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Several issues that need to be further clarified about Sino-US trade frictions

By: Qing Yuan of Qiushi MagazineFrom:English Edition of chinadaily | Updated: 2019-Jun-21 09:26
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Over the past year, the US government has unilaterally provoked and escalated economic and trade frictions with China, bringing negative impact on the bilateral economic and trade relations and the development of the global economy. During this rare dispute, voices from home and abroad have made a lot of statements, making the cause and the facts clearer. China-US economic and trade friction involves a lot of issues and it needs further clarification. Chinese believe in truth and are not afraid of clarification.

1. Is the Sino-US trade relationship a 'zero-sum game' ?

Some people in the US stirred up economic and trade friction with China for the one straightforward reason: they believed the US has lost profit during Sino-US trade, while China has benefited greatly from it, making its development a threat to the US' economic security, and even the national security. This view, which is full of Cold War bias, reflects the hegemony and "zero-sum game" thinking. Is Sino-US economic and trade relations a "zero-sum" or win-win game? The answer is clear both in theory and in practice.

During international economic cooperation, the trade relations are based on mutual beneficial exchange, rather than a 'zero-sum game' which one side benefits and the other loses. International trade can lead to the optimized allocation of global resources, the common development of all economies involved and the common progress of human society. The history of international trade and the trade between China and the US has proved that such practice is effective, and such practical experience has long been the basic principle of international economic study. Since the establishment of diplomatic relations between the two countries, bilateral trade in goods increased 252-fold, from less than $2.5 billion to $633.5 billion between 1979 and 2018.

In the past 40 years, two-way investment has grown from almost zero to over $160 billion, making the two countries a vital investment partner for each other. The history of Sino-US economic and trade relations proves that both countries have benefited in industrial development and optimization. The trade relations created a situation in which both parties won rather than one in which China progressed and the US lost out.

International trade as a whole can enhance the interest of participating parties, while the distribution of profit may vary from country to country. The international theory for value proves that in the global market, the value of commodity is decided by the necessary labor hours. While the exchange is made based on the international value system, the party with higher production efficiency will gain more advantage and gain more profit.

The exchanges are constantly repeated between countries at the larger and larger scale, but the profits of both sides may not necessarily the same. It goes without saying the US companies gain more profits through the international value chain since they are more efficient in production. In foreign trade, there was a saying that China needs to export hundreds of millions of shirts to equal the value of a Boeing airplane from the US. Such examples, shocking as they may seem, are reflections of the laws of trade.

For a long time, the US has had a monopoly position in currency, technology, market and even industry standards, thus it has gained profits higher than the normal level. US families and companies have also therefore benefited greatly from the valuable products from developing countries such as China. Of course, China has also benefited from Sino-US economic and trade through the hard work of its people, not because of ripping off the benefit from the US. At the same time, China is at the middle and lower end while the US is positioned higher in the global value chain. China has paid a greater price during the trade.

So why do some people in the US insist that the US has lost profit while ignoring the facts? The root lies in the hegemony and the "zero-sum game" thinking. After World War II, the US has surpassed its European counterparts and became the center of the capitalistic world system, and after the Cold War, it further became the world's unprecedented sole superpower. The hegemonism thinking was rooted deeply in their mindset. From the hegemonistic point of view, China's gain in any aspect was regarded as damage to the US' benefit, and China's progress in any field was seen as a threat to the US. In their opinion, it would only be fair and safe if China is locked in the dependent position to the US and at the lower end of the value chain. Thus, the US can forever be in a monopoly position with huge profits guaranteed. Once there raises the possibility of fair competition between the US and China, even through it's fair and mutually beneficial, it will fail to meet its hegemonic goal.

Under such ridiculous zero-sum game thinking, how could it be possible to build a normal Sino-US trade relationship?

2. Is US' insistence of 'fair trade' really fair?

Some people in the US accused China of adopting an unfair and unequal trade policy, which has led to the US's trade deficit with China. They tried to grab fair trade as a way to keep the moral high ground in public opinion. However, what is 'fair trade'? Fairness is a matter of history. In international trade, due to the difference in the stages of development, specific conditions and interests from different countries, in order to make trade happen smoothly, the international community has formed trade rules through negotiations on an equal footing. That is to say, what is fair or not is not something one particular country can define. And the rules should not be altered to meet one particular country's interest. Rather, they should be made through equal negotiation.

To achieve fair trade, countries need to uphold the principle of mutual benefits and equal talks while respecting the spirit of contracts.

The 'fair trade' some people in the US emphasized is not based on the international ruling but the premise of 'America First' in order to secure its own interest. The so-called 'equal' opening-up means that every country needs to comply the exact same standard—tariff and the industrial market entry permit--as the US'. Such 'absolutely fair' only seems fair on the surface. It ignores the developing countries' right to develop, and is highly unfair.

The 'equal' opening stressed by some people in the US is no more than rhetorical. Throughout the history of the US, some in the US have always applied double standards on the issue of openness: when the country needs capital, they will use protectionism and interfere in other countries; while they own an obvious competitive edge, they demand other countries to open their market with no condition and push free trade for its own benefit. When its competitiveness gradually loses as some developing country catches up, they again deploy trade protectionism tactics.

On the one hand, the US uses free trade as a tool to take advantages of its monopoly capital from the countries of latter development in order to secure its monopoly position in the market, technology and so on. On the other hand, they adopt protectionism and hegemonic measures to suppress other countries—Whether it's state-owned or private. They proclaim such economic hegemony logic is as the orthodox ideology and treat the advantages of competitors as "heresy". Friedrich List, a representative of the German Historical School, mocked such tricks as being like the use of a ladder: when someone has reached the peak, he would gradually kick the ladder away in case other follows him. It is the exact essence of the double standard some people in the US are applying.

For a long time, there has been serious unfairness in international trade, mainly caused by the US and other developed countries which use their monopoly power in science and technology to gain resource, labor and products from developing countries at a low cost. While the US is gaining huge profit through unfair international trade, the developing countries have suffered greatly. Yet some people in the US are complaining about the unfairness in the trade--is this justice or hegemony?

Looking back, some in the US have put "unfair" hats on competitors at various times. When the EU's power was on the rise, it was seen as an "unfair competitor"; the same happened to Japan, and now China is the unfair competitor for the US. It is worth noting that some people in the US are defining 'fairness' and 'unfairness totally based on their own profits. It is highly unilateral and self-interested. "unfair trade" has become a universal tool for some in the US to promote hegemonism.

The rules of the World Trade Organization were made upon the mutual agreement of all participating economies. Whenever friction happens, it should be resolved within the framework of the WTO, which is a fundamental principle for safeguarding international economic and trade relations. The US, as one of the founding members of the WTO, should comply with such a fundamental principle. However, some people in the US refuse to do so. Instead, it ignores the WTO to implement its trade bullying measures and provoke trade friction. Such behavior will never bring fair trade. If they really have the sincerity to solve trade friction, they should think if the trade fairness they address is really fair, take down the self-made 'fair-trade' fence and seek practical solutions with other countries through negotiation on equal footing.

3. Will unilateralism work?

Holding the mindset of "America First", some people in the United States who worship unilateralism put domestic law above international law, and use unilateral measures to suppress other countries and provoke economic and trade frictions. While on the other hand, they publicly stand against globalization and ignore the multilateral rules and the multilateral trading system by withdrawing from the Joint Comprehensive Plan of Action or Iran Nuclear Deal, the Paris Agreement on climate change, UNESCO, and the United Nations Human Rights Council, etc… Their unilateralist behaviors and the slogan of "America First" have become a set of "inherently self-consistent logic".

On the surface, the promotion of unilateralism seems identical to "anti-globalization" and "isolationism". However, this is only on one side. More importantly, some people in the United States pursue unilateralism because multilateralism of equal cooperation does not conform to their strategy of "America First" and intention of hegemonic dominance. Therefore, they are aggressively making unilateral actions and suppressing other countries in international competitions, in order to keep "America First" and prevent other countries from catching up. John R. Bolton, a national security adviser to President Trump, has said that, if I were doing the Security Council today, I'd have one permanent member, the United States, because that's the real reflection of the distribution of power in the world.

The statement is a real reflection of US intention of hegemonic dominance of the world.

In today's world, the science and technology revolution and productivity growth have deepened the international division of labor. The socialization of production has become more extensive and deeper than ever before. Economic globalization has also grown to be an irresistible trend, which has accelerated the globalization of trade, investment, and the mobility of factors of productions. The world is seeing increasing cooperation and communications, and competition among various countries. No country can dominate in the world market when rejecting competition or seeking monopoly. That is an objective law of economics that no one can break.

With increasing interactions and dependence among countries and the rise of emerging markets and developing countries, global powers have undergone great changes. The multi-polarization of the world and the democratization of international relations have become irreversible trends of the times. The idea of monopolizing international affairs has lagged behind the times, and such actions are doomed to fail. As to global communications, countries should uphold the principle of equal talks and decisions shall be made after negotiation. Any country that prioritizes its benefits, breaks international laws, and suppresses other countries is also doomed to fail.

Pursuing unilateralism and hegemony will not work. This is the basic consensus of the international community and many Americans are aware of it. In the beginning of this century, a famous American international political scholar predicted that on some day, the United States will seem invincible, but it's never like the same one day after. The rise of other countries, the eroding of US power, and its unilateral approach of internationalism will make it a short-lived superpower. Riding the tide of economic globalization, a country will see greater opportunities of development only by adhering to openness and cooperation.

4.Will it be a solution by pursuing technological hegemony?

Science and technology are the crystallization of human civilization and the commonwealth of human society. However, some Americans will prefer to pursue a technological monopoly. To maintain its hegemonic position in the economic and technological fields, the US government has long imposed high-tech export controls on China.

During the trade friction, the US government has abused the state power to block Chinese tech companies on the grounds of national security, suppress the development of China's high-tech industries and squeeze China's high-tech products market. This attempt at technological hegemony will in no way succeed.

Science and technology are primary productive forces. The scientific and technological strength largely determines the economic strength and international competitiveness of a country, the changes in the balance of political and economic power in the world and the future and destiny of all nations. As science and technology plays such an important role, the hegemonic thinking, monopoly practices and double standards of some people in the US have been vividly demonstrated in the field.

In an essay, geopolitical expert Adam Garrie portrays the mentality of some Americans. Pressing on with such a zero-sum mentality, China is criticized when it allegedly innovates too little while China is equally criticized and subjected to protectionist tariffs when it innovates too much. This attitude of hypocrisy on the part of the US belies a narrow and selfish mentality that does not allow for the phenomenon of shared success on the win-win model.

Some Americans' purpose is nothing more than to permanently exclude China from the forefront of technological innovation and let China accept the exploitation of US monopolistic capital.

However, this is only the wishful thinking of hegemonists. In the era of economic globalization, countries worldwide have become more interconnected and interdependent in terms of technological activities. The advancement of science and technology has largely become the result of the participation of all nations. Especially buoyed by rapid development of information network technology, the exchange and communication of science and technology have reached an unprecedented level in terms of the scope, speed and scale.

As economic globalization has picked up speed, the spread of science and technology has gradually intensified. As countries worldwide have conducted frequent exchange in the field of technology, transnational joint research has become common today, and the global application of technological innovation will be the future.

Promoting technological innovation and advancement is the legitimate pursuit of every country. Enhanced cooperation and interactions in technologies is a key driving force for the advancement of human society.

In order to better meet people's growing needs for a better life and benefit people at home and abroad, more efforts are needed to make a big push to promote technological innovation and advancement, enhance technological cooperation and oppose technological hegemony. This is our mission and our right.

Through years of rigorous efforts, marked progress has been made in the technological development of China, which has attracted the attention of the international community. These technological achievements are neither "stolen" nor obtained via "forced technology transfer". Instead, the achievement is the result of self-reliance and hard work of thousands of technologists as well as the international technological cooperation based on mutual benefits.

China's vibrant technological innovation and world-renowned achievements show the use of despicable means to suppress the so-called "competitors" does not guarantee its technological leadership in the globe.

5. Will the maximum pressure imposed on China take effect?

Using maximum pressure to achieve its own goals is a trick frequently used by some in the United States for international negotiations, calling it "the art of trading." Its main feature is using the means of multi-faceted attack and unlimited requirements while at the same time gaming against its opponent in multiple issues that cross different fields, and then resorting to selected compromising moves, thus to achieve the goals of core interests, to maintain hegemony through power, and to defeat the opponent through bullying and deception. Some people in the US think that "maximum pressure" is extremely powerful, and decidedly useful when dealing with China.

Is the "maximum pressure" measure really effective? In dealing with some small and weak countries, the US government has arbitrarily waved the big stick of sanctions and relied on its powerfulness and means of maximum pressure to impose its own interests above other countries. Some countries, shadowed by the powerful economic and political pressures from the US, either because of weaker overall strength or because of long-term dependence on the US, have been forced by the US to make compromises in accordance with the requirements of the US in negotiations, and they have to quiet down and let the US get what it wants. This is a situation that happens often and inevitably leads some people in the US to form the opinion that all countries, including China, will be afraid of the maximum pressure strategy and will certainly yield and surrender under their powerful pressure.

However, some people in the US have misjudged the situation, found the wrong target, and miscalculated. Cooperation must be based on principles. Consultation must be based on equality, mutual benefit, and sincerity. China will never compromise with regard to major principles. China is growing into a big and powerful country and is not like a "lamb" to be slaughtered. Some in the US are trying to suppress China to surrender, with the bullying means of extreme pressure, and their deeds are doomed to be in vain. Their attempts to isolate China will in turn isolate themselves, and such maximum pressure aiming at China will inevitably cause great resentment and strong opposition from the Chinese people. In the history of the US, there has been several times when it regretted and reflected who should be responsible for "losing China". I want to ask these people in the US today, can you should up such responsibilities?

Mutual respect, equality and mutual benefit are the basic norms of modern international relations. However, the maximum pressure strategy adopted by some in the US has severely violated such basic norms, causing great damage to the world trade rules and international order. Historical experience has shown that it will only undermine the relations of mutual trust and cooperation, and cost the historical opportunity of cooperation, if the way to reach an agreement is through means of extreme pressure. Some people in the US have adopted the means of imposing extreme pressure on China, which is not only unhelpful to solve the problem, but will also further damage the interests of all parties.

Maximum pressure looks to be aggressive, but in fact it is ferocious in appearance but feeble in essence. The unilateralism, protectionism and trade hegemonism pursued by the US have been causing greater and greater damage to itself internationally and domestically, and have gradually become an important dynamic differentiating American political forces. The maximum pressure will only make the world more aware of the nature of US hegemonism, and make the US more isolated in the international community.

6. Can trade protection make the 'return of manufacturing industry' to the US possible?

Since the Trump administration came to power, it has put forward the proposal of "buying American goods and hiring American workers", emphasizing the "return of manufacturing industry." Some people in the US offered preferential policies to enterprises that came back to the US to set up factories. For those enterprises that moved their factories abroad, they were threatened with tariffs, forcing enterprises to return to the US for production. Can these trade protectionist practices really enable the US to achieve a "return of the manufacturing industry"?

Whether the "return of the manufacturing industry" can be achieved depends first on the reasons behind the outflow of manufacturing in the US.

From the perspective of the US domestic economy, its manufacturing outflow is determined by how the American economy works. In the process of economic globalization, US multinational companies have transferred more and more industries to developing countries to achieve maximum profitability. Through industrial transfer, they reduce costs, expand markets, divert pollution, and increase the profitability of capital. At the same time, more and more capital has left the real economic sector with lower profit margins, and turned to the financial sector to engage in financial speculation, leading to the hollowing out and virtualization of the US economy.

From the perspective of foreign economy, the manufacturing outflow of the US is determined by the rules of the international economy. In the existing international economic system, the US dollar belongs to the world currency and is in a hegemonic position. Based on this, the operating pattern of the world economy is formed. Its main features are: The US supplies the US dollar currency, and other countries, especially developing countries, including China, supply material products. A large number of imports have created a trade deficit in the US, and other countries have exported in large quantities, forming a trade surplus. This means that trying to reduce the trade deficit through the return of US manufacturing is likely to damage the hegemony of the US dollar. In fact, in 2018, the value added of manufacturing in the US accounted for only 11.4 percent of its GDP, while the proportion of financial insurance, real estate and leasing in GDP was 20.7 percent. The degree of de-industrialization and financialization was even higher than that in 2007, which is the year before the international financial crisis. It can be seen that it is not easy for the US to realize the return of the manufacturing industry.

The industrial production index, which reflects the output of industrial products in the US, shows that after the seasonal adjustment, the entire industrial sector and the manufacturing sector were basically in negative growth in the first four months of 2019, down by 1.3 percent and 1.6 percent, respectively, from the end of 2018. The capacity utilization rates of industrial and manufacturing industries reflecting the degree of prosperity of the US industrial industry were 77.9 percent and 75.7 percent in the first four months of 2019, respectively, which were lower than that of the average of 79.8 percent and 78.3 percent from 1972 to 2018. Therefore, the US manufacturing industry has not re-prospered in the trade protection policy on the whole.

The global division of labor in manufacturing is the extension of the socialization of production in the world, and it is the general trend of productivity development. Although this trend could be affected by the policies of some countries, it will never be reversed. The incumbent US government hopes to provoke economic and trade frictions by imposing tariffs and erecting high trade barriers. It requires US-funded multinational companies to return to the US, by using the tricks of labeling them as "traitors" and threatening tax increases. These practices will not help achieve the desired results. Instead of realizing the return of manufacturing industry, it will seriously undermine the global value chain, impact global resource allocation, generate widespread negative spillover effects, and reduce the efficiency of the global economy.

7. Can economic and trade frictions promote US economy prosperity?

Since 2019, the employment rate and the market value of the US stock market have remained high. In the first quarter, the actual GDP annualized quarter-on-quarter preliminary value was 3.2 percent. Since the introduction of economic and trade frictions by the US against China, the US economy seems to be doing well. This has made some people in the US confident about constantly escalating trade frictions with China. But to objectively evaluate the so-called "prosperity" of the US economy requires a comprehensive and rational analysis.

Based on some indicators, the US economy is prospering. However, whether it will continue to prosper depends on the state of capital accumulation. In the first quarter of 2019, the seasonally adjusted fixed-capital investment growth rate of the US private sector was only 1 percent, significantly lower than growth rates in 2017 and 2018. According to US official data, US durable goods orders fell 2.1 percent from the previous month in April 2019, surpassing the expected 2 percent decline. Shipments of core capital goods - a leading indicator of economic expansion - fell by 0.9 percent in April. From the perspective of development trends, economists are very unsure about the prospects of the US economy. According to a recent survey released by the National Association for Business Economics, many economists predicted that the possibility of a recession in the US economy by the end of 2020 will almost double, mainly due to the US government's trade protectionist policy.

Many studies have shown that the US economy is in a downward phase of the so called "long wave", a steady decline instead of rise. Many scholars, including former US Treasury Secretary Lawrence Summers, described the economic performance of the US as "long-term stagnation". There is no strong evidence currently available that the US medium - and long-term economic fundamentals - have improved. Although some in the US continue to brag about "the best economy ever," the facts speak louder than words. The average annual GDP growth rate in the US was 4 percent from 1950 to 1979, 3 percent from 1980 to 2007, 2.2 percent from 2010 to 2016, and 2.55 percent in the past two years. Obviously, the growth rate in the past two years is significantly lower than the so-called "golden age" after World War II and the "Clinton prosperity" in the 1990s. It is basically on the same level as that in the middle and late period of Obama's administration, and it is far from achieving the goal of more than 4 percent.

The effect of tax cuts on economic growth in the US is limited, while its pressure on the fiscal sector is enormous. In recent years, the US federal budget deficit has risen rapidly. In February this year, data released by the US Treasury showed that the size of US public debt has reached $22.01 trillion. Jeffrey Gundlach, chief executive officer at DoubleLine Capital, also known as the new "King of Bonds", said that the growth of the US economy is only the growth of debt. US-based Citibank also warned that the market was worried that the "fatal moment" of US solvency was coming. This "fatal moment" is likely to come early as the Sino-US trade friction escalates.

Sino-US economic and trade frictions will have a serious negative impact on the US economy. It will become a heavy burden that drags down the US economy. From the perspective of production, Sino-US manufacturing is highly interdependent. Many American manufacturers rely on China's raw materials and intermediates. Adding tariffs to each other will inevitably increase the production costs of US companies and reduce corporate profits. From the perspective of consumption, the addition of tariffs will lead to an increase in the domestic price level in the US. Consumers will pay more for the same number of commodities so that there will be a decline in demand at the current income level. From the perspective of import and export, the mutual tariff increase between China and the US will directly lead to the decline of US exports to China. At the same time, due to the increase in production costs of US companies, the international competitiveness of US products will decline and exports will be affected.

In the era of economic globalization, trade protectionism is a poison rather than a good prescription. There is no winner in engaging in economic and trade frictions, and hurting others means also hurting yourself. An important reason for the worldwide economic depression during the 1930s was the high tariff barriers and the big trade wars in powers such as the US and Europe. The lessons of the past are right there.

8. Are additional tariffs in the interest of the American people?

When the US government escalated economic and trade frictions, a ridiculous argument of self-deception was floated by some in the US. It was claimed that "additional tariffs were good for the US." From last year's "trade war is very good", it is has now come down to that China is paying huge tariffs to the US ... These huge taxes will be directly handed over to the US Treasury, and tariffs will bring more wealth to the US, even more than traditional trading. This claim goes completely against the common sense of economics. It is just the rhetoric of some in the US to hide the dangers of trade wars and fool people.

As far as the essence of trade protectionism in capitalist countries goes, a great economist has revealed that the protective tariff system that the capitalist class implements in the name of the state and the nation is merely a means of artificially "creating factory owners, exploiting independent workers and capitalizing the production materials and living materials of the people". In fact, while trade protectionism harms the interests of other countries, it also harms the interests of the American people. It is a redistribution of interests that benefits only a few large monopoly capitals in the US.

Trade frictions harm the interests of ordinary American consumers. A large part of China's exports to the US are ordinary consumer goods, and the price elasticity of demand is small. Therefore, according to the tax-transfer principle, when the US imposes tariffs on Chinese goods, most of them will eventually be passed on to US consumers. A study from Goldman Sachs, a famed investment bank, believes that after the US government imposed tariffs on Chinese goods last year, Chinese exporters did not lower their prices somewhat "to compete in the US market." Therefore, tariff costs were mainly passed on to American companies and households, resulting in the rise in consumer prices. It has pushed up the core inflation rate in the US.

Economic and trade frictions are not conducive to the employment of American workers. Adding tariffs will lead to an increase in the reproduction cost of labor for American workers, restricting the demand on labor for enterprises, thus restricting the growth of employment. US companies also will have to bear higher raw material prices. The resource allocation efficiency will drop as some of the resources in the economy shift to taxable areas. Well-known American economist Paul Krugman's commentary in The New York Times pointed out that the US administration has no strategy behind the trade war, and the additional tariff burden will be mainly passed on to the downstream producers in the US, which will eventually make the US lose the trade war.

But one man's loss is another man's gain, there will always be some people who could benefit from raising tariffs and become supporters of tariff increase. Who are these people? Of course, they cannot be ordinary Americans, but the minority of monopoly capitals in the US. Professor Jeffrey Sachs, a renowned American economist, sharply points out in an opinion article that China is not the source of American economic problems, US corporate greed is. The real battle is not with China but with America's own giant companies. American business leaders and wealthy groups are actively promoting tax cuts, expanding monopolies, and outsourcing manufacturing to countries with low labor costs. They do so in order to increase profits, but they are very opposed to policies that help promote fairness in American society.

The ultimate consequence of economic and trade frictions is that only a handful of Americans will benefit, and most Americans will suffer.

9. Can the Sino-US trade frictions crush the Chinese economy?

The US has continuously escalated Sino-US trade frictions and used trade bullying and various other measures against China, which will undoubtedly adversely affect the production and operation of Chinese enterprises and people's consumption and expectations, and increase the downward pressure on the economy. However, if we take a long-term, comprehensive and fundamental view to calmly and objectively examine it, rather than being caught in the short-term economic fluctuations or the consideration of gains and losses for the moment, we can draw the conclusion that the impact will be generally controllable and positive. The good trend is unchanged, the comprehensive advantages are obvious, and the means of regulation are sufficient. There are more opportunities than challenges.

The impact will be generally controllable. In 2018, the dependence of China's growth on exports was only 18.24 percent, and the impact of exports on China's economic growth is gradually decreasing. Since the beginning of this year, in spite of the slowdown in world economic growth and international trade, China's economy has started well, and the main economic indicators have remained within a reasonable range. China is optimizing its economic structure, changing its development mode, and improving its quality and efficiency. Chinese economy is well poised to keep the healthy trend of stable growth. Sino-US economic and trade frictions seem to affect public expectations, driving investors to make irrational choices. However, since 2018, thanks to the influence of a series of the central government's policies to stabilize employment, finance, foreign trade, foreign investment, investment, and expectations, China's economy has been running steadily and healthily. The policy tools available in China are diverse, mature and reliable, and can be used at any time. The US side should not underestimate China's policy, ability and experience in dealing with economic and trade frictions.

The good trend is unchanged. Although the Sino-US economic and trade frictions have added new uncertainties to China's economy, the long-term positive trend of China's economic development remained unchanged. The good supporting foundation and conditions for sustained growth have not changed, and the upward trend of economic restructuring and optimization has not changed. China has nearly 1.4 billion people, of whom 900 million make up the labor force. China has 170 million highly educated and skilled human resources, and the world's largest middle-income group, as well as more than 100 million market entities. As the world's largest manufacturing country, China has an independent and complete industrial system and national economic system. It is the only country in the world that has all the industrial categories of the UN industry classification. The domestic demand-led economic development model has become a powerful weapon for China to resist foreign trade risks. In 2018, the contribution rate of domestic demand to economic growth reached 108.6 percent, of which the final consumption contribution rate touched 76.2 percent. Consumption has become the main engine for economic growth. The new driving force represented by strategic emerging industries and sharing economy has continued to grow, injecting new vitality into China's economic development. In 2018, China's R&D investment ranked second in the world, technological innovation capability continued to improve, new industries and business models flourished, and the economy showed a good momentum of high-quality development.

The comprehensive advantages are obvious. As a large developing socialist country, China has a special advantage in its economic development from the perspective of the overlap of time, space and institutional advantages. First, in the process of accelerating industrialization and urbanization, the factors of production are transferring from agriculture to industry, and all economic sectors and various social undertakings will see explosive growth, which is the general law of the transformation and upgrading of the newly developing economies. Second, as a large country, it has an advantage in terms of population, space, domestic demand, and capital accumulation. This will provide strong resilience, potential and room for maneuvering. Third, it has obvious institutional advantages, given the combination of socialism and market economy that can fully mobilize the enthusiasm of all parties and make effective use of various resources. The three overlapping advantages have created a miracle in the Chinese economy, and now the advantages continue to expand rather than decrease.

There are adequate measures for adjustment. Entering a new era, China adheres to the new development concept, firmly grasps the fundamental requirement of high-quality development, takes supply-side structural reform as the main line, continuously innovates and improves macro-control, and has gained valuable experience. China has formed a comprehensive macro- regulation system, which integrates government and market, short-term and medium- and long-term targets, economic output and structure, domestic and international co-ordination, reform and development coordination. Now, there's plenty of room for adjusting fiscal policy, monetary policy, income policy, industrial policy, and science and technology policy, as well as investment policy. China is fully qualified, capable and confident in responding to various risks and challenges.

There are more opportunities than challenges. The world today is facing unprecedented changes not seen in the past 100 years. Faced with the severe challenges of Sino-US economic and trade frictions, the political superiority of the CPC's strong leadership and concerted efforts to carry out major tasks will be further demonstrated. It will surely unite the people's forces, turning the crisis into an opportunity for development and turning the pressure of development into the power of high quality development. We are more soberly aware that China still has obvious shortcomings in key technology in core fields. Key technologies are not buyable. We must firmly grasp the initiative of innovation and development. We continue to increase investment on research and development in key core technology areas, bring together more high-end talents, enhance the ability of scientific and technological innovation, and get us out of the predicament wherein core technology is controlled by others. We are more clearly aware that we must grasp the general trend of the new industrial revolution and the scientific and technological revolution, grasp the opportunities of digitalization, internet, and intelligent development, explore new technologies and business models, and explore new growth engine and development paths. We will strive to lead the world at the forefront of new technologies, enhancing China's ability to withstand various risks and challenges.

10. China's position and attitude toward China-US economic and trade frictions

Since some people in the US provoked the Sino-US economic and trade frictions, the two sides increasingly took divergent approaches to this issue. That is, should it be taken as a zero-sum game or based on mutual benefit, being addressed through confrontation or cooperation? Should the countries stay enclosed or open-up, maintaining a monopolistic or competitive market? Should the countries stick to unilateralism or multilateralism? All these differences are underpinned by the ultimate question of whether the world is governed by the old way of hegemonism, or a new approach by building a community with a shared future for mankind. China's position and attitude toward these major fundamental issues is clear, firm and consistent.

Faced with the economic and trade frictions provoked and escalated by some people in the US, China does not want a trade war. However, the country is not afraid of a trade war and will fight one if necessary. Proceeding from safeguarding the common interests of the two countries and the world trade order, China has responded to the concerns raised by the US with great sincerity. China overcame various difficulties, proposed practical solutions, and conducted 11 rounds of high-level economic and trade consultations with the US, which demonstrated China's sincere desire of not fighting a trade war. However, the US has continuously challenged China's bottom line and overstepped the red line of norms governing international relations, attempting to sacrifice China's rights to development and even damaging China's sovereignty and dignity. This can in no way be accepted by the Chinese people. China expects the two sides to reach a win-win agreement based on mutual respect, equality and reciprocity. China's sincerity is consistent, while its principle is firm. China will not fear any threat or oppression from the US side to escalate the economic and trade frictions. China has no choice or line of retreat, but to fight resolutely to the end. No one or any force should underestimate the iron will of the Chinese people and their strong resilience for a protracted war!

Facing the unilateralism and protectionism pursued by the US government, China is committed to mutual benefit and win-win progress, striving to build a community with a shared future for mankind. China will continue to play its role as a responsible major country, firmly uphold global and regional strategic stability, promote mutually beneficial and win-win cooperation with other developed countries and developing countries, unswervingly follow the path of peaceful development, and work for the building of a community with a shared future for mankind. As a permanent member of the UN Security Council, China will continue to work together with the international community, to resolutely safeguard the international system with the UN as the core based on the basis of international law. China will work to build a new type of international relations featuring mutual respect, fairness, justice and win-win cooperation, and will work to build an open, inclusive, clean and beautiful world that enjoys lasting peace, universal security and common prosperity. China will further promote high-quality development of the Belt and Road Initiative, follow the principle of extensive consultation, joint contribution and shared benefits, and strive to achieve policy consultation, infrastructure connectivity, trade promotion, financial cooperation and people-to-people exchanges. China will build a global connectivity partnership, create new development opportunities for all countries, and move forward toward a community with a shared future for mankind.

Facing continued challenges and disruptions to the existing international order by some people in the US, China has firmly upheld the multilateral trading system and actively participated in leading the reform and development of the global governance system. As a firm defender and builder of the current international order, China has worked hard to make the global governance system more just and equitable, which meets the general needs of all countries. The reform of the global governance system should better reflect the changes in the international landscape, and reflect the will and interests of most countries – especially the emerging markets and developing countries – in a more balanced way. Advancing the reform of the global governance system does not mean to scrap the old system or rebuild a new one. Rather, it means to keep the global governance system up with the times, and improve it with innovation. As the world's largest developing country, China firmly abides by and upholds the WTO rules, supports an open, transparent, inclusive and non-discriminatory multilateral trading system, and backs necessary reform of the WTO. China sticks to the road of opening-up, integration and mutual benefit, strives to build an open world economy, strengthen cooperation within the G20, APEC and other multilateral frameworks, promote trade and investment liberalization and facilitation, and address global economic problems of imbalance and inequality, promote economic globalization toward more open and inclusive, balanced and win-win development.

In the face of the adverse impact of Sino-US economic and trade frictions, China will stick to its independence and self-reliance, deepen reform and opening-up, unswervingly follow the path of high-quality development, and earnestly run its own affairs well. Regardless of past, present and future, China will develop the country and the nation by mainly relying on its own strength, maintain national dignity and confidence, and stick to its own path. China will speed up the process of enhancing its independent innovation ability and strength, strive to independently control the core technologies, and firmly grasp the initiative of innovative development.

No matter how the situation develops, China earnestly runs its own affairs well. The fundamental way to deal with economic and trade frictions is to develop itself through reform and opening-up. China will continue to deepen reform and opening up. China will not close its door, but rather open it even wider. In his keynote speech of the opening ceremony of the Second Belt and Road Forum for International Cooperation, President Xi Jinping announced that China will adopt a series of major reform and opening-up measures to strengthen institutional and structural arrangements and promote higher-level openness, including widening market access for foreign capital, strengthening international cooperation in intellectual property protection, increasing imports of goods and services on a larger scale, implementing international macroeconomic policy coordination more effectively, and paying more attention to the implementation of the opening-up policy. The more China opens up its door, the better it will interact with the world and contribute to progress and prosperity for both China and the world.

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