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Justin Yifu Lin:China must continue path of reform, opening-up


The escalating China-US trade friction is drawing the world’s attention, with the US accusing China of unfair competition. Despite unreasonable demands from the United States, China must maintain firm resolve and continue with further reforms and opening-up. I have three perspectives on the trade war.

First, trade is mutually beneficial. The US does not produce everything at home, which means it has to import. It buys from China because of the relatively low price and good quality of goods. Trade is by no means an American favor extended to China. The US government says the country is suffering losses because of the trade deficit. When evaluating the international trade balance of a country, one should not focus on its trade with one country, but look at the overall picture of its trade with the entire world.

In international trade, some countries have a surplus, such as China, whose surplus stood at 2.6 percent last year, while others, like the US, have a huge deficit. The solution: Increase savings and reduce consumption.

The US took several measures against its trade partners in the past two years. Yet the US trade deficit continued to rise, increasing 12.1 percent last year.

Also in 2018, the US trade deficit with China rose 11.7 percent. The US government's actions led to worsened trade ties and higher costs suffered by US consumers of Chinese goods and US manufacturers that used Chinese materials.

The US complaints against China began with accusations about the trade deficit. Now unfair trade has been added to the list, although the US has no concrete evidence to support its allegations. By taking advantage of its domestic law, the US initiated an investigation and published a report filled with guesses and speculation. As Yale professor Stephen Roach says, it's basically “evidence-less slander”.

It's natural for US companies investing in China to bring their technologies. Are they forced to do so? Of course not. And it’s true that Chinese technology has enjoyed rapid development,thanks to its efforts as well as research and development.

Lawrence Summers, a former World Bank chief economist, former US Treasury secretary and president  of  Harvard University, says China's technological advances are a result of its own efforts and not through forced transfer or theft. So why is the US obsessed with making allegations of trade deficit and unfair competition? My view: an ulterior motive to contain China's rapid development. A blockade on Huawei exposes America's intention of cracking down on Chinese tech companies.

Two, we hope to solve trade disputes through negotiations. If that fails and the US levies 25 percent tariffs on all Chinese goods, what would be the impact on China?

From page 1 Any move to block win­win trade will affect both. Exports account for less  than  20  percent  of  China's gross  domestic  product,  while exports  to  the  US  account  for  19 percent of its total exports.

The impact is expected to be a reduction  in  growth  of  0.5  percentage  point  in  China  and  0.3 percentage point in the US.

China seems to suffer more in terms  of  absolute  quantity.  The International Monetary Fund has forecast that the US would grow at 2.5 percent. If this is reduced by 0.3  percentage  point,  its  growth rate is expected to suffer by 12 percent.

It's easier for China to maintain a growth rate of 6 percent to 6.5 percent. This means that despite a 0.5  percentage  point  loss,  the country would grow at a rate of 6 percent.

Since  the  collapse  of  Lehman Brothers, a global financial services  firm, triggered  the  international  financial  crisis  in  2008, China's  contribution to the world’s economy has been above 30 percent.

The world's economy is predicted to grow 2.9 percent, according to the  World  Bank,  and  3.5  percent according to the IMF. Despite the ongoing  trade  friction,  China  is expected to contribute 30 percent to the  world's  economy  and  remain the largest contributor.

Three, China is ready to talk to the US for a solution that works for both sides. Despite the unreasonable US allegations, we should maintain our resolve, stay on the path  of  reform  and  opening­up and pursue high­quality development by carrying out the new philosophy  of innovative  and  open development for all, as proposed by President Xi Jinping.

If  China's  exports  to  the  US decline due to the trade conflict, its  imports  from  the  US  would drop as well.

What matters most to the world is development, and China's opening­up will create chances of common development for the globe.

I hope we stay on the path of reform  and  opening­up  to  share opportunities with countries willing  to  maintain  sound  relations with China. I also believe that US entrepreneurs and ordinary people are also willing to share China's opportunities.

From: China Daily