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Substantial changes have taken place in Sino-US relations

I think the United States has two main purposes. The first purpose is to push the industry chain out of China. Now that the industrial chain has begun to move out of China, Southeast Asian countries can fully accept them. These countries are in the low-end of the industrial chain, and the labor costs in Southeast Asia are lower. Regardless of the outcome of the Sino-US negotiations in the future, the transfer of the industrial chain is difficult to avoid.

Substantial changes have taken place in Sino-US relations

Because investors will consider placing the industry in an opponent’s home in the world’s largest market, the uncertainty of future market security and stability is too great, so it is necessary to consider at least partial transfer. The part that is not transferred is mainly for the domestic market in China. The second is to curb China’s development along this path and force China to adopt a market economy system recognized by the United States. This is the institutional dispute, the road dispute, will not end easily.

Since 2018, I have published two articles in the Economic Guide. The first one is “The enemy without the enemy label”, and the second is “Not just a trade war.” We have an economic war, a financial war, a public opinion war, a science and technology war, a foreign student war, a sports war, and a cultural war with the United States.

Until June, July, or even the end of September 2018, the domestic public opinion circles did not believe that the relationship between China and the United States had undergone fundamental changes. Other leaders do not believe that the nature will change. Let me give you an example. Recently, I saw a person in charge of a department in the newspaper writing an article saying that there has been no substantial change in Sino-US relations. why? He said that contact and containment have always been the US’s China policy. The policy of contacting and containing this policy has not changed. Therefore, there has been no substantial change in Sino-US relations.

Substantial changes have taken place in Sino-US relations

If the original contact is 80%, the containment is 20%; now that the containment is 80% and the contact is 20%, how can there be no substantial change? This is the change from quantitative to qualitative. This kind of cognition will be misleading if the changes in the nature of things are not clear or adopted.

I have read more than a dozen American articles. They all believe that the Sino-US trade war will definitely go on. Have we believed that this trade war will last forever? There may still be people who don’t believe it, or think that they will stop at a certain point in time. For example, when the United States introduced China’s export tax policy of 50 billion US dollars to the United States, some people said that it would not come out for the tax increase of 200 billion yuan; after 200 billion yuan came out, it said that 267 billion yuan might not come out. The Americans’ understanding is more consistent: as long as China does not change, tax increases for all of the more than $500 billion in exports will definitely be introduced.

Some views hold that the change in US policy toward China is due to changes in the balance of power between China and the United States, and the United States expressed anxiety about China’s development, and began to change its China policy. I don’t agree with this point of view, or I think this view is not comprehensive enough. Comparing the strength of China and the United States, no matter in which aspect, we are far from the United States, especially the three hard powers of economy, technology and military. We are still far away from the United States. The United States is not challenging China because it is worried that China will soon overtake it. It will exert economic pressure on the military.

I think that the reason why the United States is uneasy about China is that China’s development mode, and sometimes the speed of development is not its main concern. If we develop in a way that the United States believes to be “reasonable”, maybe we don’t care if we develop faster, because it thinks we can compete with us. Now the United States believes that our way of development, the so-called “state capitalism”, the party and the government play a leading role, violating its so-called “rules”, it is difficult to compete with it. So the US is hitting our growth pattern. Looking further, the dispute between China and the United States is a road dispute, which is the essence of the problem. If we still say that the US trade war is because China’s strength has changed, it is one-sided. Sino-US relations have not been able to return to the past four decades.

Substantial changes have taken place in Sino-US relations

In other words, the United States believes that China’s development is to use the international market and international division of labor system dominated by the United States or the West, but we have not acted in accordance with the “market rules” advocated by the United States, so we must suppress us and force us to change. If you want to continue to enjoy the “benefits” of the US market and the international market division of labor, then you must follow the “rules” of the United States. Otherwise the market will be closed to China.

What is the public opinion in our country, propaganda in the newspapers and on television? It is said that most companies in the United States are opposed to tax increases. This statement is correct because it sanctions the US and foreign companies in China, because the volume of Sino-foreign joint ventures in China is far greater than that of China’s state-owned and private enterprises. This is an objective reality. But it is neglected that these companies have complained to the US government that you must let China treat us fairly. We are now treated unfairly, but no one has explained this.

We have not told you that the United States has seriously assessed the damage of the trade war, and its policy is not made out of the head. With the introduction of this policy, how much the United States will suffer, how much damage China will suffer, and it has undergone a serious assessment. An economist told me that there is discussion within the US that their damage is controllable. They calculated that China’s losses would be eight times that of the United States. We are now underestimating the losses we may suffer in the trade war with the United States.

The United States, after a damage assessment, is willing to bear the price of “killing one thousand, self-destruction eight hundred”, and this determination is made. The US economic community will have a voice of opposition. It is true that many industrial chains in the United States are in China, but the United States will adhere to this practice because the purpose of this policy is to press China to change. Its purpose in raising taxes on trade imports is not just to reduce the trade deficit. In fact, the United States does not care about this trade deficit. Only when there is a deficit, the dollar can only go out. If it is a surplus, the dollar will not go out. How does the dollar occupy the world? Therefore, its policy is not exactly aimed at the trade deficit between China and the United States.

Substantial changes have taken place in Sino-US relations

I think the United States has two main purposes. The first purpose is to push the industry chain out of China. Now that the industrial chain has begun to move out of China, Southeast Asian countries can fully accept them. These countries are in the low-end of the industrial chain, and the labor costs in Southeast Asia are lower. Regardless of the outcome of the Sino-US negotiations in the future, the transfer of the industrial chain is difficult to avoid. Because investors will consider placing the industry in an opponent’s home in the world’s largest market, the uncertainty of future market security and stability is too great, so it is necessary to consider at least partial transfer. The part that is not transferred is mainly for the domestic market in China. The second is to curb China’s development along this path and force China to adopt a market economy system recognized by the United States. This is the institutional dispute, the road dispute, will not end easily.

Now, the domestic assessment of the losses we will face in the trade war is too optimistic. Some people may calculate the economic growth rate of 0.4%-0.5%. I don’t know how this is calculated. I guess the exchange rate of more than 500 billion exports to the US is more than 3 billion yuan. It accounts for 0.4% to 0.5% of China’s GDP. A private enterprise manager told me that in Fuzhou, a foreign-funded enterprise invested in a touch-screen factory and prepared to export to the United States. He has already invested a portion of the funds, but he saw the trade war a dozen, and then withdrew. This has happened and will happen in the future.

Therefore, when estimating losses, we can’t just say that more than 50 billion US dollars have disappeared, because these more than 50 billion are connected with China and ASEAN’s more than 530 billion US dollars in import and export trade, and South Korea’s more than US$30 billion in import and export trade, and Japan’s more than $200 billion in import and export trade, as well as trade in other regions, combined with more than $100 million. Many of them are imported raw materials, parts or intermediate products, which are exported after processing. For example, we export clothing to Japan and the United States, many of which are our advanced fabrics, and we have re-exported garments. If more than 50 billion exports to the United States are gone, then many imports will disappear.

Substantial changes have taken place in Sino-US relations

This is cross-trade, which affects more than $500 billion. Of course, we have not earned the money that should be earned by the more than 500 billion exports. Because investors in the US and other countries, as well as importers and distributors, have made money from it. The loss of more than $500 billion is great for employment, for social stability, and for many families. In addition to direct losses in the estimation of damage, indirect losses should be included, as much as possible, and such an assessment is useful for decision making.

The white paper published by China illustrates the problem in great detail, and in the end it also shows China’s position. This is very necessary. It is very important to announce China’s clear position and viewpoint to the world.

But I also feel that China and the United States have not spoken in one dimension. China hopes to explain the problem by putting facts and reasoning. Does the United States not understand these reasons? It is clear that it is not entangled with you because you do not understand these principles, and its struggle is not in this dimension. China pointed out that the United States has benefited more from Sino-US trade. In fact, the United States knows all these facts.

We said that both parties to the technology transfer are voluntary and the two sides signed the agreement. But we have not talked about our market-changing technology. Isn’t the market-changing technology a forced technology transfer? According to American theory, I am a good and good thing. I should enter the market directly.

Substantial changes have taken place in Sino-US relations

There should be no threshold. Free competition, my good things should be able to enter your market, why should the market change technology? We said that if I let the market, I should get the technology. We now use the theory of comparative interests to explain international trade. We are able to enter the US market because we are cheap and good. It also talks about the comparative interest theory, saying that my technology is more profitable than yours, so I should be able to enter your market and not use technology. Our dimensions are different and we should have a targeted response. For example, we should suggest that the lack of openness in the US technology market is also one of the causes.

I suggest that you revisit the article “Strategic Issues of the Chinese Revolutionary War” written by Chairman Mao. Chairman Mao talked about the strategic retreat in the article. He said that people who do not retreat strategically will not be strategically attacked. Chairman Mao specifically talked about the five lessons of anti-encirclement. At that time, we were weak. The weak and the strong had to retreat, and it was impossible to fight hard. Therefore, I advocate that there is something wrong with it. The concession is not to surrender, but to win the initiative. In the Sino-US economic and trade disputes, I don’t think it is applicable. You must have a certain strategic thinking, have certain arrangements, concentrate on maintaining this market, and develop yourself. We must work hard, retreat, and strive to develop ourselves. Do not brag about the results.

We must follow the ideological line of seeking truth from facts and understand the line, and make strategic arrangements for the future to surpass. If the market is lost now, it is very problematic. In addition, don’t imagine that this fight will end in the short term, or it will only be limited to the economic and trade field. In short, we must recognize that there has been a substantial change in Sino-US relations. Under this understanding, how to develop future Sino-US relations is something we must think about.

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