In what direction is the relationship between the world’s two largest economies headed?
Business and government leaders gathered at the 7th Annual China Business Conference, held at the U.S. Chamber, to answer this critical question.
While many touted the vast opportunities and critical nature of U.S.-China economic and commercial relations as well as the absolute need to for the two countries to work together to address global challenges, the mood was one of concern about the overall direction. With international trade—specifically with China—wedged into the presidential debate as never before, many speakers worried that leaders could be hesitant to continue developing economic ties between the United States and China. But that would be a mistake.
“We must be careful at this time not to undermine the relationship and allow it to slide backwards, because there is danger on both sides,” warned Myron Brilliant, U.S. Chamber Executive Vice President and Head of International. “This is particularly the case as China’s economy slows, and movement on market-oriented reforms in China appears stuck.”
China is the U.S.’s largest trading partner and third-largest export market--$116.2 billion in 2015. What’s more, U.S. exports to China have nearly tripled since 2005. Meanwhile, China’s investment into the United States continues to surge.
“We have real challenges to address in the geostrategic and economic arenas, and the two governments, together with business and other stakeholders, must red-double efforts to address them directly and trying to resolve them wherever possible,” Brilliant explained.
One of those challenges that was discussed throughout the conference is the slow-down in negotiations on a potential Bilateral Investment Treaty (BIT). A high-standard, comprehensive BIT would establish rules for foreign investment in each other’s countries and would be mutually beneficial. For U.S. companies it would allow greater access to China’s growing middle class, and for Chinese firms, it would provide greater certainty as they invest and create jobs in the U.S. Yet China missed its own, self-imposed deadline to submit an updated offer in the negotiations at the end of March, coincident with President Xi Jinping’s visit to Washington for the Nuclear Summit.
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Another challenge is China placing barriers on foreign companies who do business there such as economic security requirements in laws and regulations, pushing top-down industrial policies that give uncompetitive advantages to domestic companies, and forcing foreign companies to transfer valuable technologies.
China’s National People’s Congress also passed a new law governing the management of non-governmental organizations earlier this week that will adversely affect the ability of business, professional, and social organizations like the U.S. Chamber of Commerce to operate in China. Such efforts impede China from fully converging with global norms and will stymie domestic economic growth.
A number of senior policy influencers at the conference surprisingly suggested that the next administration consider adopting a more reciprocal approach in the treatment of Chinese commercial interests in the United States, including where China is pursuing industrial policies at home and acquisition initiatives abroad that together distort global markets and undermine the competitive prospects of U.S. market-based companies.
The two governments will have an opportunity the first week of June in Beijing to try to make progress on a number of regulatory challenges in China that are impeding, or threaten to impede, two-way business, including restricted market access for U.S. services industries, ICT and related security measures that have increased discrimination against U.S. companies, new drug registration and pricing measures for U.S. pharmaceutical companies, ongoing biotechnology approval challenges, looming Anti-Monopoly Law implementing guidelines that could be used to unfairly target the intellectual property of advanced U.S. companies, recent tax measures that could compromise data security of U.S. firms in China, and persistent IP challenges in the areas of patents, copyrights, trademarks and trade secrets.
This year’s forum, co-hosted by the U.S. Chamber and the American Chamber of Commerce in China, featured Bloomberg LLP Co-Founder and President and former NY Mayor Michael Bloomberg, Honeywell Chairman and CEO David Cote, former Secretary of State Madeleine Albright, former Defense Secretary William Cohen, former US Trade Representatives Susan Schwab, Robert Zoellick, and Charlene Barshefsky, Treasury Under Secretary Nathan Sheets, and Deputy US Trade Representative Robert Holleyman.
At the conference, the U.S. Chamber's Brilliant stated bluntly, the U.S.-China relationship is “too big to fail.” The U.S. and China can’t afford to walk away from solving our problems:
Our countries, our governments, our stakeholders can manage through areas of disagreement, but we have to redouble our efforts going forward to resolve these issues at a time when the world is looking for China and the U.S. to collaborate wherever possible on global, regional and bilateral issues.
Deepening U.S.-China economic ties must continue, and now is the moment for both sides to solidify the relationship in advance of political transitions in both countries. There’s too much at stake for both peoples.