The Six Expectation Of The Third Round Of Sino US Dialogue Is &Nbsp; The Real Reason For China'S Surplus.

Editor's note: in from May 9th to 10th, the third round of China US strategic and economic dialogue will be held in Washington.

Sino US strategy and

Up to now, the formal topic and the specific agenda of the dialogue have not yet been disclosed, but based on the basic routine of the first two dialogues, the current characteristics of Sino US relations and the changes in the global level, analysts expect to urge the United States to safeguard its sovereignty.

Looking forward to topic 1

Urging the United States to safeguard the credibility of sovereign debt

As of April 30th, the total public debt of the United States amounted to 14 trillion and 280 billion US dollars, equivalent to 97.5% of its GDP14.6578 trillion in 2010. It is one of the most heavily debt burdens in the world.

In addition, the US federal budget deficit has reached US $830 billion in the first half of 2011, and the annual rate is equivalent to 10.7% of its GDP, far exceeding the GDP3% international warning line.

There is no doubt that the United States is facing the crisis of high debt and high fiscal deficit left by the financial crisis.

Its huge fiscal deficit and high debt have begun to cause public confidence in US sovereign debt and the US dollar.

This has also led to domestic political and market reactions. The fiscal policy war is being carried out in Congress, and standard and poor's rating of the outlook for US government bonds is an example.

Obviously, the quantitative easing policy adopted by the Federal Reserve since the financial crisis is at the expense of triggering global inflation, thus avoiding the technical bankruptcy of the United States.

However, for creditors, the essence of the United States is the same as bankruptcy: to pay the devalued currency to creditors.

For example, from June 2010 to March 2011, the real effective exchange rate of the US dollar has fallen by 8.44%.

According to the latest report released by the US Treasury in April 30th, as of June 30, 2010, China is the largest holder of US securities, holding US $1 trillion and 611 billion, including US Treasury bonds of US $1 trillion and 110 billion.

China's foreign exchange reserves have also exceeded 3 trillion US dollars.

In view of this, China has become the largest creditor in the United States.

International public opinion has been concerned about the Fed's insisting on quantitative easing policy. Its chairman, Bernanke, will not know the absurdity of such a policy.

In an interview with the media, some experts pointed out clearly that the intelligence of the chairman of the Federal Reserve, Bernanke, told himself that the so-called quantitative easing monetary policy he adopts at present is politically, or in character, degenerate, immoral and dishonest.

"When the financial crisis broke out in 2008, the Federal Reserve rescued those who should have gone to jail."

Well known economist Xie Guozhong said.

At present, "Bernanke is playing a decisive match with China."

Xie Guozhong's latest view is that China's currency is linked to the US dollar and its monetary policy magnifies the impact of the Fed's policy on inflation.

In the dynamic change of us quantitative easing and the depreciation of US dollar, China's inflation problem will be more serious.

The United States hopes that before inflation becomes a serious political problem, China's economy will be hard to land because of inflation.

Because this hard landing will reduce international commodity prices and inflationary pressures in the United States.

Therefore, it can be assumed that as long as China's inflation does not deteriorate to the danger and its economy, the Federal Reserve's loose monetary policy will continue.

Therefore, it is necessary for the Chinese government to explicitly request the US government to take relevant measures as soon as possible, terminate its quantitative easing monetary policy, ensure the credibility of its sovereign debt, and maintain the basic stability of the US dollar exchange rate.

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Looking forward to topic 2

Analysis of the real cause of China's trade surplus

The previous Sino US strategic and economic dialogue, the RMB exchange rate and China's trade surplus are always around the topic.

[RMB exchange rate]

It should be based on the real effective exchange rate and cannot be measured against the US dollar exchange rate.

The bill of exchange and fair trade, which has already been registered in the US Congress, and the meeting of finance ministers of Paris and Washington, G20, stipulates that the standard of measuring whether the currency is undervalued is the real effective exchange rate of the currency against a basket of currencies.

The latter criterion is whether or not it has been underestimated by more than 5% in the past 18 months.

According to figures released by the bank for International Settlements, the real effective exchange rate of the renminbi against the US dollar, euro, yen and sterling has increased by 7.54%, 9.90%, -1.38% and -0.05% over the past 18 months.

The trade surplus has nothing to do with exchange rate.

In the first quarter, China's total trade deficit with Japan, Korea, China, Taiwan and ASEAN was 60 billion 838 million dollars, and the United States and the European Union had a surplus of 64 billion 29 million dollars.

The two are roughly the same.

This clearly shows that the real situation of China's foreign trade is the import of raw materials and components from Japan, Korea and Taiwan to the export of goods to Europe and the United States after processing and assembling.

There is a great difference in the adverse and favorable balance, but there is only one RMB exchange rate. Obviously, the trade surplus has nothing to do with the exchange rate.

[China's trade surplus]

China's trade surplus mainly comes from processing trade, but at the present stage, the reduction of processing trade is not feasible for China and the United States.

According to Chinese customs statistics, China's trade surplus in 2010 was US $183 billion 100 million, of which processing trade surplus was US $322 billion 900 million.

That is to say, if there is no processing trade, China's foreign trade should be a deficit of US $139 billion 800 million.

In the first quarter of 2011, China had a trade deficit of 1 billion 20 million US dollars and a surplus of 77 billion 110 million US dollars in processing trade.

In other words, if there is no processing trade, China's deficit will reach US $78 billion 130 million in the first quarter, an annual rate of US $312 billion 520 million, that is to say, China will become a big trade deficit country.

Therefore, if China's trade surplus with the United States is cut down according to the requirements of the United States, the processing trade can only be reduced.

However, at the present stage, the processing of US multinational corporations can not be eliminated.

According to the results of three scholars from the University of California, the US Apple Corp has no assembly line in the United States. The company commissioned a Foxconn iPad processing and assembling in mainland China, with a wholesale price of $299 per unit in the US.

Apple's patents, design and marketing revenue amounted to $163, while Foxconn's imports from Japan, Taiwan, China and Philippines were $133 and Foxconn processed only $3.

According to statistics, in 2009, the total export volume of Foxconn processed amounted to 55 billion 200 million US dollars, most of which were exported to the US.

If it is not assembled in China, China's surplus to the US can be eliminated.

Whether this can be achieved, the US government needs to study and take enough measures to make domestic production in the United States more profitable than overseas.

According to the statistics of the US Department of Commerce, the sales volume per employee created by the parent company in 2008 was 413 thousand and 600 US dollars, an increase of 25.9%, while the sales generated by each subsidiary of the offshore subsidiary reached 413 thousand and 600 US dollars, an increase of 59.3%, which is 24.3% higher than that of the domestic parent company.

Profit comparison proves that overseas production and processing are more cost-effective than domestic ones.

Therefore, in order to change this trend, the United States must make the profit margins of domestic production and processing catch up with and exceed the profit margins abroad.

Overseas refers to the whole world, not China.

Because by the end of 2009, the total stock of foreign direct investment in the US was US $3 trillion and 510 billion, of which only 49 billion 403 million US dollars were invested in China, accounting for 1.41%.

At the same time, the difficulty for China to reduce processing trade lies in local employment and economic growth.

Taking Apple Corp as an example, every year, orders from apple to Foxconn, quanta, HSK, Chen Hung and Shenghua are about 100 billion yuan, which directly drives China's 100 billion GDP to solve the employment of millions of people.

Because most of China's export products are still in the low processing stage, the profits are very low, and the international pricing power is very weak. Only by achieving industrial upgrading and having independent brands can China reduce processing trade.

According to the author's investigation, in 2010, the average export profit margin of 2000 Chinese enterprises contacted by the Ministry of Commerce was only 1.47%, but the production of export commodities involved tens of millions of people.

If the reduction of processing trade leads to the closure of export enterprises, the government must shoulder the responsibility of relief and re employment.

We should change the "country of origin of manufactured goods" and calculate the trade balance for the "ownership law".

In October 2010, the director general of the World Trade Organization (WTO), Lamy, told the French Senate that what people call "made in China" is actually only assembled in China.

In the global value chain, the commercial value of these products comes from many countries before China's assembly.

Therefore, the concept of "country of origin of manufactured goods" is gradually obsolete.

If the trade statistics are adjusted to reflect the actual value of the contribution of different countries to the product, then the US trade deficit with China should be reduced by half.

The statistical deviation of all commercial values attributable to the final production of the product may mislead the political discussions on the root cause of the imbalance, leading to erroneous and backfired decisions.

China can remind the United States that China and the United States should actively coordinate WTO and emerging economies and joint China World Trade Center conference to promote the reform of the world trade statistics system.

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Looking forward to topic 3

Clarifying China is not an export oriented economy.

Referring to Sino US trade, the US side is accustomed to treating China as an export-oriented economy. In fact, it is a wrong conclusion drawn from the wrong analogy.

First, the main body of China's economic growth is at home.

In 2010, for example, China's GDP grew by 10.3%, and final consumption and investment contributed 3.9 and 5.6 percentage points respectively. Net exports contributed only 0.8 percentage points.

If this is because China has increased domestic demand after the global financial crisis, look at the figures before the financial crisis.

In the 7 years from 2002 to 2008 after China's accession to the WTO, the growth rate of GDP remained at two digits in 5 years, while the contribution of net exports was only two percentage points in 3 years, and 0.1 to 0.8 percentage points in 4 years.

The highest year was 2007, contributing 2.6 percentage points.

But in the same year, domestic consumption and investment contributed 10.4 percentage points to GDP (GDP grew by 13%) and 4 times net exports.

Second, China's "dependence on foreign trade" is misread.

In 2010, China's total import and export volume was 2 trillion and 972 billion 800 million US dollars, accounting for 50.6% of the total GDP value of US $5 trillion and 878 billion 600 million in that year.

This percentage is therefore misread as China's dependence on foreign trade.

The mistake is: the total value of imports and exports is here, while GDP is only an increase from the previous year, and the two are not comparable.

In 2010, for example, the total export volume of China's goods amounted to 1 trillion and 577 billion 900 million US dollars, equivalent to 10 trillion and 666 billion 600 million yuan.

In the same year, China's industrial added value was about 16 trillion and 400 billion yuan.

The National Bureau of statistics did not publish the figure of gross industrial output value.

However, according to the figure that China's industrial added value only accounts for 26.3% of the total industrial output value in 2008, the total industrial output value in 2010 should be 62 trillion and 360 billion yuan.

According to this calculation, China's exports account for only 17.1% of its industrial output.

Look forward to issue 4

Government procurement is an international practice to encourage independent innovation

With regard to China's independent innovation and government procurement, American companies have recently expressed concern that they will urge the government to include this as one of the topics of this dialogue.

The United States opposes the Chinese government's premise of participating in government procurement with domestic intellectual property rights and trademarks.

They identified these measures as barriers to market access and protectionism.

But in fact, it is a common practice of governments to encourage independent innovation through government procurement.

In a report from the US China Trade Commission, citing the findings of the Boston Consulting Group, 19 of the world's top 20 innovative best practices are implemented through tax incentives and R & D funding.

At the same time, international practice has proved that many countries support their own indigenous innovation through government procurement. The typical examples are Britain, Australia, Ireland, Sweden and so on.

The US's own government purchase policy also inclined to domestic enterprises: its provisions such as the exceptions of the US product law, the government procurement act and the small business act all contain provisions on the purchase of domestic goods and the care of small and medium-sized enterprises.

Looking forward to topic 5

Indicates that China creates an open investment environment for foreign investment.

In April 26th, the China Chamber of Commerce of the United States announced the 2011 white paper on American enterprises in China (hereinafter referred to as the white paper). The Chinese Chamber of Commerce of the United States urged China to reconsider discriminatory trade policies that impede fair competition.

The white paper believes that these policies include laws related to independent innovation, licensing standards, government procurement, competition law and intellectual property law enforcement.

Di Anhua, chairman of the chamber of Commerce, told the media on the same day that he intends to submit this Sino US strategic and economic dialogue discussion as a topic.

The Chinese government can use this dialogue to explain clearly to the US and the international community that China has basically solved the relationship between independent innovation and international cooperation from the legal and institutional aspects.

The Chinese government will introduce national treatment to foreign enterprises in China as their own enterprises. China will continue to open to the outside world, expand the scope of market access, improve policy pparency, maintain policy coherence in different regions, and actively strive to create more openness and equity for the vast number of foreign-funded enterprises, and optimize the rational investment environment.

Looking forward to topic 6

Truly fulfill the promise of China and the United States

With regard to the issue of reciprocal commitments such as the p Pacific Partnership Agreement (TPP) and China and the United States, it is possible to respond and mention this initiative in this dialogue.

In March 9, 2011, the office of the trade representative of the United States issued the 2011 presidential trade agenda report.

The report said that the United States should actively promote the free trade negotiations on the p Pacific Partnership Agreement in 2011 and strive for negotiations to complete substantive progress this year.

The p Pacific region is a very important trade target for China. Bilateral or multilateral trade accounts for more than half of China's total foreign trade.

China should remind the United States of its involvement in the economic and trade activities in the region.

Regarding reciprocal commitments, the Chinese side must emphasize that the United States has made positive responses to the requests made by the United States to the Chinese side in the first two dialogues, including the opening of the service industry, government procurement, independent innovation, and the protection of intellectual property rights.

However, the US side has not really given the Chinese demands such as relaxing high-tech export control, recognizing China's market economy status, and supporting Chinese enterprises to invest in the US.

Therefore, the "dialogue" China should ask the US side to fulfill the commitments made before the two "dialogue", and on this basis, we can make new demands.