US-China Relations Updates

The U.S. trade and technology wars can have significant impacts on the Chinese economy. These conflicts encompass various measures, including tariffs, restrictions on technology transfers, and increased scrutiny of Chinese investments, among others. Here are some ways in which these actions can affect China:

1. Trade and Export: The imposition of tariffs by the U.S. on Chinese goods can lead to reduced exports from China to the United States. This can disrupt supply chains, decrease demand for Chinese products, and ultimately impact China’s economic growth.
2. Manufacturing and Employment: As trade tensions persist, some companies may choose to relocate their manufacturing operations from China to other countries to avoid tariffs or mitigate risks. This could result in job losses and a decline in manufacturing activity within China.
3. Technology Sector: The technology wars involve restrictions on Chinese companies’ access to critical technologies, such as semiconductors and software. These measures can hinder the development and competitiveness of Chinese tech firms, affecting their ability to innovate and potentially slowing down the growth of China’s technology sector.
4. Investment and Capital Flows: The trade and technology conflicts can create uncertainties that may dampen foreign direct investment (FDI) in China. Investors may be cautious due to concerns about trade disruptions, intellectual property protection, and geopolitical tensions. Reduced FDI inflows can impact China’s economic development and its ability to attract advanced technologies and expertise.
5. Consumer Confidence: Heightened trade tensions and the potential for retaliatory measures can lead to decreased consumer confidence in China. Uncertainty about the future economic situation may cause individuals and businesses to reduce spending and delay investment decisions, which can have a negative impact on domestic consumption and overall economic growth.
6. Geopolitical Dynamics: The trade and technology wars are not solely economic issues; they also have geopolitical implications. The tensions between the U.S. and China can affect regional stability and influence global trade patterns. It may lead to shifts in alliances and trade relationships, potentially isolating China from certain markets or limiting its access to resources.

It’s important to note that the actual impact on the Chinese economy will depend on the specific measures taken, their duration, and the responses of both the Chinese government and global markets. China has also implemented various strategies to mitigate the effects, such as domestic consumption stimulation, technological self-reliance, and diversifying its trade relationships.

what’s the result so far?

The U.S.-China trade and technology wars had already begun to impact the Chinese economy. Here are some key developments up to that point:

1. Trade Deficit and Tariffs: The U.S. imposed tariffs on a significant amount of Chinese goods, prompting China to retaliate with its own tariffs. This trade war led to disruptions in bilateral trade, affecting industries such as manufacturing, agriculture, and technology. However, dispite the Tariffs, US-China trading amount reached record high in 2022, to US$700billion.
2. Manufacturing Relocation: Some companies, particularly those in labor-intensive industries, started shifting their manufacturing operations out of China to countries with lower labor costs or to avoid tariffs. This relocation trend was accelerated by the trade tensions and aimed to mitigate the impact of tariffs and supply chain disruptions. However, since the internal industrial issues, countries like India or Vietnam have difficulties to replace China on Supply Chain change.
3. Technology Restrictions: The U.S. imposed restrictions on Chinese companies, particularly in the technology sector, citing concerns over intellectual property theft and national security. Chinese tech giants like Huawei faced challenges in accessing critical technologies and expanding their market reach. These restrictions aimed to limit Chinese technological advancements and potential dominance in certain sectors. However, after Huawei announced new Mate 60 pro and X5 serious, the US’s restrictions seems failed.
4. Investment and Capital Flows: The trade tensions created uncertainties for investors, impacting foreign direct investment (FDI) in China. While FDI into China remained substantial, the growth rate began to slow, reflecting concerns about the trade conflict’s impact on the business environment and market access. However, people also said this is due to higher interest rate so part of the funding is just to more around for short benefits.

It’s worth noting that the situation is dynamic and subject to change beyond my knowledge cutoff date. The trade and technology wars have been characterized by ongoing negotiations, escalations, and potential resolutions. The long-term impacts on the Chinese economy will depend on the outcomes of these conflicts, as well as the strategies implemented by the Chinese government to mitigate the effects and promote domestic growth. For the most up-to-date information, it is recommended to refer to current news and analysis on the topic.

Based on the Dr. Shan Weijian, Chairman of PAG group:

1. Total Trade volume increased to 700Billion since 2018
2. Trade deficit for USA was increased compare to 2018 (so the purpose of tariffs was not succeed based on Trump’s action)
3. China import from US reduced 5% from 20% to 15%, however, that 5% is possible from Vietnam or other alternative country to avoid tariffs.
4. China’s global manufacturing share keeps rising , to 33%
5. technology restriction is failing…

regarding technology war, Dr. Shan mentioned that the effectiveness of Tech restriction to Chinese is highly effective in a short run but will not achieve it’s goal in a long run. Why?

based on his study in the school, his study was to figure out why and how USA can grow up those high tech companies (Biotech in particular), and why is only a American phenomena, not European and Asia phenomena. He came up to the conclusion : in order to have cutting edge technology to develop in the place you need five necessary conditions together they make sufficient condisions.

No. 1 : There has to be a concentration of research insitutes, or Universities , we have that in Bay Area, UCB, Stanford..

No. 2: concentration of the best talents, we have that from Bay area, silicon valley;

No.3: Lots of Capital ready to invest to the start ups or mature business

No.4: Manufacturing capabilities

No.5: Huge Market that you can sale your products

American has all five conditions （a bit week on No 4 now），however，China by itself today has the five necessary conditions，therefore they are sufficient and that’s the reason why I believe that trade war would have only short-term effect but not long-term effect.