New Situation in the Economic and Trade Cooperation and Competition between China and the US

Zhen Bingxi

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New Situation in the Economic and Trade Cooperation and Competition between China and the US

Zhen Bingxi

The economic and trade relations between China and the United States are among the most important bilateral economic and trade relations in the world. They are the cornerstone of China-US relations and an important engine driving the growth of the global economy and trade. Since the international financial crisis， China-US economic and trade relations have witnessed sustained， rapid and steady development，with the cooperation between them expanding and deepening. However，China-US economic and trade competition is also prominent， with frictions emerging from time to time. There is now a new situation in the economic and trade cooperation and competition between China and the United States.

New Features of China-US Economic and Trade Cooperation

Since the financial crisis， bilateral trade and economic cooperation between China and the United States has been strengthened. China and the United States have become important partners for each other with comprehensive and mutually beneficial relations forged. China is the United States' secondlargest trading partner， third-largest export market， largest source of imports and largest purchaser of its national debt； while the United States is China's second-largest trading partner， largest export market and fifth-largest sourceof imports. Through bilateral and multilateral mechanisms such as the China-US Strategic and Economic Dialogue （S&ED） and the G20， the two countries have carried out coordination and cooperation on their domestic economic affairs and global economic governance， leading to the steady development of global finance and the global economy.

Bilateral trade has steadily increased

Over the past 37 years since the establishment of China-US diplomatic ties， the economic and trade cooperation between the two countries has achieved historic progress. Compared with the situation when their diplomatic ties were first established， the bilateral trade has expanded 230 times， reaching $555.1 billion in 2014. The expansion of China-US trade has not only benefited the two countries' economies， but also led the growth of global trade. Despite the slow growth of the global economy and trade since the global financial crisis， China-US trade has maintained relatively fast growth，becoming a highlight and driving force for the development of global trade.

According to statistics， the China-US trade volume increased to $555.1 billion in 2014 from $302.1 billion in 2007， representing an average annual growth of 9.1 percent， equivalent to two times the average annual global trade growth rate （which was around 4.5 percent over the same period）. Also US exports to China increased from $77.4 billion in 2007 to $167.2 billion in 2014， an average annual growth rate of 12 percent. At the same time， US exports as a whole increased from $1.58 trillion in 2007 to $2.34 trillion in 2014， representing an annual average growth rate of about 6 percent. That is to say， the growth of US exports to China was twice as fast as that of its total exports worldwide （as shown in Figure 1）. From January to October 2015，Chinese exports to the US reached $339.76 billion， an increase of about 6 percent year-on-year， also nearly twice the rate of growth for its total exports. It should be noted that in the first three quarters， China-US trade hit $502.99 billion， more than that between the US and Canada （$489.87 billion）.1“U.S. International Trade in Goods and Services，” U.S. BEA News， October 2015， http：//www.bea.gov/ newsreleases/international/trade/2015/pdf/trad1015.pdf.Thismeans that China has replaced Canada as the largest trading partner of the United States since 1985.

Figure 1 Annual Growth Rate of China and US Trade or Exports 2007-14

China has given play to the “advantage of latecomers” in bilateral investment

For a long time， US direct investment in China has been expanding，which has played an important role in the economic development of China since its reform and opening up. According to statistics from China's Ministry of Commerce， the stock of direct investment from US companies increased from $200 million in 1982 to $75.4 billion in 2014， a 377-time increase，representing an average annual growth rate of 20 percent. However， in recent years， the pace of US investment in China has slowed， with investment flows decreasing from nearly $4.4 billion in 2000 to below $3 billion in 2011. Different from US investment in China， in the first 20 years since the two countries established diplomatic ties， the scale of China's direct investment in the United States was almost negligible. However， over the past 10 years or so， China's direct investment in the United States has increased rapidly，with significant growth in the scale of investment. Data （as shown in Table 1）shows that China's direct investment in the United States increased from $50 million in 2000 to $20.5 billion in 2014， a 410-fold increase in only 14 years，with an average annual growth rate of 54 percent. It should also be noted thatChina's direct investment in the United States in 2013 （$4.23 billion） for the first time surpassing the United States' investment in China （$2.82 billion）. This marked the beginning of a change in the two-way investment structure between the two countries， which indicates that the balance of economic strength between the two countries has changed.

Table 1 FDI Volume between China and the US Since 2000

Meanwhile， Chinese companies' investments in the United States have also witnessed major structural changes. First， Chinese investment in the United States has become more diversified. Initially， Chinese investment concentrated on the financial sector， but now it has expanded to such industries as energy， real estate， services and high-tech manufacturing. What is striking is that in the first quarter of 2014， China's investments in US high-tech industries surged to $6 billion， more than the total investment from 2009 to 2013. Second， private enterprises have developed into a major force for China to invest in the United States. From 2003 to 2010，the investment of private enterprises accounted for just 35 percent of China's total investment in the country. But in 2013， 76 percent of China's investment was by private enterprises.

Bilateral Investment Treaty negotiations have made significant progress

Since 2008， when the fourth round of the S&ED officially launched negotiations on a Bilateral Investment Treaty （BIT）， the negotiations have experienced many twists and turns. But after seven years of consultations and 23 rounds of negotiations， substantial progress has been made. In 2013， China agreed to have substantive negotiations on the BIT with the United States. The BIT will offer national treatment in each investment stage， including access， and take the “negative list” model as the basis for negotiations. In 2014 a timetable for the BIT negotiations was drawn up. It was agreed that the core issues and main terms of the BIT text should be agreed in 2014， and that the negative list negotiations should be launched in early 2015 based on the negative list offered by each country. This was regarded as “historic progress.” In 2015， the two sides reaffirmed that the BIT was the most important issue for bilateral economic and trade relations. Both countries believed that exchanging negative lists in the 19th round of negotiations was an important milestone for the negotiations. Both promised to increase their efforts to exchange their improved offers in early September 2015.

During Chinese President Xi Jinping's visit to the United States in September 2015， the leaders of the two countries reached an important agreement on promoting the BIT negotiations， reaffirmed that reaching a high-level investment treaty was the most important economic issue for both countries， and agreed to vigorously promote the negotiations and accelerate work on the BIT so as to conclude a mutually beneficial and high-level investment treaty. In late November 2015， the 23rd round of China-US BIT negotiations was held in Washington， during which both countries agreed that they would continue to implement the important consensus reached by the two leaders and promote the positive progress of the negotiations.

So far， agreement on the China-US BIT has not been reached， mainlybecause the two countries disagree over each other's negative lists. The United States argues that China's negative list is “too long；” while China says the United States' negative list is too “vague.” But it is imperative to reach agreement on the BIT. A BIT with high standards would not only relax the access limits on both markets， establish more open and more transparent market rules， and create more open and more favorable conditions for both enterprises to enter each other's markets， it would also lay an important foundation for future negotiations on a China-US Free Trade Agreement.

The joint opening ceremony of the 8th round of US-China Strategic and Economic Dialogues and the 7th round of US-China High-Level Consultation on People-to-People Exchange is held in Beijing， June 6， 2016.

Local-level cooperation has been deepened

In recent years， China-US economic and trade cooperation has witnessed very active local-level cooperation， with cooperation mechanisms between provinces and states， as well as cities established. First， the China-US Governors Forum. So far， three China-US Governors Forums have been held. The first was held in July 2011 in the Salt Lake City in the UnitedStates. The two sides signed dozens of cooperation agreements in such fields as economy and trade， investment， the environment， energy， culture and people-to-people exchanges. The second was held in Beijing and Tianjin in April 2013， and mainly discussed China-US local government cooperation and experience sharing on environmental protection. The third was held in Seattle during President Xi Jinping's visit to the United States in September 2015， which promoted some trade and investment programs，among other things. Second， the China-US Sister Cities Conference. In April 2011， the first China-US Sister Cities Conference was held in Seattle. Centered on the topic of “strengthening local-level economic cooperation between China and the United States in the age of globalization，” Chinese entrepreneurs and US mayors exchanged views on opportunities for economic and trade cooperation. In June 2012， the second conference was held in Nanjing， during which the two sides signed 42 agreements on cooperation， amounting to $3.4 billion. In addition， the provinces and states concerned also set up a “joint working group of trade and investment.”

Provincial and other locallevel economic cooperation is an important aspect of economic cooperation between the two countries.

Provincial and other local-level economic cooperation is an important aspect of economic cooperation between the two countries. As an important foundation and driving force for both countries' economic growth， it reflects a partnership of mutual respect， mutual benefits and win-win cooperation. Local-level cooperation has played a unique role in China-US relations.

First， it will help China and the United States build a new type of relationship between major countries. At present， 44 pairs of sister provinces and states and 201 pairs of sister cities have been established. In recent years，more than 100 exchange visits between local governments of various levels have taken place each year. This has helped bring local governments onto the track of a mechanism for their exchanges which enriches the new type of major country relationship.

Second， it will help promote China-US economic cooperation. Through mechanisms such as the China-US Governors Forum， small- and medium-sized enterprises can find more and better business partners and create more jobs and output for both countries. At present， of the 50 states of the United States， more than 40 states have direct trade links with China，and 45 have received direct investment from Chinese enterprises.

Third， it will help ease economic and trade frictions. When Chinese enterprises are restricted at the federal level， especially in the US Congress，they can deal with the problems through state-level or other local cooperation mechanisms. With state or other local governments doing the job， they can have the problems solved more easily.

Fourth， iThelps strengthen the foundations for China-US diplomatic ties. The China-US Governors Forum directly serves local governments，which makes it more flexible than formal diplomatic work. It directly or indirectly influences local senior officials， federal officials and members of Congress， and is helping to shape the future of both countries' foreign policies. Former US presidents including Jimmy Carter， Ronald Reagan， Bill Clinton and George W. Bush all served as governors and many senators have also been governors. The experiences of senators as governors will to a greater or lesser degree influence their governing philosophies and decision-making in the future.

Cooperation on global economic governance has been strengthened

Since the financial crisis， China-US multilateral coordination and cooperation have become increasingly frequent. First， the two countries have strengthened cooperation under the mechanism of the G20. The financial crisis not only activated the G20， it also enabled it to replace G8 as the main platform for global economic governance. During the crisis， China and the United States strengthened their coordination during the G20 Summit， and the two countries have worked together to promote global financial stability and the global economic recovery. In recent years， in terms of stabilizing the global market， both the G20 Summit and the G20 Finance Ministers'Meeting have witnessed strengthened coordination on macroeconomic policy by China and the United States. The two countries have reached some consensus on promoting the shift of the G20 from responding to the global financial crisis to building a long-term governance mechanism.

Second， the two countries have worked together to promote reform of important institutions such as the International Monetary Fund （IMF） in terms of capital shares and voting rights. After consultations among major economies， China and the United States in particular， the G20 put forward reform of the IMF in 2010， requiring that more than 6 percent of the IMF's quota and voting power be transferred from developed countries （mainly European ones） to emerging markets and developing countries.

Third， new progress has been made in multilateral financial cooperation. In September 2015， during President Xi Jumping's visit to the United States， the two countries promised to work together to maintain the existing pattern of the global financial system， and reached consensus on new financial institutions and mechanisms to be built in the future. Both sides acknowledged that the new and future institutions would be significant contributors to the international financial architecture. These institutions， like the existing international financial institutions， are to be properly structured and operate in line with the principles of professionalism，transparency， efficiency， and effectiveness， and with the existing high environmental and governance standards， while recognizing that these standards continuously evolve and improve.2“Outcome List of President Xi Jinping’s State Visit to the United States，” http：//news.xinhuanet.com/ english/2015-09/26/c_134661037_2.htm.

In addition， China and the United States strengthened their communication and coordination on including the renminbi into the IMF's Special Drawing Rights （SDR） basket of currencies. The United States reiterated its support for the inclusion of the renminbi into the SDR basket provided the currency met the IMF's existing criteria in its SDR review. These created favorable conditions for the renminbi's inclusion in the SDR currency basket，and on November 30， 2015， the IMF approved the inclusion of renminbi inits SDR currency basket.

New Situation in the Economic and Trade Competition between China and the United States

During the financial crisis， the United States “practically” dealt with the economic and trade differences between the two countries by putting aside such issues as the trade imbalance and the renminbi's exchange rate. But with the gradual recovery of the US economy， the Obama administration's China policy has gone back to a “double-dealer approach” as it has increased its pressure on China. The competitive side of China-US economic and trade relations has become more prominent with structural problems reemerging and new disputes occurring.

Economic and trade frictions have become the new normal

As China-US trade and economic cooperation has expanded， frictions have become the new normal for their bilateral economic and trade relations. First， the scope of economic and trade disputes has grown. In recent years，China-US economic and trade relations have seen both old conflicts and new frictions. The United States has been putting pressure on China over such issues as the trade imbalance， the renminbi's exchange rate， intellectual property rights （IPR） protection， and textiles quota. Cyber security， which should have been a strategic issue， has been listed as an intellectual property rights issue that belongs to the economy and trade. And the United States has even fabricated claims that the Chinese government is a major source of cyber economic espionage targeting US enterprises.

Second， traditional trade rescue measures such as anti-dumping and anti-subsidy have been frequently used. Since 1995， China has been subjected to more anti-dumping investigations than any other country. In recent years， US anti-dumping investigations on Chinese enterprises have accounted for one-fifth of all the anti-dumping investigations the country has carried out. In December 2013， following 13 anti-dumping measurestaken by the United States against Chinese Oil Country Tubular Goods （OCTG） and other products， China began the formal settlement procedures of the World Trade Organization （WTO）. This dispute involves a yearly export volume of $8.4 billion for Chinese enterprises.

Third， technical trade barriers are becoming increasingly prominent. Trade in technology features wide coverage， invisibility and high technical standards， which has a negative impact on Chinese exports. The most affected are food， animal products and labor-intensive products such as textiles， and the impacts are extending to technology-intensive products such as electronic products. The United States frequently renews its energy efficiency certification standards， with more technical and stricter requirements introduced each time， this has significantly increased the cost of Chinese products exported to the United States. The threshold for Chinese enterprises and products to enter the US market also becomes higher each time.

Fourth， the United States' government procurement system has shown strong discrimination against China. The Continuing Appropriations Act For Fiscal Year 2013 signed by President Barack Obama on March 26， 2013 included contents limiting part of US governmental departments' purchase of information technology systems produced by Chinese enterprises. This act has sent a wrong signal and has directly affected Chinese enterprises' normal trade and investment cooperation with their US business partners.

Rivalry over the making of rules has become a new focus

In recent years， as the world's multilateral trade negotiations have proved fruitless， as a result the development of regional free trade arrangements is in full swing and international economic and trade rules have been evolving at a higher speed. China and the United States are competing to lead the writing of the new international economic and trade rules. First， they are competing to have the dominant say in the new round of economic and trade rule-making. With its deep integration with the world economic system， China has become the world's second-largest economy，largest goods trading country and the third-largest direct overseas investor. As a result， it hopes to have a greater say in global economic governance and the making of global trade rules. China is committed to being a contributor and leader rather than a bystander or follower. However， with the excuse that “China refuses to conform to economic and trade rules，” the US has been forcing China to act according to the existing global economic and trade rules while opposing China's participation in the making of rules for the global economy and trade. President Obama has repeatedly said that global economic and trade rules must be made by the United States， rather than by countries such as China.

China and the United States are competing to lead the writing of the new international economic and trade rules.

Second， they are competing to set the standards for new economic and trade rules. China advocates the improvement of the multilateral trading system and promotion of regional economic and trade arrangements that are fair， rational and transparent. At the G20 SummiTheld in November 2015，President Xi Jinping pointed out that “We should reject protectionism and uphold and strengthen the multilateral trading regime in order to provide sufficient space for the development of different countries. We should ensure that regional free trade arrangements serve as a useful complement to multilateral trading regime， rather than create new obstacles or barriers. We should work for balanced， meaningful and development-oriented outcomes of the 10th WTO Ministerial Conference.”3Xi Jinping， “Innovative Growth That Benefits All，” Remarks on the World Economy at Session I of the 10th G20 Summit， Antalya， 15 November 2015， http：//www.fmprc.gov.cn/mfa_eng/zxxx_662805/t1315058. shtml.At the informal Asia-Pacific Economic Cooperation （APEC） leaders' meeting held in November that year， to address the concerns of the international community about the fragmentation of regional cooperation， Xi further clarified the principles that should be upheld by the Free Trade Area of the Asia-Pacific （FTAAP），emphasizing “openness” and “inclusiveness”： “We need to encourage equal-footed participation and extensive consultation， and make free trade arrangements open and inclusive to the extent possible with a view to enhancing economic openness in our region and upholding the multilateral trading regime.”4Xi Jinping， “The Leading Role of the Asia-Pacific in Meeting Global Economic Challenges，” keynote speech at the APEC CEO Summit， Manila， 18 November 2015， http：//www.fmprc.gov.cn/mfa_eng/ wjdt_665385/zyjh_665391/t1316082.shtml.

Meanwhile， with the excuse that the Doha Round negotiations have been deadlocked， the United States accelerated its efforts to build an economic and trade system for the Asia-Pacific region and even the world that would be dominated by itself. By signing the Trans-Pacific Partnership Agreement （TPP） and speeding up negotiations on the Trans-Atlantic Trade and Investment Partnership （TTIP）， it is seeking to occupy the vantage point in making new rules for the trade and investment in the Asia-Pacific region and beyond， and to eventually force China to accept these new rules. The United States is also trying to weaken China's competitiveness through the high standards of the TPP. The higher labor standards， environmental standards， intellectual property protection system， e-commerce management system， as well as the regulation of state-owned enterprises all pose severe challenges to the development of China. This also reflects the deepseated strategic considerations of the United States： China's economic rise is irrepressible， but the country must develop according to the rules made by the United States. Ian Bremmer， president of the US company Eurasia Group， once claimed that the TPP was the best way to deal with China's “state capitalism.” He said the rise of China would pose great challenges to the United States and its economy， as China uses its state-owned enterprises，state-owned banks and politically reliable large private institutions to achieve its political aims， which makes it hard for overseas companies， including those of the United States， to compete with them.

Third， the two countries have accelerated the pace of economic and trade rule-making. China has intensified the implementation of a free trade zone strategy， and gradually built a network of free trade zones that is basedon neighboring countries， covers the Silk Road Economic Belt and the 21st Century Maritime Silk Road （Belt and Road） regions and faces the whole world. China has actively promoted the establishment of regional or bilateral free trade zones， with 14 free trade zones established so far and six others under discussion， covering dozens of countries in Asia， Oceania， Latin America and Europe. China has taken the initiative to lead and promote regional economic cooperation， advances the building of the Belt and Road in a step-by-step manner， continues to forge version 2.0 of the China-ASEAN Free Trade Zone， is striving to finish the negotiations on the Regional Comprehensive Economic Partnership （RCEP） by 2016， and promoting the construction of the FTAAP and a China-Europe Free Trade Zone.

The United States， meanwhile， has tried to speed up the ratification and implementation of the TPP. Obama was in a hurry to yield TPP fruits while in office so it would form part of his political legacy， and he has used all political resources in an attempt to get the US Congress to pass the bill and implement it as soon as possible. Obama signed the TPP in February 2016， and the US Congress is expected to debate and vote on the TPP this year. For the United States， the most optimistic outlook is the TPP will be implemented in 2017， but if opposition occurs when the United States is preparing the draft， it may be postponed. In addition， the United States wants to strike while the iron is still hot and it has accelerated discussions with the European Union （EU） on the TTIP. On October 23， 2015， the 11th round of TTIP negotiations finished. The United States suddenly changed its previously negative attitude， and submitted new negotiation proposals in almost all fields， including government procurement and access to its agricultural market. The United States and the EU have reached consensus that they should strive to finish the TTIP negotiations by the end of 2016.

New cases in which the United States politicizes economic and trade issues

Since the 21st century， the normal commercial activities or economic issues between China and the United States have been distorted by someUS politicians and interest groups into political issues， by continually demonizing China's economic development and China-US economic and trade relations. China's leadership in building the Asian Infrastructure Investment Bank （AIIB） and promoting its Belt and Road Initiative have naturally become targets in this politicizing of economic and trade issues.

First， the United States has been setting obstacles in the way of the AIIB. In addition to opposing the AIIB， the United States also strongly urged its allies not to engage with it. The opposition of the United States is out of its own political considerations and concerns： （1） It is worried that China has strategic intentions behind the construction of the AIIB and it is seeking to challenge and weaken the US-dominated World Bank and Asian Development Bank. （2） It regards the AIIB as a political tool of China to win over Southeast Asian nations， and a soft power offensive to enhance China's image in the eyes of its neighbors.

Second， the US has been highly concerned about the Belt and Road Initiative. （1） The United States believes that the Belt and Road Initiative is a rival to its “Asia-Pacific rebalancing” strategy， as through the initiative，China may change “the US' Asia-Pacific region” into “China's neighboring areas.” （2） It is worried that the promotion of the Belt and Road Initiative will weaken its influence on the relevant regions. Driven by economic cooperation， political and security coordination will be on the agenda， thus forging a “de-Americanized” regional order on many fronts. （3） It claims that the Belt and Road Initiative is in conflict with its “New Silk Road” program and is concerned that China will enhance its influence on Central Asia through the Belt and Road Initiative.

Disputes on business environment have been intensified

In recent years， enterprises of both countries have been complaining about the “deterioration” of the investment environment， and demanding improvement as soon as possible. The Chinese side argues that while the United States expresses its welcome for Chinese enterprises investing and running businesses in the United States， it has set discriminatory limitson Chinese enterprises， state-owned ones in particular， which is in sharp contrast to the red-carpet treatment China has received in Europe. The most prominent case is that the United States has restricted Chinese enterprises' commercial mergers and acquisitions in the country with the excuse of “national security.” Since 2005， with the constant expansion of China's investment in the United States， the Committee on Foreign Investment in the United States （CFIUS） has carried out more and more reviews of proposed Chinese investments. And using the excuse of “national security，”the United States has repeatedly obstructed and interfered with Chinese enterprises' normal business and investments in the United States.

From the failure of China National Offshore Oil Corp's （CNOOC）acquisition of Unocal in August 2005， to Tsinghai In-group's failed acquisition of Micron Technology Inc. in July 2015， more than 10 big deals in which Chinese enterprises have attempted to buy US companies have been prohibited， all because of their failure to pass the US' “national security review.” This has not only dampened the enthusiasm of Chinese enterprises to invest in the United States， but also made the United States lose huge investment opportunities. From 2005 to 2013， due to the United States' obstruction of major mergers and acquisitions in the United States by Chinese enterprises， China's direct investment in the United States has suffered a great setback. According to incomplete estimates， if everything had gone well over the past nine years， then the total direct investment of China in the United States could have exceeded $200 billion. Chinese enterprises have asked the United States to reduce political interference， saying rather than the willful use of “national security，” it should treat Chinese enterprises with fair and open policies， especially when it comes to investment and acquisitions in the United States by Chinese state-owned enterprises..

Meanwhile， the United States has also complained that the business environment for US enterprises in China is much less favorable than before. In the 2013 China Business Environment Member Survey， the US-China Business Council argued that the Chinese government was less “friendly”toward US-funded companies than before， the investment environment inChina has generally deteriorated， and the Chinese government has set up various invisible barriers against investment from the United States. The US business circle which traditionally has strongly supported the development of China-US trade feels “disappointed” about the business environment in China. The American Chamber of Commerce in China and its member enterprises are particularly concerned about the Chinese government's many policies and actions preventing them from entering and participating in market competition.

For example， they complain of discriminatory industrial policies against foreign businesses' investment in Chinese companies， including those that have completely achieved localized production； the investment approval procedures are not transparent， and there is no effective administrative and legal recovery system when investment approval procedure is delayed or rejected， or when conditions are added. They also say there is the lack of transparency and procedural legitimacy in law enforcement， and there is more and more use of national security rules in economic and commercial regulations. US enterprises want China to open its door and allow them to immediately enter such industries as financial services， insurance， agricultural products， legal services， media and entertainment， engineering and construction， information and communications technology.

The development competition of new industries has begun

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A new industrial revolution is gaining momentum， which will change the development trend and competition landscape for global industries. Major countries， especially China and the United States， have intensified their preparations and put forward new plans for industrial development，striving to occupy the commanding heights for the development of science，technology and industry.

Since the financial crisis， the United States has introduced a reindustrialization strategy with advanced manufacturing at the core. It has been vigorously promoting an advanced manufacturing strategic arrangement including the “internet industry，” “new generation of robots”and “manufacturing innovation network.” Based on innovation， the United States has constantly improved manufacturing and developed emerging industries， with the aim of claiming leadership in the new industrial revolution， and firmly seizing the high-end links of the global industrial chain and value chain. In 2013， to make sure that the new industrial revolution starts in the United States，the Obama administration took a series of measures to integrate government，academic and business community resources， and put forward the initiative to establish 45 manufacturing innovation research centers within 10 years. So far， nearly 10 centers have been launched， covering today's frontier and highend manufacturing technologies， such as 3D printing， digital manufacturing，advanced composite materials manufacturing， integrated photoelectron manufacturing， intelligent manufacturing， and clean energy manufacturing.

A new industrial revolution is gaining momentum， which will change the development trend and competition landscape for global industries.

High-end manufacturing has to some extent made up for the United States' disadvantage of high labor costs. Together with lower energy costs，these factors have promoted the return of high-end manufacturing to the United States. Google， Apple， Microsoft， Motorola and other companies have already transferred some of their business back to the United States. According to the prediction of the Boston Consulting Group， this trend will last for a long time， and US high-tech companies will return to their homeland from emerging economies such as China.

Meanwhile， China has launched its “Made in China 2025” strategy for industry. This action plan is aimed at making China a global manufacturing power by 2025 through strengthening the in-depth integration of information and industrialization， and speeding up the upgrading of industries to the medium and high-end levels. To speed up its construction as a manufacturing power， China is focusing on innovation center building， intelligent manufacturing， industrial base consolidation， green manufacturing， and high-end equipment innovation. Over the next 10 years，China will promote the development of a new generation of information and communication technology， high-end numerically controlled machine tools and robots， aerospace equipment， ocean engineering equipment and hightech ships， advanced rail transport equipment， energy-saving and new energy vehicles， electrical equipment， agricultural machinery and equipment， new materials， bio-medicine and high-performance medical equipment.

Prospects for the Economic and Trade Cooperation and Competition between China and the United States

With the continued growth of China's economic scale and influence， the United States will harbor concerns that China's economic rise will challenge its hegemony and its dominance in the global economic system. In order to curb China's “strategic intentions，” the United States will continue to implement trade and investment protectionism， limit and interfere in China's development， and “standardize” China's development through new rules. In the context that China-US economic and trade relations are being “kidnapped” by ideology， even if the two countries reach agreement on the BIT， the tendency of politicizing economic and trade issues is unlikely to fundamentally change.

But while the aforementioned negative elements restricting the development of China-US economic and trade relations can hardly be eliminated in the short term， there is no reason to be pessimistic about the prospects for the China-US economy and trade， because positive factors will continue to play their role in promoting the steady development of relations.

China's reform and opening-up has strengthened the foundation for the sustained development of China-US economic and trade relations

The development of China-US economic and trade ties has been accompanied by China's reform and opening-up. At the third plenary session of 11th CPC Central Committee in December 1978， the decision wasmade carry out “reform and opening up.” Subsequently， the Party Central Committee decided to set up special economic zones in cities such as Shenzhen， implemented a contract responsibility system in rural areas， opened up the coastal and river areas， started WTO entry negotiations， and launched reform of state-owned enterprises. The implementation of these major initiatives not only opened roads for the sustained and strong development of the Chinese economy， but also kicked off the rapid development of China-US economic and trade relations. At the end of 2001， China became the 143th member of the WTO， which marked the further integration of the Chinese economy into the world economy. After joining the WTO， with China's allround and in-depth integration into the world economy， China-US economic and trade relations expanded from trade in goods to trade in services，investment， economic and technical cooperation and many other fields.

The stable China-US relations have created a favorable political atmosphere for developing China-US economic and trade relations

Over the 37-year history since the establishment of China-US diplomaticties， experience shows that when China-US relations are developing well， their economic and trade relations have developed smoothly as well； when relations have soured， on the other hand， bilateral economic and trade development have slowed or even stalled. From 1979， when the two countries established diplomatic relations to the mid and late 1980s， there was a stable period of development for bilateral relations in which trade and investment grew quickly. But after the summer of 1989， the United States imposed sanctions on China， which caused serious damage to China-US economic and trade cooperation， and greatly limited US exports to China. Due to the sanctions and the annual review of the most-favored nation treatment for China， lots of big orders by large US companies failed to be realized.

In 1993， president Jiang Zemin and president Bill Clinton met at the informal APEC leaders' meeting in Seattle and achieved a significant turnaround in China-US relations. Bilateral trade then returned to the track of fast growth. China and the United States reached an agreement on China's entry into the WTO in November 1999， which concluded the 14-year long “marathon” negotiation process. At the end of 2001， president George W. Bush officially announced the granting of permanent normal trade relations status to China， eliminating what had been a major obstacle to the bilateral economic and trade relations for more than 10 years.

With the steady development of China-US relations， their economic and trade relations expanded in an all-round way with more fields explored. In September 2006， at the suggestion of president Bush， China and the United States established a strategic and economic dialogue mechanism. In early April 2009， president Hu Jintao and President Barack Obama held their first meeting during the G20 Financial Summit in London， during which the two leaders agreed to jointly build positive， cooperative and comprehensive China-US relations for the 21st century， and to establish the S&ED mechanism. In June 2013， President Xi Jinping and President Obama held an informal summit at the Sunnylands estate in California. In November 2014， the two leaders had an informal meeting at Zhongnanhai in Beijing. In September 2015， President Xi paid a state visit to the UnitedStates， during which the two leaders reached consensus on building a new type of major country relationship between China and the United States，and exchanged views on national governance and bilateral and multilateral cooperation， injecting a new political driving force for the expansion of China-US economic and trade relations.

The highly complementary and mutually beneficial economies of the two countries are the driving force for the sustained development of China-US economic and trade relations

Due to their different resource endowments and stages of development，there are many differences between the two countries. First， the United States is a highly market-oriented country， with a developed financial market featuring strong liquidity. China， meanwhile， is still in the stage of market transformation，and it is still trying to open up and improve its financial market.

Second， the economic growth model of the United States has been transformed from one driven by consumption and imports with the expansion of exports and investment， with highly developed services and attention paid to advanced manufacturing. Meanwhile， the Chinese economy is transitioning from exports and investment as the drivers to consumption and innovation as the growth engines， and the country is giving priority to the development of newly emerging industries and a modern service industry.

Third， the United States has abundant energy resources and the technology for the development of new energy， and is considering exporting energy capacity and products. China on the other hand has a huge demand for energy resources， and it needs to import advanced technology to develop its new energy industry.

These differences make the economies of China and the United States highly complementary， which has increased their economic and trade cooperation and enhanced their interdependence. The United States has become China's largest export market， and China is the United States' fastestgrowing export market， and it has been and will continue to be its largest trading partner. The United States has become China's trading partner withthe largest deficit， and China has become the largest creditor of the United States. This feature not only shows the necessity of sustaining the development of China-US economic and trade relations， but also highlights the importance of their economic and trade relations for the economic development of both countries. Most importantly， the economic and trade cooperation between the two countries has brought tangible benefits to both peoples.

Economic and trade coordination mechanisms are the stabilizers for the healthy development of China-US economic and trade relations

Since the establishment of diplomatic ties， there has been ongoing economic policy coordination between the two countries， with the Joint Commission on Commerce and Trade （JCCT）， the S&ED and other such economic and trade coordination mechanisms established. These coordination mechanisms have played an important and effective role in their macroeconomic cooperation and managing and controlling disagreements and frictions. The S&ED mainly covers whole-picture，strategic and long-term security and economic issues， and seven rounds of dialogue have been held so far. The Economic Dialogue mainly involves strengthening macroeconomic policy coordination， jointly coping with the global financial crisis and the global recession， supporting strong domestic and global economic growth， promoting open trade and investment，improving international regulations and rules， as well as global economic governance， supporting the stability and reform of the financial market，and promoting the substantive progress of the BIT negotiations. So far， 26 sessions of JCCT have been held， which mainly involve the trade in goods and services， market access， investment protection， industrial technology cooperation， and IPR protection. JCCT consultations on relevant issues and areas have promoted the normal and stable development of bilateral economic and trade relations by ensuring timely responses to and appropriate handling of issues of concern to both sides， and helped reduce bilateral trade conflicts， and thus the avoidance of a destructive “trade war.”

Cooperation on a variety of areas on the global stage has provided “l(fā)ubricant” to the development of China-US economy and trade

As major countries， China and the United States have a lot of common interests in many international areas， which calls for their good communication and strengthened coordination and cooperation. The influence of their relations has gone far beyond a bilateral sense， and keeps expanding to global politics， economy， finance， security and many other fields. In recent years， the two countries have engaged in close consultations and coordination on global and regional hotspot issues such as the Iran and North Korean nuclear issues， South Sudan and Afghanistan， as well as affairs related to the United Nations. There has been strengthened cooperation on such global issues as the financial crisis， climate change， energy security， terrorism and disease control. This fruitful “trans-Pacific cooperation” has become a highlight of China-US relations and a positive factor for the development of bilateral economic and trade relations. Particularly， when China-US economic and trade relations are in trouble due to frictions， their cooperation on various global issues has and will continue to play a “l(fā)ubricating” role， boosting the further development of bilateral economic and trade ties.

In conclusion， China-US economic and trade relations will witness steady and sustained development amidst twists and turns. Despite all their competition， cooperation will always be the mainstream. This is determined not only by the trend of development for their economic and trade relations during the 37 years since the establishment of their diplomatic ties， but also by the new world architecture that is emerging after the financial crisis.

Zhen Bingxi is Senior Research Fellow at the Department for World Economy and Development Studies，China Institute of International Studies.