comments came amid growing discussions in Washington about lowering tariffs to help ease the decades-high inflation in the US.
US headline inflation came in at 8.5 per cent in March, year on year – a level and pace not seen since December 1981.
US Treasury Secretary Janet Yellen noted in April that lowering tariffs on Chinese products was “worth considering“.
The US Trade Representative Office also announced earlier this week that it would launch a statutory four-year review of the tariffs that were imposed on Chinese products in 2018 by the former administration of Donald Trump.
The first review would cover US$50 billion worth of Chinese products from July, when the tariffs will expire.
The Peterson Institute for International Economics (PIIE) said in a study in March that removing the Trump-era tariffs, including those on Chinese products, would reduce inflation by 1.3 percentage points.
State media Xinhua said in an interview with PIIE economist Gary Hufbauer that lifting tariffs on Chinese products would directly lead to a 0.3 percentage point reduction in the consumer price index.
Qin reiterated China’s long-standing position against tariffs and its calls for dialogue to resolve trade conflicts.
“The tariffs are bad. It hurts China and the US,” Qin said. “The tariff war hasn’t reduced the trade deficit in the US, and it [has cost] US families US$1,300 each year since the tariffs took effect in 2018.”
China and the US should cooperate to take a leading role in the global economic recovery, and doing so requires a “good environment”.
Chen Fengying, a senior fellow at the China Institutes of Contemporary International Relations, said most of the products under review are labour-intensive goods, some of which have already been put on the tariff-exemption list.
“We need to see the results of the review and whether it will cover strategic products,” Chen said.
“The Biden administration is focusing on tech competition with China, rather than trade. It is aiming to seek a coalition on chips, and to build up the Indo-Pacific Economic Framework to set rules and standards in containing China,” she said. “That is the Achilles’ heel for China. Washington knows it, and it has refrained from dialogue with China.”
Everbright Securities projected that overall bilateral relations between the countries are unlikely to improve greatly in the run-up to the US midterm elections in November, though the US may lift tariffs on more Chinese goods.
“Democrats and Republicans will pressure China on human rights, ideology, issues over Xinjiang and Taiwan prior to the midterm election. They will intensify the anti-China rhetoric to attract hawkish voters,” the securities brokerage said in a research note on Thursday.
Zhang Monan, a researcher with the China Centre for International Economic Exchanges, said in late April that the US had adopted a new trade strategy with “selective decoupling” and “precise strikes” on China.
She also said that the Biden administration has sought to contain China on industrial subsidies, digital trade and competition policies, while noting that the window opportunity for effective engagement is disappearing.