News | "China-US Trade Friction" Sub-forum —— "2019 International Trade Relations and the Reconstruc
On the afternoon of December 8, 2019, the third session of the "International Conference on International Trade Relations and Reforms in Globalization"—the "China-US Trade Friction" sub-forum—was officially launched. The event was jointly organized by the Center for International Finance and Economics Research (CIFER) of the National Institute of Financial Research, Tsinghua University's PBC School of Finance, and the Center for Cross-border Digital Capital Research (IDC) of the Tsinghua University Institute of Fintech. Professor Sun Qiankun, Director of the Department of International Trade, School of Economics, Beijing Second Foreign Language University; Professor Cheng Yonglin, Guangdong University of Foreign Studies; Professor Zhao Yongliang, Dean of the School of Economics and Management, Yancheng Institute of Technology; and Associate Professor Li Bing, Lingnan (University) College, Sun Yat-sen University, participated in the conference and shared their latest research.
Professor Cheng Yonglin of Guangdong University of Foreign Studies first delivered a report entitled "Trade Conflict, Interest Groups, and US Trade Policy Towards China." Based on an analysis of data on the top 15 commodities in US goods trade and US-China bilateral trade from 2007 to the first half of 2019, he pointed out that the main business interest groups supporting the trade war include: machinery and electronics, audio-visual equipment and their parts and accessories, jewelry, precious metals and products, imitation jewelry, and coins; while the main business interest groups opposing the trade war include: vehicles, aircraft, ships and transportation equipment, optics, medical instruments, watches, musical instruments, and textile raw materials and textile products; and the majority of business interest groups maintain a neutral stance on the US-China trade war. Professor Cheng also analyzed online search results to identify different attitudes of US businesses and industry associations towards the trade war, and found that new media is playing an increasingly important role in influencing public opinion and policy-making. Finally, Professor Cheng proposed a policy recommendation to divide and conquer US interest groups.
(Photo of Professor Cheng Yonglin)
Following Professor Cheng's lecture, Professor Sun Qiankun, Director of the Department of International Trade at the School of Economics, Beijing Second Foreign Language University, suggested in his comments that the article should include an introduction and literature review, and that the writing style and data sources should be standardized. Professor Li Bing from Lingnan College, Sun Yat-sen University, suggested in his questions: 1. "Bulk commodity" is a professional term, generally referring to raw materials or agricultural products; commodities with huge trade volumes should not be called "bulk commodities"; 2. The number of HS codes used in product classification needs to be explained; 3. For search engine results, machine learning methods could be used to process large-scale data, rather than relying on manual reading and judgment.
Next, Professor Sun Qiankun, Director of the Department of International Trade at the School of Economics, Beijing Second Foreign Language University, delivered a speech entitled "The Potential Impact of Sino-US Trade Friction on Major World Economies." Professor Sun established a multi-country dynamic CGE model and used the GTAP Global Trade Analysis database to conduct a quantitative assessment of the potential impact of Sino-US trade friction on major world economies. The research results demonstrate the impact of Sino-US trade friction on various aspects, including price indices, economic output, imports and exports, real exchange rates, real income, and China's industrial exports to the US. Finally, Professor Sun concluded that the impact of trade friction on China is entirely controllable and suggested that the Chinese government should focus on a response strategy that includes resolute countermeasures, using trade as a means to promote dialogue, deepening reforms, and addressing both internal and external challenges.
(Photo of teacher Sun Qiankun)
Professor Cheng Yonglin of Guangdong University of Foreign Studies commented: Professor Sun Qiankun's article has an excellent topic selection, strong policy relevance, and significant practical implications. However, it focuses too much on describing the phenomena and data of the Sino-US trade friction; the literature classification and organization need improvement, and more original commentary is needed. The article lacks core innovation and marginal contribution. Furthermore, the research methods and theoretical models should incorporate analysis of government behavior, and the classification criteria for the samples should be explained in detail. When referencing well-known literature, the parameter settings should be based on original analysis rather than simply copying. The scenario simulation section may be too simplistic; more complex real-world situations should be analyzed. Professor Sun's abstract needs to be more concise. Professor Cheng also believes that many domestic policy recommendations are still somewhat detached from reality and require further consideration in the future.
Professor Li Xin of Beijing Normal University noted that CGE articles are time-consuming, difficult to publish, and have long submission cycles, making Professor Sun Qiankun's article particularly valuable. Professor Li also raised several questions: In the recursive dynamics of this article, is dynamic or statistical regression used? Currently, most US tariffs target intermediate inputs; how do US tariffs on products affect industry performance? The trade boundaries in CGE are given; all your discussions focus on trade diversion, not trade creation. It's important to consider the relationship between trade diversion and production capacity.
The third speaker was Zhao Yongliang, Dean of the School of Economics and Management at Yancheng Institute of Technology. In his presentation titled "The Global Sectoral Economic Effects of the Sino-US Trade War and the Hedging Effect of RMB Depreciation," Professor Zhao stated that this paper uses a global output analysis model to calculate the economic effects of the Sino-US trade war and the economic effects of RMB exchange rate fluctuations. The results show that the US tariffs on all Chinese industries have a significant negative impact on China's furniture manufacturing, electronics, and textile and apparel industries, but the overall impact on China's macroeconomy is very limited. The tariffs have some positive effects on the US itself, Mexico, Canada, and other countries in the short term. China's retaliatory tariffs on the US have some negative effects on the US and some positive effects on China. However, overall, the impact is very limited, and the ripple effects on other regions and countries are even weaker. Meanwhile, RMB exchange rate fluctuations have a significant impact on China itself, other major economies, and China's neighboring economies.
(Photo of Professor Zhao Yongliang)
In his comments on Professor Zhao's article, Associate Professor Li Bing of Lingnan College, Sun Yat-sen University, pointed out that discussing tariffs and exchange rates together is relatively rare and may be a significant innovation. He suggested that Professor Zhao's analytical framework should be explained in detail in relation to relevant literature, and that it should be differentiated from the KWW analytical frameworks of Professors Wang Zhi and Wei Shangjin. He also noted that the current function specification is rather flexible, and a more fixed one might be better.
Meanwhile, Professor Li Xin from Beijing Normal University commented that Professor Zhao's article was very interesting. This research is closely related to the content of IMF Chief Executive Gita's speech in Beijing this September, but the conclusions of the two are different. Gita believes that the effect of exchange rate hedging against tariffs is declining, especially in countries with deeper GVC integration, where the hedging effect is worse. She suggested that Professor Zhao add a review of Gita's literature. Another minor suggestion is that the three-dimensional graph is difficult to obtain effective information and should be improved.
Finally, Associate Professor Li Bing from Lingnan College, Sun Yat-sen University, shared a report he co-authored with doctoral student Chen Jiacheng from the Central University of Finance and Economics, entitled "Are Chinese Companies Stealing American Jobs? -- A Re-examination of the China Shock." This paper divides China's exports to the United States into two parts: exports from Chinese-funded enterprises and exports from foreign-invested enterprises in China. Following the framework of Autor, Dorn & Hanson (2013), it re-examines the impact of the China shock on the US domestic labor market. The study found that exports from Chinese-funded enterprises did not have a significant negative impact on the US domestic labor market. However, exports from foreign-invested enterprises in China had a significant negative impact. Simultaneously, regression results showed that US direct investment in China also had a significant negative impact on the US domestic labor market. Therefore, the shock to US employment is a shock from the global production allocation of multinational corporations, including those in the US; it is not a shock from China, but rather a shock from globalization.
(Photo shows Associate Professor Li Bing)
Commentator Zhao Yongliang, Dean of the School of Economics and Management at Yancheng Institute of Technology, stated that Professor Li Bing's article is of great significance because "China Shock" is a highly influential paper, and responses from Chinese scholars deserve attention. He raised several questions: Whether FDI can represent exports is debatable. The article argues that the impact on US employment stems from the shock of globalization; however, he believes there may also be issues related to the US's own economic structure. The US trade imbalance and deficit may also originate from other factors such as the savings rate. Finally, he raised a minor question: does a seemingly insignificant impact mean it is zero?
Transcript of the breakout session discussion:
Zhan Chaoqun, Assistant Professor at Lingnan College, Sun Yat-sen University, asked: "Changan Mazda is a Sino-foreign joint venture. In your research, it would be classified as a foreign-invested enterprise, and its impact on US employment would be attributed to foreign-invested enterprises. However, the fact is that this company has very close ties with China. Moreover, the US may not care whether the company is a foreign-invested enterprise or not; it only cares about which country the trade deficit comes from."
Professor Li Bing replied: The United States cannot stop foreign investment or the process of globalization, so I want to emphasize that the impact on the United States is not the impact of China, but the impact of globalization.
Professor Ma Hong from the School of Economics and Management at Tsinghua University: How do you explain the different impacts on Chinese-funded enterprises and foreign-funded enterprises?
Teacher Li Bing: Our detailed analysis of the products revealed that many technologies are in the hands of foreign-funded enterprises. Chinese-funded enterprises are taking over industries that have been phased out by the United States, while foreign-funded enterprises are able to produce in industries that compete with the United States overseas.
Teacher Ma Hong: We can do a correlation to see the industry distribution of the fastest-growing exports by Chinese/foreign capital.
Teacher Li Xin: We generally believe that employment opportunities follow FDI. So, should we make a graph in the introduction to show the relationship between FDI and employment, for example, focusing on the manufacturing industry?
Audience: I'd like to follow up on Professor Ma Hong's question. For example, in Japan, are the impacts of Japanese-owned companies and foreign-owned companies in Japan on employment in the United States different?
Professor Ma Hong: There are relevant studies that have studied the impact of Japan on employment in the United States, because before 1995, Japanese automobile exports significantly impacted the Great Lakes region of the United States.
Audience: Does your policy recommendation suggest that the United States should suppress foreign-invested enterprises in China?
Professor Li Bing: Trump cannot stop companies from investing overseas, politically as well. So what does this mean for the Chinese government? The Chinese government should stabilize foreign investment and trade, and keep American foreign investment within its borders.
Professor Cheng Yonglin: Does your research support Trump's policy of bringing manufacturing back to the US? And will the situation of rising unemployment in the US be repeated in China in the future?
Professor Li Bing: To answer your question, I might need to refer to the value chain articles by Professors Wang Zhi and Wei Shangjin. Our traditional trade theory points out that trade inevitably results in some people benefiting and others suffering losses; in globalization, some people will certainly be harmed. For example, after joining the WTO, Northeast China suffered losses, but this is a necessary cost that can be addressed through transfer payments, which the Chinese government has done very well.
Each speaker, drawing from their respective research fields, delivered an academic feast for the audience. The commentators, equally well-prepared, provided insightful and pertinent critiques. The Q&A session at the end of the conference saw a lively discussion between the speakers and the audience, further elevating academic ideas through the exchange of ideas.
