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He Weiwen: Historic Value of the Past 40 Years

Thursday,Jan 10, 2019


On January 1, 1979, the People’s Republic of China and the United States issued a joint statement announcing the establishment of formal diplomatic relations between the two countries. From January 28 to February 5, Vice Premier Deng Xiaoping and his wife Zhuo Lin made an eight-day official visit to United States, at the invitation of U.S. President Jimmy Carter and his wife. (file photo)

By He Weiwen,

a senior research fellow at the Center for China and Globalization(CCG). 

December 2018 marks two simultaneous 40 years anniversaries of historic significance: China and the US established diplomatic relation on December 16, 1978, and China launched reform and opening-up on December 18, 1978. They are by no means coincidence, but closely related both in logic and reality.

Deng Xiaoping, the master designer of China’s reform and opening-up, held that China must normalize its relations with the United States to make the reform and opening-up a success. Two days before the opening of the historical 3rd Plenary Session of the 11th CPC Central Committee, China and the United States singed the joint communique on establishing diplomatic relations as from January 1, 1979. A month later, Deng Xiaoping visited the United States where he had long discussions with President Jimmy Carter.

Forty years of the normalization of relations between China and the US has played a vital role in supporting China’s reform and opening-up. It has not only provided a stable international environment for China, but also resulted in numerous concrete tools securing the mutual benefitial cooperation. The two countries have signed hundreds of agreements covering trade, science and technology, education, intellectual property, agriculture, energy, education, tourism, medical service, culture and more. The massive investment of the US multinational companies, which boasts over 68,000 US-invested businesses in China today, has brought tremendous new products, new technologies, new visions and world market opportunities to China. They also supported 1.74 million jobs directly. The two-way trade volume increased 233-fold from 1979 to 2017, unprecedented in human history, contributed energetically to the economic growth in China. Over the past 40 years of reform and opening-up, over five million Chinese students studied abroad, with over one third of the total studying in the US, acquiring the latest knowledge and expertise in various sectors in the world. China has also benefited from cooperation with the US in the contemporary law making, and in learning and following international trade rules. With hard, protracted talks, China and the US reached the agreement on China’s accession to WTO on November 15, 1999, which was the key for China’s WTO membership two years later. The latter in turn helped turn China into a leading trading power 15 years later. All the above developments provided a strong push in China’s reform and opening-up and in her integration into the world.

On the other hand, the continuous reform and opening-up in China has also provided vast opportunities for the American businesses and the America people. According to a joint study by US-China Business Council (USCBC) and the Oxford Research Institute, the two-way trade and investment in 2015 alone contributed 1.2 % to the US GDP, and supported 2.6 million jobs. In recent years, Chinese exports to the US lowered the US CPI by 1.5 percentage points and saved roughly 850 dollars per family each year. The US has also benefited tremendously from China’s accession to WTO. According to the USDOC data, from 2002 to 2017, the US exports to China increased by 487.0%, four times as fast as its export to the world (including China) which increased by 123.1%. Its imports from China rose by 303.8% during the same period, while its imports from the world was up only 101.7%. The US trade with China increased much faster than the rest of the world, and its exports to China grew faster than imports from the latter.

During the past 40 years of reform and opening-up, China’s average tariff levels were brought down from over 30% to 7.5% by November 2018, and most of the non-tariff barriers have been removed, offering ever expanding market for the US exporters. China now accounts for 57% of the US soybean export sales, 25% for Boeing’s global sales, 20% of the US automotive exports. China’s continuous opening-up in market access has provided promising opportunities for the US multinational enterprises. According to the latest data by Bureau of Economic Analysis (BEA, USDOC), by the end of 2016, China accounted for only 1.6% of total US multinational enterprises overseas investment assets, but for 6.0% of total overseas sales, 2.6% of total overseas net revenue, and 5.0% of total overseas added value. It shows that China is a market with higher than average returns for the US multinationals. The AmCham 2018 White Paper also found that close to 60% of its members had put China among top three of their global investment destinations, and one third of them had planned a 10% or more investment increase in 2018. A recent Rhodium Group report showed that, by the end of 2017, total US investment stock in China reached $ 200 billion, making profit of $ 70 billion out of the local sales over $ 600 billion, larger than the Chinese exports to the US at $ 505.6 billion in 2017, according to USDOC data.

The past 40 years have proved that, a sound relationship between China and the US is considerably constructive to China’s reform and opening-up; and a constantly opening China is also essential for the US in its global environment and ever-expanding business interests.

The current sharp downturn in the bilateral relations since President Donald Trump took office, especially the ongoing trade war, is good for nobody. A fundamental concern behind the latest Trump Administration’s China policy is the mentality of “China threat”. They assume that China will threaten the US global dominance in both geopolitics and high-tech industries. The past 40 years of both the bilateral diplomatic relations and China’s reform and opening-up have provided a shared cognition that China has no interest in challenging the US in either field.

Although China’s total GDP is already two thirds that of the US, its per capita GDP, estimated at around $9,700 in 2018, is still below the world average of $ 11,000. The repeated downward pressure in China’s economy justifies the urgency of upgrading the manufacturing to the higher end to keep economy growing. If China wants to avoid the “middle income trap” and move into a high- income society, its per capita GDP will have to attain at least $ 14,000, or a total GDP at $ 19.6 trillion, very close to the current size of the US economy. Will that be a threat to the US? Absolutely no. At that level, China’s per capita GDP will be less than a quarter of the current US level ($ 60,000), or less than half that of the average OECD countries. China will still have a long way to go to bring happy lives to its people. It will cause no threat to the US dominance.

The two 40-years anniversaries are treasured memories for both countries, reminding us what is good for both and what might hurt the interests of each. A stable relationship and prosperous future depend on the strategic vision and practical efforts by both governments, businesses, academics and the peoples. Regardless of twists and turns ahead, China-US relations will ultimately return to the track of win-win collaboration.


From chinausfocus,2019-1-3