2013 has seen three remarkable changes in China-US economic and trade relations.
1. US exports to China have grown faster than China export to US
Since the beginning of the new century, US exports to China have grown very fast with the tremendous development of China modernization. According to US statistics, in 2000, China was the 11th largest export market for the US, and in 2007, China became the third largest export market for the US, leaving Japan behind. In 2000, the value of US exports to China was US$16.25 billion, and by 2011 it increased to US$103.9 billion, an increase of 542%. During the same period, US exports to the other parts of the world only grew by 80%, and its exports to Japan grew only by 1.4%. In 2000, US exports to China’s mainland, Hong Kong and Macao were valued at US$27.77 billion. By 2011, it grew to US$ 140.7 billion with an increase of US$112.9 billion, exceeding the increase of US$102.1 billion worth of exports to Canada, the US’ largest export market, over the same period. During the past 12 years, China became a big US commodity export market that grew the fastest and in the largest amount. Starting from 2010, China has also become the largest US agriculture export market.
In 2012, US exports to China, Hong Kong and Macao were valued at US$148.45 billion, accounting for 9.6% of the US total export, while the US exports to Japan was US$70 billion, accounting for 4.5%.
From January to October, 2013, US exports to China and Hong Kong were valued at US$131.3 billion, accounting for 10% of the US total export over the same period, while its exports to Japan was US$54.1 billion, accounting for 4.1%.
According to US Customs statistics, during the 8 years from 2006 to 2013, the annual growth rate of US export to China was higher than that of China’s exports to the US. From January to October 2013, US exports to China grew by 6.9%, higher than the 3.3% growth rate of its import from China. According to China Customs statistics, in the same period, China’s exports to the US grew by 3.6%, while its import from the US grew by 16.1%.
On February 20, 2013, Secretary of State John Kerry said in his first speech about foreign policy: “We create 5000 jobs for every billion dollars of goods and services that we export.” This leads to the conclusion that in 2012, US$148.45 billion worth of commodities exported to China could have created more than 740,000 jobs for the US.
2. China investment to US grew faster than US investment to China
With the fast growth of bilateral investment, China and the US invested in each other on an increasingly large scale. From 1980 to the end of October 2013, the actual utilized US investment in China amounted to US$72.78 billion, ranking fourth.
In 2012, US actual investment in China was US$3.13 billion, up by 4.5% over the same period; from January to October 2013, US actual investment in China was US$2.59 billion, up by 16% over the same period.
Since the financial crisis in 2008, an increasing number of Chinese large and medium-sized enterprises have shown interest in making investments in the US. According to incomplete statistics from China, by the end of October of 2013, China investments in the US had exceeded US$30 billion (not including the investments in the US through the third place. Take Shuanghui International Holdings Limited, for example. It acquired US Smithfield Foods Inc at US$7.1 billion but this investment was not calculated in China Mainland’s investment in the US, since Shuanghui is a Hong Kong-based company.
In 2012, the actual investment from China mainland to the US was US$4.048 billion, up by 123.5% over the same period; from January to October 2013, the actual investment from China mainland to the US was US$3.21 billion, up by 227.3% over the same period.
The statistics from US Rhodium Investment Consulting Group indicate that from 2003 to the end of March of 2013, China actual investment in the US amounted to US$25.5 billion. Since 2010, Chinese enterprises went to US for acquisition on an increasing large scale.
3. The RMB has quickened its pace of internationalization.
Since 2003, some American scholars, congressmen and government officials imposed pressure on China to force a big appreciation of the RMB exchange rate, so as to ease its trade deficit with China. For 8 years, the RMB has appreciated by 35%. The US trade deficit with China reached US$315 billion in 2012 from US$201.6 billion in 2005, an increase of 56%. Forcing the appreciation of RMB cannot solve the US trade deficit issue with China at all.
In September 2008, the financial crisis broke out in the US and Europe, revealing a big drawback in the international monetary system centered on the US dollar. This offered an unexpected opportunity for the globalization of the RMB. After the financial crisis, China took four steps to promote RMB globalization.
The first step was to promote the convertibility of RMB with foreign currencies.
From December 12, 2008 to October 10, 2013, China converted RMB2.32 trillion with 23 countries and areas including South Korea, Hong Kong, Malaysia, Singapore, New Zealand, Australia, Brazil and England. On October 9, China converted RMB350 billion with European Central Bank. These two figures make RMB2.67 trillion, which serve as the breakthrough in promoting RMB globalization.
On September 5, 2013, Bank for International Settlements reported that the RMB has ascended to the ninth largest global trading currency. On the same day, Chartered Bank predicted that, by 2020 the RMB will become the fourth largest global trading currency.
Statistics have shown that the scale of RMB abroad is enlarging, deposits of offshore RMB have been over RMB10000 trillion, and Union Pay card has been in use in 142 countries and areas.
The second step is to actively promote the establishment of the RMB Offshore Center. Hong Kong, Singapore, London, Frankfurt, Tokyo, Taiwan and some other big cities announced the establishment of their RMB offshore center one after another.
The third step is to actively promote the direct RMB exchange with other hard currencies to enhance the RMB’s international position.
On June 1, 2012, the Bank of Japan announced the Japanese yen’s direct exchange with the RMB; then Australia and Singapore followed on April 10 and October 25 respectively. Today, there have been 25 countries and areas where RMB can be directly exchanged.
The fourth stepis to put the RMB into the basket of currencies for Special Drawing Rights.
Now, the International Monetary Fund’s basket for Special Drawing Rights consists of four currencies: the US dollar accounting for 41.9%, the Euro for 37.4%, the British pound for 11.3% and the Japanese yen for 9.4%.
At the G20 Summit on September 5, 2013, President Xi Jinping said that China will “…build a stable and anti-risk international monetary system, conduct reform on the basket of currencies for Special Drawing Rights. China will strive to deepen the reform on the marketization of interest and exchange rates, to increase the elasticity of the RMB exchange rage, and to gradually make the RMB capital account convertible.”
The Shanghai Free Trade Zone is quickening its financial reform to make an endeavor to forgeturn Shanghai into a world financial center.
On May 17, 2011, the World Bank released a report “Global Development
Horizon—-Multipolarity: The New Global Economy”, which points out that the current leading position of the US dollar will come to an end before 2025 and be replaced by a multicurrency regime based on the US dollar, Euro and RMB.
Zhou Shijian is a senior fellow at the Tsinghua Center for US-China Relations.
