China Center for International Economic Exchanges

Zhang Yansheng: The Process of the China-US Economic and Trade Consultation is More Important than Its Outcome
Date:Feb 15,2019    Source:CCIEE

Shortly before the Chinese New Year, Liu He, Vice Premier of China’s State Council, led a team to the US for the economic and trade consultations with their US counterparts, led by US Trade Representative Robert Lighthizer. Trump announced that the consultations have achieved great progress. However, this is only an intermittent period of the China-US economic and trade consultations, and a new round of consultation is just around the corner.

This round of consultation involves a wide range of issues of mutual concerns, especially trade balance, technology transfer, and intellectual property protection. The two sides had frank and constructive discussions and made important progress. Moreover, they have agreed on a timetable and roadmap for the next consultation. The US team will continue the negotiation in China in mid-February.

The result of this consultation has sent us the following messages.

First of all, the leaders of the Chinese and US consultation team focused on topics such as trade balance, technology transfer, intellectual property protection, and the implementation of mechanisms. The two sides attach great importance to intellectual property protection and agreed to further strengthen cooperation in this regard, which will help China to promote high-quality development and build a modern economic system. In 2018, China’s R&D intensity reached 2.15%, which exceeded the average of the EU-15 countries (2.08%). In well-developed eastern China, such as Beijing, Shanghai, Tianjin, Jiangsu, Guangdong, Zhejiang and Shandong, the R&D intensity exceeded the average of OECD (2.4%).

This shows that developed regions in eastern China have entered the stage of kinetic energy conversion driven by technological innovation. Establishing a fair, standardized, transparent and efficient intellectual property protection and technology transfer system will help China to promote its kinetic energy conversion, structural transformation and economic model transformation.

Second, the discussions on issues such as technology transfer, intellectual property protection, implementation of mechanisms, non-tariff barriers, services, and agriculture can hardly be completed within 90 days. Whether the two sides will reach a consensus and make another 90-day consultation process depends on the goals and strategies of the two sides. This is only the beginning of the first round. After all, China and the United States have a great difference in the areas of economy, politics, ideology, security, and strategy. The consultations and confrontations between China and the United States will continue for quite a while but in the end, they will move from irrational confrontation to rational cooperation.

At the Davos Forum, Chinese Vice Premier Wang Qishan said that in the face of problems, China chooses to focus on its own tasks. First of all, we will shift commodity and factor from circulation-based openness to institutional openness. The strategic game between China and the United States is actually a competition in rules and institutions. This is the biggest shortcoming and weaknesses of China, but it is the strongest advantage of the United States. Historically, rules and institutions were also shortcomings and weaknesses of the United States.

After the United States became the world’s largest economic power, it still spent 60 years or so to improve its weak links.

Therefore, it is necessary to learn rules and regulations during the process of China-US strategic competition. We should learn from the advanced international model and the United States. Moreover, we should build a market system for coordinated development among enterprises, markets, governments, and society.

In addition, China’s industrial system is shifting from OEM to independent production, from the low-end to the high-end of the global value chain. The China-US strategic competition is an important test and a rare opportunity for China, and the process is more important than the outcome. We should not waste this historic opportunity to complete the transformation.

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