Andrew Polk, the co-founder and head of economic research at Trivium China, a Beijing-based strategic advisory firm, and a senior associate (non-resident) of the Freeman Chair of China Studies at the Center for Strategic and International Studies addressed the WSCRC Board at its quarterly Board meeting on May 27^th. Andrew discussed China’s macroeconomic growth policy framework from the short term, medium term and long term perspectives, which are driven by the key goals of the two sessions, the dual circulation, and the 14^th five-year plan respectively.

Andrew presented a contrarian view of the commonly acknowledged short term growth of the Chinese economy, predicting that Chinese leaders would like to slow GDP growth but not to take “sharp turns”. Andrew noted that credit cycle, a key economic growth determinant of China’s economic growth, should be basically in line with potential nominal GDP growth. He suspects that credit growth, which had been expanding at approximately 13% p.a. would be dialed down to 10% per annum by the end of the year.  Andrew believes that with China limiting the growth of its credit markets that the drivers of global growth in 2022 will be the U.S. and European economies as they rebound from their Covid slowdowns. He mentioned that will make for tougher times for companies operating in China as opportunities develop in other markets.

For the medium term growth that’s driven by the dual circulation framework, the principle is to reduce external demand and increase domestic demand. Andrew argued that if this policy framework is effectively and fully executed, it could fundamentally reshape  global trade and investment flows and could be seen as part of China’s own plan for decoupling. Andrew also listed and commented on several key goals of dual circulation as articulated by economist Yu Yongding.

Andrew noted that the policy setting for the long-term growth in China is the 14^th Fiver-Year Plan (FYP). There are three overarching themes of the 14^th FYP – national economic security, innovation and tech self-sufficiency, and transitioning to greener growth. Both the U.S. and China see green tech as a key competition area and this is where companies should focus on.

To see Andrew’s presentation please click here.

The Washington State China Relations Council and its partners recently prepared a document for federal, state and local officials, outlining policies that these organizations endorse with the intent to improve the competitiveness of Washington businesses in their dealings with China.

As the Biden Administration formulates its China Policy, Washington businesses hope for a reset in the U.S.-China relationship that enables vigorous, fair economic competition and trade while honestly raising and addressing challenges. As the most trade dependent state in the union, many Washington businesses have ideas on how China policy should be shaped in the future. This document has been prepared to assist elected and government officials to understand the positions of major trade associations in our state. The Washington State China Relations Council solicited the perspectives and concerns of these associations on how the current state of U.S.-China relations impacts their members. The Council also asked these organizations what policies they would like to see implemented by the current administration and our local legislature to improve business operations and opportunities for their member companies and constituents. A summary memo consolidating the viewpoints of some members of these organizations is presented in the report.

Key policy recommendations are:

1. Create a more level playing field by eliminating non-tariff and regulatory trade barriers.

2. Create a stable, competitive trading environment through reviewing and eliminating tariffs.

3. Strengthen intellectual property and cybersecurity protections and enforcement.

4. Expand U.S. visa availability and increase predictability in the U.S. visa process.

5. Strengthen domestic Infrastructure and investment—at both the federal and state levels—to improve Washington State’s global competitiveness.

6. Advance environmental sustainability and human rights as priorities in the bilateral relationship in a manner that maintains global economic stability.

7. Seek constructive new areas for collaboration and cooperation with China, including on climate change, global health, and other common challenges.

8. Facilitate constructive sub-national relations with China.

The WSCRC would like to thank our partner organizations, CleanTech Alliance, the Northwest Horticultural Council, Visit Seattle, and the Washington Technology Industry Association, for providing their valuable inputs. Individual memos from each participating association are included in the report’s appendix.

Click to read and download the full report.

On April 28, 2021, the WSCRC hosted a book talk with Sam Kaplan, author of “Challenging China: Smart Strategies for Dealing with China in the Xi Jinping Era”. Sam is currently the director of the Center of Excellence for Global Trade and Supply Chain Management, which connects industry and education in Washington around workforce development issues. In the book, Sam asserts that a more authoritarian, more expansionist China is one of the four most important issues in the world. He analyzes China’s economic future, how it is changing the world order and what that means for the U.S and its allies.

Moderated by Ann Tyson, the Christian Science Monitor’s Beijing Bureau Chief, the lively discussion covered a wide range of critical topics, including China’s complex economic development, human rights issues, “decoupling” of technology between the two countries, and how the Biden administration should craft and pursue its China policy.

Missed the book talk? Watch the recording here.

Engage and compete with China to boost Washington’s economic recovery

This Op-ed was published online on April 16 and in print on April 18.

The recent frosty consultations between senior Chinese and U.S. officials in Anchorage brought into stark relief the scale of the challenges that must be navigated within this crucial bilateral relationship. These challenges resonate strongly here in Washington, for no state is more on the front line, or has more at stake, in U.S.-China relations.

The erosion in U.S.-China relations has had a punishing effect on our state’s economy. In 2020, Washington state exports to China were just $3.5 billion, down from $14.6 billion (adjusted for inflation) in 2018. Non-aerospace exports fell more than 27% in real terms in 2019 before rebounding 15% in 2020. Most notably, export sales of aircraft to China fell from an average of $11.7 billion per year (adjusted for inflation) in the years 2014-2018 to zero in 2019.

Many of the issues raised by the Trump administration, from weak intellectual property enforcement to unfair trade practices, were longstanding and legitimate concerns among the business community. But the approach, including tariffs and a go-it-alone strategy, was incoherent, haphazard and ineffective.

The Biden administration needs a fresh approach to meet the challenges of an ever more aggressive China. While maintaining the Trump tariffs in the near term, the new administration recognizes that the previous policy single-handedly confronting China was a failure that made little progress on China’s market interventions and burdened U.S. consumers with higher prices from tariffs. Biden’s team must rapidly rebuild a coalition of allies to push back against China’s aggressiveness and align international institutions on the actions and reforms China must take. Coupled with efforts to further level the playing field for U.S. companies doing business with China are steps that the administration must take which will directly improve Washington communities and businesses by improving American industry’s global competitiveness.

Members of the Washington State China Relations Council, and the Washington business community more broadly, have constructive ideas for how U.S. policy toward China should be shaped. The council has consulted with a wide range of organizations across many sectors of our state’s economy. Five core themes rise to the top of policy recommendations members and businesses would like federal, state and local governments to implement. While these policies are national in scope, we believe they’ll show positive returns in Washington state.

First, remove barriers that impede America’s trade with China. The new administration must exert constructive pressure, as a country and with its allies to call out China for its mercantilist trade policies and overzealous protection and manipulation of its home market in favor of Chinese companies. This includes reviewing and eliminating tariffs imposed under the Trump administration — particularly those proven to harm American businesses and households — significantly strengthening intellectual property protections and enforcement and eliminating non-tariff and regulatory trade barriers to Washington goods and services in China. We must have true reciprocity where U.S., UK, EU, and Canadian companies, for example, have the exact same access and operating rights that China enjoys in these open markets — making clear to Beijing what is at risk if reform is not rapid and comprehensive.

Second, strengthen U.S. visa policies to encourage the best and brightest to pursue education, research and investment opportunities in Washington state. Chinese students, researchers, professionals and visitors contribute enormously to our state’s economic competitiveness and the rich cultural fabric of our communities.

Third, strengthen domestic infrastructure and investment — at both the federal and state levels — to improve our global competitiveness. This includes critical transportation, broadband and digital infrastructure, as well as investment in state and local economic development initiatives that play a pivotal role in building and sustaining Washington’s labor competitiveness and our trade and investment relationship with China.

Fourth, seek constructive new areas for cooperation with China, focused on shared interests. Climate change should be priority No. 1. President Xi Jinping has made bold commitments for China to quickly reach peak carbon emissions and carbon neutrality, aided by investments in clean energy. The Biden administration’s creation of a climate czar signals a similar commitment to address one of the world’s most pressing issues, and we are encouraged that these bilateral discussions will progress following the Anchorage meeting. Collaboration on climate change is not a choice, it’s a necessity, and will present real opportunities for Washington businesses.

Finally, we must recognize that that the issue of human rights, as manifest by our divergent viewpoints regarding Hong Kong and Xinjiang, and sensitive issues in the areas of military or economic coercion could, if not managed with a balance of strategy and force, derail the global economy. The reality is that the U.S., with its allies, together with China, are the dominant foundations of the global economy of this century, and it would be irresponsible if issues in these areas force economic disengagement. In addition to necessary domestic resilience of critical supply chains, our national security also requires full competition and economic engagement with China in all markets. This is the essential difference from the Cold War approach to the Soviet Union.

Washington state has the opportunity to model a way forward in advocating and implementing policies that advance the kind of constructive, competitive U.S.-China relationship that our communities and businesses want to see. Our global competitiveness requires economic access and engagement with China, its markets and human talent. We would be irresponsible if we pursued policies that forced either country to wholly disengage commercially from the global economy.