Wei Shangjin | The Impact of the China-US Trade War on the US Soft Power

On December 4, 2021, the International Finance and Economics Research Center of the National Institute of Financial Research, Tsinghua University PBC School of Finance, held a meeting.(CIFER)The "2021 International Trade Disputes and Globalization Restructuring Academic Symposium" hosted by [organization name]2021 International Conference on US-China Trade Disputes and Rearchitecture in Globalization)"Grand opening."The seminar was chaired by Professor Ju Jiandong, Director of the Center for International Finance and Economics Research (CIFER) at the National Institute of Financial Research, Tsinghua University. Professor Shang-Jin Wei of Columbia Business School delivered the keynote speech entitled "Has America's Soft Power Been Hindered by the Trade War?"

Wei Shangjin

Besides its economic and military strength, the United States exerts influence on the world through cultural dissemination, including the dominant position of American films in global cinema. American films subtly introduce audiences to the American way of life, American aspirations, and American anxieties, thereby influencing their thinking.

In his keynote speech, Professor Wei Shangjin, based on joint research with Professors Fan Haichao, Tang Lixin, and Hu Yichuan, explored the relationship between monthly US film box office data at the city level in China and the impact of US tariffs on those cities during the trade war. He analyzed how the trade war affected Chinese audiences' preferences for or aversion to US films, and by what extent. Professor Wei and his collaborators found that, after controlling for income effects, government effects, and supply-side factors, US tariffs significantly and negatively impacted Chinese audiences' interest in consuming US films.

Professor Wei began by reviewing the basic situation of American films in China. American films have consistently played a leading role in promoting American values ​​and lifestyles to a global audience; Hollywood is even sometimes referred to as the "mini-Foreign Ministry" of the United States. The U.S. Department of Defense also provides equipment, locations, and even personnel support when some films are shot in the U.S. American films also have a large audience in China. Since 2012, American film box office revenue has consistently accounted for over 80% of all foreign film box office revenue, far exceeding the proportion of trade and investment between China and the U.S. Under these circumstances, the box office performance of American films in China can be seen as a proxy variable for American cultural influence in China, or rather, American soft power.

Professor Wei's research selected monthly box office data from Chinese cinemas between 2016 and 2019, and measured the impact of the US-China trade war on residents' preferences for American films in different regions, based on the varying degrees of tariff impact on each city. Regression results showed that, after controlling for factors such as income levels, the box office of American films in regions more severely affected by tariffs was significantly negatively impacted. As another indicator of changing interest in American films, Professor Wei and his collaborators also found that local residents were less likely to actively search online for keywords such as "American movies" and "American tourism," while other foreign films were not significantly negatively affected during the same period, and residents even chose to consume more Chinese films.

The article further controlled for the impact of supply-side factors, including import approvals and film release schedules, and found the results to remain robust. Overall, the tariffs imposed by the United States on China are perceived as unjust by affected Chinese residents, thus damaging America's soft power. Professor Wei concluded by suggesting directions for further exploration, including the sustainability of the impact and whether university and graduate school choices have been affected.

Finally, Professor Wei engaged in a discussion with other scholars and online audience members. Professor Ju Jiandong first stated that while China's tariffs on US products did not include film products, there was uncertainty regarding whether tariffs would be imposed on US films. He argued that this uncertainty about the price impact of tariffs on film products would influence consumer behavior, not just based on emotional factors. Professor Wei responded that this uncertainty was nationwide but couldn't explain regional differences in box office revenue; for example, Taizhou saw a greater decrease in film ticket sales than Beijing. Furthermore, if people anticipated tariffs on films and if ticket prices for US movies rose tomorrow, they might rush to see them today, leading to increased box office revenue. Professor Qiu Dongxiao from Lingnan University in Hong Kong asked whether similar sentiment might have a similar impact on other US products. He further inquired whether Chinese consumers were reducing their consumption of US cultural products or physical products more than virtual cultural products like movies. Professor Wei responded that, based on his collaborators' statistics on Baidu searches, there was a significant decrease in enthusiasm for traveling to the United States, indicating a reduction in demand for related services. They could collect more data to verify the specific impact. Professor Wei speculated that demand for products with particularly strong American brand recognition might indeed be declining in China. Following this, the participants engaged in a lively discussion and exchange on issues such as changes in American soft power in countries and regions outside of China, and changes in China's soft power in the United States. 

Keynote Speaker: Wei Shangjin

Professor Wei is a tenured professor at Columbia Business School and the School of International Relations and Public Policy at Columbia University, and a visiting professor at Fudan University's Fanhai International Finance Institute. He previously served as Chief Economist and Director of the Economic Research and Regional Cooperation Department at the Asian Development Bank, Associate Professor of Public Policy at Harvard University, and Assistant Director of the Research Department at the International Monetary Fund. Professor Wei has made numerous internationally influential and highly cited academic contributions in international finance, international trade, macroeconomics, and development economics. He has received numerous awards, including the 2019 Contemporary Economics Prize, the 2015 and 2020 Sun Yefang Economics Paper Award, the 2014 Zhang Peigang Development Economics Outstanding Paper Award, the 2016 and 2020 Pusan ​​World Economy Outstanding Paper Award, the 2021 Digital Finance Research Summit Award, and the 2016 An Zijie International Trade Research First Prize. He has served as co-editor of the leading international academic journal *Journal of Development Economics*, and associate editor of *International Journal of Economics* and *Journal of Comparative Economics*. Professor Wei is the founding director of the China Economic Research Group at the National Bureau of Economic Research (NBER, a world-renowned economics research alliance and academic think tank) and a researcher at the Centre for European Economic Policy Studies.