|Keynote Speech by Consul General Hong Lei at US-China Think Tank Symposium Luncheon|
Honorable Minister Zhao Qizheng, Vice Minister Guo Weimin, Vice Minister Wei Jianguo, Ambassador Stapleton Roy, Ambassador Kenneth Quinn, Ambassador Julia Chang Bloch, Ladies and Gentlemen,
This morning we had a rich and extensive discussion of China-US relations in wake of our presidents’ successful summit at Mar-A-Lago in Florida in early April, agreeing that this summit initiated a good start for China-US relations in the new era and laid a solid foundation for bilateral exchanges and cooperation across the board.
China and the US are respectively the world’s largest developing country and the largest developed country, and differ in national conditions, history, culture, stages of development, social systems and ideologies. As economic partners, the two are writing the history of major countries of different systems respecting each other, coexisting in peace, and conducting mutually beneficial cooperation. Over the past 38 years since the establishment of diplomatic relations between the two countries, China-US economic and trade relations have been moving ahead despite ups and downs. Trade and economic cooperation has helped to stabilize, propel and maintain the bilateral ties. Every major breakthrough made in China-US economic and trade ties has pushed the relations between the two countries to a new
level. Every time a major difficulty in the relations is overcome, it is due to the stabilizing role of the economic and trade ties. In other words, economic and trade cooperation is a dynamic and lasting driving force in China-US relations, the world’s most important bilateral ties.
Some figures in China-US economic and trade relations are truly encouraging.
On trade in goods, according to Chinese statistics, China-US trade volume has grown from US$2.5 billion in 1979 to US$524.3 billion in 2016, a rise of 209 times. China is the United States’ largest export market outside North America, and is also one of the fastest growing major export markets of the United States. In the past 10 years, the average annual growth rate of US exports to China hit 11%, higher than not only the 4% of
average growth rate of US total exports during the same period, but also the 6.6% of average growth rate of China’s exports to the United States in this period. Since China’s accession to the WTO, US exports to China in 2016 has been up 500% from 2001, while US global exports during the same period only grew by 90%. China has become an important overseas market of many products of the United States, especially bulk agricultural
products and high-end finished products.
According to Chinese statistics, in 2016, the United States exported 440 aircraft to China worth of US$12.5 billion; 33.66 million tons of soybeans
Worth of US$13.8 billion, many of which are from the state of Iowa; 255,000 automobiles worth of US$12.1 billion; US$9.7 billion of integrated circuits; and 260,000 tons of cotton worth of US$500 million. Currently, China is the largest export market of American aircraft and soybeans, and the second largest market of American automobiles, integrated circuits and cotton. Among US exports, 62% of soybeans, 17% of automobiles, 15% of integrated circuits, 14% of cotton and some 25% of Boeing aircraft are sold to China.
On trade in services, from 2006 to 2016, the service exports of the United States to China expanded from US$14.4 billion to US$86.9 billion, a rise of 5 times. In 2016, the US trade surplus with China in services reached US$55.7 billion, 40 times the amount of 2006. As for tourism, according to the Chinese Ministry of Commerce, Chinese tourists spent some US$13,000 in the US per person in 2016, far more than the tourists from other countries. In 2016, Chinese tourists spent a total of US$35.22 billion in the US, creating about US$97 million of revenue for the US per day.
On education, the US is Chinese students’ top destination for studying abroad. According to a report published by US Immigration and Customs Enforcement in May 2016, there were some 353,000 Chinese students studying in the US, accounting for 34% of the total number of international students in the US. According to the estimates of the Chinese Ministry of
Commerce, Chinese students studying in the US spent about US$45,000 per person in 2016, contributing around US$15.9 billion of revenue to the US. In 2016, the US exported to China 51 movies, obtaining revenue of US$16 billion, four times of other countries’ movie export to China combines.
With respect to investment, US-invested enterprises in China have maintained good performance and gained high profits. Sales revenue in 2015 totaled US$517 billion, and profit reached US$36.2 billion. In 2016, the total revenue of US-funded banks, insurance and security companies was US$48 billion; and the total revenue of US-funded accounting firms, law firms and consulting firms exceeded US$19 billion. In 2016, General
Motors sold 3.87 million automobiles in China at a rate of one automobile per 8 seconds. Ford Motor sold 1.27 million automobiles at a rate of one automobile per 25 seconds. Both enterprises set new records in sales volumes in China. Through over 2,200 stores in China, McDonald’s sells 1,600 hamburgers every minute.
At the meantime, Chinese investment in the US is growing rapidly. According to a report published by the National Committee on United States-China Relations and Rhodium Group, Chinese enterprises invested
US$15 billion in the US in 2015. In 2016, Chinese enterprises invested US$45.6 billion in the US, a 200% increase from the previous record set in 2015. By the end of 2016, the accumulative total of Chinese foreign direct investment in the US reached around US$109 billion, covering such sectors as services, manufacturing, real estate, hospitality, information and communication technology, entertainment and financial services. Nearly 98% (425 of 435) of congressional districts in 46 states hosted Chinese-owned establishments. The total number of Americans employed by Chinese-owned companies exceeded 141,000, and most of them work in the manufacturing sector.
There are new features in China-US economic and trade relations.
First, high-level dialogue has played an increasingly important leading role in China-US economic and trade ties. President Xi Jinping met President Donald Trump in Florida in April. The two sides talked about economic and trade issues, agreeing to deepen pragmatic cooperation in investment and trade, properly manage trade confrontations and achieve mutually beneficial results. They announced the establishment of four high-level dialogue mechanisms including the comprehensive economic dialogue and the initiation of the 100-day action plan for economic cooperation. This has lent strong boost to China-US economic and trade relations.
Second, China-US economic and trade cooperation has expanded in various areas and in different modes. In recent years, under the concerted efforts of the governments, enterprises and scientific research institutions of China and the US, the two countries have established all-directional, multi-layered and wide-ranging energy cooperation which has yielded remarkable results and kept a good momentum. The two sides have organized energy policy dialogues, oil and gas industry forums and forums on renewable energy, pressed ahead with bilateral civil nuclear energy cooperation initiatives, established a research center on clean energy. Oil and gas cooperation is becoming a bright spot of China-US economic cooperation. Chinese companies have invested over 10 billion US dollars in the US in oil and gas projects. It is worth mentioning that cross-border e-Commerce platform is increasingly important for promoting CHina-US business cooperation. According to estimation of Alibaba, the sale of American brand products on Taobao.com alone reached RMB 120 billion in 2016, creating about 270,000 jobs for the United States. Alibaba will hold a grand e-commerce conference in Detroit on June 20.
Third, economic cooperation between states and cities of China and the US has become even more vibrant. Since 2012, 25 Chinese provinces (cities) have established the Joint Working Group on Trade and Investment Cooperation between Chinese Provinces and US States with seven US states (cities), including California, Chicago, Iowa, Texas, Michigan, Washington and New York. Under the framework of the Joint Working Group, the two sides have cooperated in the fields of infrastructure, bio-pharmaceuticals, electronic information, agriculture, energy, manufacturing, finance, tourism, environmental protection, exhibition, professional services, cross-border electronic commerce, etc., and whereby, personnel from the countries can
communicate with each other more frequently and project cooperation can be progressed more smoothly.
The close economic ties between US mid-West and China are examples of the boosting cooperation between the two countries at local level. The Chinese Consulate in Chicago covers nine mid-West states, namely Illinois, Missouri, Kansas, Colorado, Wisconsin, Minnesota, Michigan, Indiana and Iowa. These nine states are developed and rich in resources, and are centers for agriculture and manufacturing. Governments and enterprises of the nine states all pay great attention to economic development and creating new jobs, and have strong willingness to develop ties and cooperate with China.
Thanks to joint efforts of both sides, mid-West states and China now enjoy a good momentum of economic ties which have yielded fruitful results. Last year, the trade volume of the nine states with China hit 90 billion US dollars. From 2000 to 2016, Chinese companies have invested nearly 15 billion dollars in these nine states, creating 36,000 new jobs. Many multinationals in these nine states have also increased their investment, expanded operation and sett up new factories and research centers in China, harvesting great success and rich dividends.
When I visited the Principle Financial Group based in Des Moins, President Dan Houston told me that by 2030, the world’s GDP will be equally distributed among China, the US and the rest of the world. He asked me where should he go as a multinational enterprise if he did not go to China? Head of the Eli Lilly company headquartered in Indiana told me that China has become the largest source of foreign employees of the company.
After the acquisition by China’s CIMC of Monon company in Indiana which had been on the brink of bankruptcy three times, the enterprise finally make a profit thanks to optimized process and reduced cost. It currently has a revenue of 500 million US dollars with 500 local employees. And the city of Monon is full of vigor again.
When a Chinese company purchased Nexteer based in Michigan in 2011, it only had 3000 employees. And now the number has risen to 5000. Yanfeng, a company making car interiors, employs 4000 people in Michigan and another 1000 in Missouri. Wanxiang America has 13 factories across the US with a total employment of 13,000.
Why can China-US economic relations come so far？I believe there are several reasons behind this.
First reason is that differing in development stage, economic structure and natural resources , China and the US are highly complementary in terms of economic advantages. At present, China’s manufacturing industry accounts for more than 25% of the global manufacturing industry. China has marked advantages in the supply chain and supporting industries. China has the world’s largest, good quality and relatively low-cost labor resources. China’s infrastructure has the late-mover advantage. The scale of its highways, high-speed railway, subway, water transport, ports, tunnels, water conservancy and power grid ranks first in the world.
The US leads the world in science and technology. In 2016, 10 of the 15 largest technology companies released by Forbes headquartered in the US. Among the world’s top 500 research institutions ranked in 2015, there were 198 US universities and research institutions; and 9 of the 10 top research institutions were US institutions. The cost of some US production factors is low. The US has a cost advantage in electricity, gas, land, logistics, raw materials, financing and taxation. And US service sector is highly developed, with various industrial categories.
Second, respective development of China and the US will bring great opportunities to bilateral cooperation. China has put forward the development concepts of innovative, coordinated, green, open and sharing development, and is fully committed to deepening reform and opening-up, driving development through innovation, and enabling the Chinese economy to transform and upgrade. China will follow through on the open strategy of win-win cooperation, conform to the trend of integrating Chinese economy into the world economy, strike a balance between domestic and foreign demand, import and export, attracting foreign investment and going global, introducing investment and technology and management, so as to proactively participate in global economic governance and public goods supply and build a community of shared interests. During this process, US products and services, be it agricultural produce or smart high-tech gadgets, are well sought after by Chinese consumers. US companies can also ivnest in China’s high-end manufacturing, smart manufacturing and green manufacturing to upgrade traditional services and set up partnership with Chinese companies or invest in China’s service industry.
The US has also proposed big plans of massive infrastructure building and revival of manufacturing to transform the growth model and speed up development of new energy, new materials, environmental protection technologies and wireless internet. State and municipal governments are all interested in cooperating with china and welcome Chinese companies’ investment.
Third, a stable and sound China-US relationship will create favorable environment for bilateral economic and trade cooperation. Converging national interests serve as the strategic foundation for bilateral cooperation. Ever since the two countries established diplomatic relations, the influence of bilateral relationship has gone far beyond a bilateral scope, and kept expanding to such areas as international politics, economy, finance and security. In recent years, the two countries have maintained close negotiation and coordination on international and regional hot-spot issues such as Iranian nuclear issue, Korean nuclear issue, South Sudan and Afghanistan issue, forging cooperation in response to global challenges including the financial crisis, climate change, energy security, terrorism and disease control. This fruitful cooperation has become bright spot and shed a positive perspective on bilateral relations and economic and trade ties.
China-US economic and trade relations are mutually beneficial in nature, and the two countries share far more common interests than differences. Dialogue and cooperation are always the dominant feature in bilateral relations. As President Xi said, a sound China-US relationship is good not only for the two countries and two peoples, but also for the world. We have one thousand reasons to make China-US relationship a success, and not single reason to break it. Bilateral cooperation on culture, education, science and technology as well as on global governance and development shall boost the development of China -US economic and trade ties in this new era.
Fourth, China-US economic and trade cooperation will have increasing important global influence. The world economy is still faced with uncertainties and lack of strong impetus. As the two largest economies in the world, China and the US account for one third of the world GDP, one fourth of the population and one fifth of the trade volume, sharing major responsibilities in enhancing macro-economic policy dialogue, addressing global financial crisis and facilitating economic recovery and growth. The two sides have increased their policy coordination under the framework of the G20, and have made joint efforts to promote global economic and trade growth and the world economic recovery. The two sides have maintained communication and exchange under the Asia-Pacific Economic Cooperation (APEC) to promote the Global Value Chain Initiative, the Asia-Pacific Free Trade Zone strategy research, and the Services Competitiveness Roadmap. The cooperation results have demonstrated the vitality of and great potential for the development of China-US economic and trade relations, and have also showed the responsibility of the two great powers for the world.
The development of the relations is not always smooth sailing. However, the two sides have generally chosen to achieve win-win results through constructive cooperation, and have resolved conflicts time and again, making the economic and trade relations between the two countries more mature.
Bilateral economic and trade ties have now come to a starting point. At present, the global industrial layout is under continuous adjustment. New industry chain, value chain and supply chain are taking shape and artificial intelligence, digital economy and other new technologies keep emerging, driving more extensive and intensive development. The development of China and the US can complement and promote each other and the two sides can maintain their mutually beneficial and win-win economic partnership.
Looking into the future, I suggest we make efforts in the following aspects.
First, to increase trust in economy and trade. For a long time, the US has implemented strict high-tech export control against China, which prohibits the export of a great range of competitive US high-tech products to China. Strategic mutual trust lies at the core of export control. The strict export control of the US against China is based on Cold War mentality, which has ignored the rapid development of China-US relation and does not fit into the future development of this bilateral relation. China hopes that the US side will take practicable action in easing the export control against China and effectively loosen the restrictions on products exported to civilian users for civil purposes. This also helps to create new growth points in China-US economic and trade cooperation reduce the US trade deficit.
Second, to speed up the negotiations of bilateral investment treaty. Since the start of negotiations in 2008, the two sides have held 34 rounds of negotiations and made significant progress. China’s urbanization is still in progress and the middle class keeps growing, providing a huge market for the mid- to high-end manufacturing and services industries where US companies have competitive advantages. The BIT will bring tangible benefits to the two sides. On one hand, this will increase US investment in China, enabling more US companies to benefit from the further opening up of Chinese industries such as banking, security, insurance, telecommunication and automobiles. On the other hand, this will also propel more Chinese companies to invest in the US and improve its employment and economic growth.
Third, to further expand bilateral cooperation under the Belt and Road framework. The Belt and Road initiative is a grand plan to deepen China’s reform and opening up, and also a positive proposal to promote wider and more in-depth regional cooperation at a higher level and explore new models of international cooperation and global governance given the new circumstances of global multipolorization, economic globalization, cultural diversity and IT application in the society. The Belt and Road Forum on International Cooperation which was just concluded in Beijing has drawn positive response and participation of over 130 countries. The US also sent a high-level delegation to the forum. The Belt and Road initiative will open a door of opportunities to American companies. China looks forward to and welcomes the participation of the US in this initiative.
Fourth, to resolve such issues in bilateral trade through dialogue as US export restrictions to China and fair treatment of Chinese investment in the US that China is interested in, as well as issues such as US trade deficit to China that the US side is interested in. We hope that the US can grant fair treatment to Chinese companies investing in the US as that number increases year by year. In recent years, Chinese enterprises’ investment in the US has facilitated US economic development and created jobs and tax revenue for local people. Thus, China’s investment has become a highlight and an important driving force in China-US economic and trade relations. We hope that certain US legislators can have an objective view on this fact and that the Committee on Foreign Investment in the US (CFIUS) can be fair and square when conducting national security inspections.
History has told us that the expanded economic and trade cooperation can connect the two countries closely together, and the two are not rivals in a zero-sum game but mutually beneficial partners. Dialogue costs much less than confrontation; and cooperation is the only correct choice for China and the US. As long as the two countries follow the principle of mutual respect, equality and mutual benefits, open their market wider, facilitate two-way investment, enhance state-province economic and trade cooperation, properly address economic differences through dialogue and negotiation, I am confident that China-US economic and trade relations will move forward on a right track and embrace a brighter future.
Thank you very much.