Reuters:

After the latest North Korean missile launch over the weekend, U.S. President Donald Trump said in a tweet that he is very disappointed in China, declaring: "we have allowed them to make hundreds of billions of dollars a year in trade. Yet, they have done nothing for us with North Korea. We will no longer allow this to continue."So, my question is this: is the Chinese government concerned about actions from the U.S. side on the trade relationship, and how concerned are you?

Qian Keming:

In my opinion, the North Korea nuclear issue is totally irrelevant to the China-U.S. trade. We should not mix the two issues. Generally speaking, China-U.S. trade, including mutual investment, involves win-win cooperation. Both countries have obtained huge benefits through bilateral trade and investment. Many reports confirm bilateral trade and cooperation have benefited both the enterprises and the peoples of the two countries.

As for the North Korea nuclear issue, China will continue to work with international society toward achieving denuclearization. At the same time, we are willing to make joint efforts with the U.S. side to promote a more balanced bilateral trade relationship, which can be exemplified in the comprehensive economic dialogues between China and U.S., the 100-Day Action Plan as well as the latest one-year plan.

CGTN:

Looking at China's trade figure as calculated in U.S. dollars, we find that its trade surplus with the United States is up 6.5 percent year-on-year. How do you view the lasting trade surplus between the two countries, Minister Qian? Thank you.

Qian Keming:

Director Long will take the question.

Long Guoqiang:

The trade imbalance between China and the United States is both a practical issue of policy and an academic concern, having gained close attention over the years in the academic community. Trade between the two countries is based on their respective resources endowment and highly complementary industrial structure. They benefit from each other through bilateral trade, and it is clearly understood that China does benefit in this way. The United States is expected to reduce its consumption costs significantly by large imports of Chinese low-cost labor-intensive products, especially consumer goods. There is an economic term called "Consumer Surplus." As a matter of fact, the bilateral trade certainly improves the welfare of American consumers.

Particularly, there is a very big income gap in the United States. Imagine if the actual consumption costs did not decrease, an inevitable conflict would have fermented. The large import of low-cost products, on the macro level, helps the United States to curb inflation, which gives more space for the country's own macro-policy. When the economy keeps growing, there is no need to apply any tightening. Therefore, the United States has largely benefited from the bilateral trade whether at the micro or macro level.

With regard to the bilateral imbalance, China historically faced a trade deficit in the 1980s, and its trade surplus is due to changes in the pattern of bilateral trade. It is very complicated. We need more research to find out the exact reasons. The two sides need to pay great attention to it and make joint efforts.

We have noticed that there are great differences in the statistics of the Sino-U.S. trade imbalance, which is caused by the statistics produced by different entities. In addition to the differences in FOB and CIF, one of the important factors is that Hong Kong acts as a relay station. When compiling statistics on imports, there is no problem if the United States includes the transit of China's products via Hong Kong to the United States as being China's exports to the country. However, when compiling statistics of exports, the United States identifies the country's exports to Hong Kong in transit to the Chinese mainland as exports to Hong Kong. This leads to an enlarged trade deficit in American statistics in regard to China.

Secondly, trade imbalance between China and the U.S. can be viewed in the global value chain. Since China lies in the middle and lower reaches of the global value chain, plenty of inputs of China's exports to the U.S. are mainly from the neighboring countries and regions, such as Japan, Korea, and Taiwan province. As a result of continuously deepening global division, there even are products sold back to the U.S. after being processed in China. I recall Pascal Lamy once said that the value of the trade imbalance between China and the U.S. would be reduced by half if not for considering all of these factors. Another research suggests that it would be reduced by around 40 percent.

Thirdly, looking at it from the perspective of America's macro economy and its place in the global economy. The U.S. trade deficit is not only with China, but also with many economies all over the world. The reasons for this deficit are known by all who learned macro-economics, which are caused by America's low savings rate and high consumption rate. So the gap between savings and consumption will lead to the trade deficit, which is caused by its inner macro-economic structure. As the international currency, the dollar will be used around the world, and it will flow out of the U.S., through purchasing other countries' goods and services. So out of these reasons, the U.S. has to undertake a trade deficit, a Triffin Dilemma.

What's more, to view it in the framework of China-U.S. comprehensive economic trade. The imbalance we talked about now mainly refers to the trade in goods. Take the trade in services as an example. According to the statistics, in 2016, the value of China-U.S. services trade is US$ 118.1 billion, and the value of America's surplus with China is US$ 55.69 billion, accounting for 23.3 percent of China's total services trade deficit. We did not count up the value of U.S.-funded companies investing in China, which is also a large number. So, the China-U.S. trade deficit is indeed a problem to be comprehensively viewed, in a bid to solve it.

At last, in order to solve the problems, we need to take it into consideration under the overall framework of China-U.S. economic and trade cooperation, including China-U.S. BIT negotiations, and fully take the goods trade, services trade and bilateral investment under consideration as a whole, in a bid to further promote the bilateral trade and investment relationship and realize win-win cooperation.

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