Trade friction to harm both sides
Uneasy situation likely to see China seeking other markets for the country’s imports
The impact of ongoing trade friction will not only keep Chinese investors away from the United States, but also lead to a shrinking share in the huge Chinese market for US firms, experts warned on Thursday.
They forecast that the uneasy situation will force China to import more products such as automobiles, passenger aircraft, natural gas, crude oil, cotton and medicines from other nations.
Their comments came after the New York-based Rhodium Group said in a report on Wednesday that China’s investment in the US totaled $1.8 billion in the first five months of this year, a 92 percent drop year-on-year, and the lowest level in seven years.
Chinese investors, in the meantime, completed $9.6 billion worth of divestitures in the US, with another $4 billion of sales pending, according to the report.
Another survey carried out by the China General Chamber of Commerce-USA showed that 44 percent of respondents have seen a deterioration in China-US economic and trade relations in 2018.
And the same proportion said that a stable and healthy relationship between the two nations is extremely important to the success of their company’s business in the US, according to the chamber’s survey.
Chinese companies had invested $140 billion in the US by the end of last year and had created 140,000 jobs mainly in the manufacturing, infrastructure, service, research and development sectors between 2010 and 2017, according to a report jointly released on Tuesday by the National Committee on US-China Relations and Rhodium Group in April.
“Chinese companies have already shifted their focus to European countries and South Korea to seek new opportunities via establishing joint ventures, and merger and acquisition activities,” said Ma Yu, a senior researcher at the Chinese Academy of International Trade and Economic Cooperation in Beijing.
He said China and the European Union, both as the victims of US trade protectionism, as well as comprehensive strategic partners and firm supporters and active participants in multilateral free trade, will certainly increase their FDI in each other’s markets as the negotiation progress of the EU-China Comprehensive Agreement on Investment has been smooth.
Aside from investment activities, experts said a trade war would hit US farmers and manufacturers, a vast majority of whom supported Donald Trump in the 2016 US presidential election.
“Jobs for the Chinese are just as precious as those for the Americans,” said Zha Daojiong, professor of inter- national political economy at the School of International Studies at Peking University.
“It will be wise for the two sides to come back to the negotiating table, abide by a temporary agreement and turn down the rhetoric.”
Reuters reported that Indian cotton exporters expected the nation’s cotton shipments to China could grow fivefold to 850,000 metric tons in the next crop year as they rack up orders amid trade friction that is forcing China to look for other sources of supply, even though the US is the world’s biggest exporter of the fiber and has been supplying cotton to China for almost a decade.
US automakers and US aircraft giant Boeing Co, which have targeted China as a key growth market, are also slated to be hit by the bruising tariffs.
US auto giant Ford Motor Co sold 338,386 vehicles in China in the first five months this year, around one-third the number in the US. It had welcomed a Chinese plan to lower tariffs on auto imports, and had even planned to cut prices of its imported Lincoln brand of vehicles.
That may be in jeopardy now as a higher import tax is due to be imposed on gaspowered and electric vehicles.
Wei Jianguo, former viceminister of commerce, said this move, once it takes effect, will further push US automobile manufacturers out of the Chinese market, as vehicles from Germany, Sweden, France and Japan have already taken the majority of the country’s medium and high-end vehicle market.
US automakers may miss the golden chance to expand their footprint in China, if the Trump administration sticks to trade protectionism and keeps undermining free trade, said Wei.
Jobs for the Chinese are just as precious as those for the Americans.”
Zha Daojiong, professor of international political economy at the School of International Studies at Peking University