MOFCOM Posts 2017 China-US Trade Report

The MOFCOM China-US Trade Report released on May 25 is a good resource for understanding the dynamics of the trade relationship through China’s eyes as the US goes into the first formal meetings of the Comprehensive Economic Dialogue rumored to be scheduled for July. The report looks at the major benefits and concerns and provides recommendations for ways to strengthen cooperation.
 
The paper discusses roles in the global supply chain, the trade deficit, market access and the benefits of openness and globalization, Chinese companies receiving unfair treatment in the US market, data policy, and the BIT. MOFCOM highlights the need for cooperation across the global supply chain as China has the largest industrial base and the US has outstanding tech and innovation capacity. In terms of the trade deficit, the report notes that the US and Chinese numbers do not align. The US reported a $366 billion deficit in goods while the Chinese numbers show a $254 Billion deficit. Additionally, the report points out that the US runs a LT trade surplus in the agricultural products, aircrafts, automobiles, and IC industries as well as services.
 
In the area of market access, the report says that since the US is higher up on the value chain they can be more on offense when it comes to opening up markets while China, on the other hand, needs to be more vigilant about economic growth and national security so they cannot be as flexible in the area of market access. The US is China’s largest source of technology imports and MOFCOM says that the high-end products, equipment, and technology has promoted the upgrading of China’s manufacturing sector. Foreign investment has also contributed to improved levels in Manufacturing. Another obstacle the report highlights is the need for the US to remove obstacles set up by US bank regulators for the transmission of Chinese banks’ business data overseas so that Chinese banks in the US can transmit business data back to China for processing. US companies will be facing the same obstacles when the CAC releases the cross-border data regulations.
 
MOFCOM does address the CFIUS review in the report, and states that Chinese companies have been treated unfairly through this process. According to statistics, Chinese enterprises have the highest number of review cases of any country while China’s investment in the US is less than 1% of total foreign investment. They feel that SOEs are also being treated unfairly and made reference to a telecoms operator who was denied a license because their parent company was a ‘government run’ SOE. This has been an area of tension between the US and China as the idea of reciprocity is being thrown around. The report states that they know the US would like to work on market openings in banking, insurance and other industries, but does not explicitly mention telecoms. This is frustrating as the Chinese government knows that this is an area where the US has been trying to negotiate market opening for a long time. The end of this section states that China hopes their companies can invest in US high-tech, finance, information and communications industries and receive treatment equal to investors from other countries.