Speech by Consul General Zhang Ping at

VICA International Trade Committee Meeting

Respected Chair Jeffrey Daar and Co-Chair Claudette Moody,

Ladies and gentlemen,

It gives me great pleasure to join our friends from the business community of San Fernando Valley in discussion of the current China-US trade relationship, which I believe many of our friends are concerned about. Before I proceed, let me express my thanks to the Valley Industry and Commerce Association (VICA) for the kind invitation which enables me to have this opportunity to exchange views with you.

The past two weeks have seen escalation of tension in China-US trade relationship as a result of US administration's announcement of its intention to impose tariffs on 1300 Chinese made products worth about 50 billion USD, and later another tariff measure targeting 100 billion USD worth of Chinese imports. The Chinese government responded swiftly and firmly with strong statements and countermeasures, condemning the US actions and vowing to fight back with the same scale and intensity to defend its own legitimate interests with all necessary means. The fear of a possible trade war has caused market uneasiness and many local business leaders and groups, economists and other stakeholders have voiced their concern over the possible impact on the US economy and people's livelihood if the trade war really breaks out.

The imposition of punitive tariff on Chinese imports is a typical unilateral trade protectionist action. It serves nobody's interests. It will directly hurt the US consumers, companies and financial markets. It will disrupt the growth of world economy and jeopardize the multilateral trade system which the US played a big part in establishing.

As we have stated very explicitly, we do not want a trade war. There will be no winners in trade war. We wish the trade disputes could be solved through dialogue and negotiation. If the US side wants to talk, we can sit down to find proper solutions based on mutual respect and mutual benefits free from pressure and coercion. However, if someone wants to impose a trade war on us, we are not afraid of it, nor will we recoil from it. We will fight to the end. We are confident and capable of facing any challenges.

China-US economic and trade relationship is mutually beneficial in nature. Over the last 40 years since the establishment of diplomatic relations between our two countries, the bilateral economic and trade relations have seen rapid development both in depth and breadth. China and the US are now the second largest trading partners to each other. Last year, bilateral trade in goods reached 583.7 billion USD, an increase by 238-fold when diplomatic relations were forged. Accumulated two-way investment reached over 230 billion USD. US companies have invested in nearly 70,000 projects in China. By the end of 2016, the accumulated Chinese direct investment in the US totaled about 109 billion USD.

 As far as California is concerned, China now is the largest trading partner, the largest source of import and the third largest export market for California. Last year, bilateral trade volume between California and China reached 175.6 billion USD, a 10.9% increase over the previous year. The greater Los Angeles area takes a big percentage of it. In 2016, the trade volume between China and LA reached 159 billion USD. Nearly one third of the trade between China and the US goes through the Los Angeles customs district. Over 600 Chinese enterprises have invested in Southern California with total amount of investment surpassing 10 billion U.S. dollars.

Some people, by citing the US trade deficit with China, suggest that China gets all the benefits from the bilateral trade. Such a view does not square with facts. China has indeed benefited a lot from the growing business ties between our two countries. So has the United States. Since China joined the WTO, US export to China has increased by 500%, much higher than the 90% increase in US global export. Over the past 10 years, the average growth of US export to China was twice the growth rate of China's export to the US. Currently, the volume of US export to China has surpassed the total volume of US export to Germany and Japan combined. China has become the major market of American agricultural products, aircrafts, automobiles and many others. Besides, the US has kept gaining surplus from trade in services with China. From 2006 to 2016, the US service export to China expanded from 14.4 billion USD to 86.9 billion USD. The US surplus on trade in services with China reached 55.7 billion USD, 40 times the amount of 2006. The increase of FDI from China also helps the growth of local economy, creating jobs for the local community. China-invested companies in the US employ more than 140,000 American workers. In Southern California, China-invested companies provide more than 10,000 job opportunities. The 30th congressional district where San Fernando Valley is located also enjoys close trade relations with China. China is its 2nd largest export market for goods and the 5th largest export market for services. The district's export to China together with the investment from China, which is over 3 billion USD in accumulative terms since 2000, supports over 3000 jobs in the district.

China should not be blamed for the imbalance in China-US trade. There are a number of causes which include the industrial competitiveness and comparative advantage which causes the transfer of manufacturing activities to the low labor cost countries, the international division of labor as a result of economic globalization, the economic structure, which, in the case of the US, is the low saving rate and high spending and some other factors. The US has trade deficit not only with China but also with many other countries. The stringent US export control regime, which prevents the export of high value added tech products to China, also contributes to China-US trade imbalance. According to a report by the Carnegie Endowment for International Peace, if the United States were to liberalize its export barriers against China to the same level as those applicable to Brazil, the US trade deficit with China would be narrowed as much as by 24 percent.

Apart from this, the figure of US trade deficit with China has been somehow exaggerated. If we take into consideration of factors of statistical discrepancy, transit trade and trade in services, China's trade surplus with US is just one third of US trade deficit with China.

Ladies and gentlemen,

Economic globalization is an irreversible trend of our times. Whether we like it or not, we have to face it and find ways to adept to it. To blame others and resort to protectionism will not help to solve the problem. We need to reform ourselves to keep abreast with the changing world. China's four decades long reform and opening-up has given us many valuable inspirations. The most important one is that for any country to achieve progress, they must follow the logic of history and the trend of the times. Opening leads to progress and seclusion leaves one behind. The world has become a global village where our interests are intertwined and our economic and social progress interconnected. We need to seek cooperation for win-win results rather than confrontation to promote common prosperity and development.

This year marks the 40th anniversary of China's reform and opening up. Over the past 40 years, we have achieved tremendous progress, yet we still need to overcome new challenges on its way ahead. We will continue to adhere to our fundamental national policy of opening-up and pursue development with the door wide open. China's opening will not be disrupted by any outside pressure. We will push forward it according to our own set pace and toward the pre-determined direction.

As President Xi Jingping pointed out in his recent speech at the Annual Conference of Boao Forum for Asia, opening-up is a strategic decision made by China based on its need for development as well as a concrete action taken by China to move economic globalization forward in a way that benefits people across the world.  China will adopt major measures to pursue further opening, including significantly broaden market access for services, particularly for financial services to raise foreign equity caps in the banking, securities and insurance industries; ease foreign equity restrictions in manufacturing sector of automobiles, ships and aircraft, particularly automobiles; create a more attractive investment environment, strengthen protection of intellectual property rights; take initiative to expand imports by significantly lower the import tariffs for automobiles and some other products and seek faster progress toward joining the WTO Government Procurement Agreement. In November this year, China will host the first International Import Expo in Shanghai. This is a major policy initiative and commitment taken of our own accord to open up the Chinese market.

Ladies and gentlemen,

China-US relationship is one of the most important bilateral relationships in the world. To maintain a stable and healthy China-US relationship is in the interest of our both countries and peoples as well as the world at large. Though our two countries have differences over some issues, our common interests are far greater than the differences. We need to build up mutual trust, avoid strategic misjudgment, respect and take care of each other's core interests and major concerns, try to expand cooperation while properly managing the differences and sensitive issues. We appreciate the care and support that our friends of VICA have given to China-US relations over the years and hope you will continue to make your contribution to the cooperation between our two countries. The Consulate General of China in Los Angeles will do its outmost to help the business community in San Fernando Valley to expand business ties and people to people exchanges with China. Let's join hands for a better China- US relationship.

Thank you.