Due to the endlessly growing efforts by the United States to suppress and restrain China, the bilateral relationship between China and the United States is becoming increasingly rocky. As some American politicians constantly call for decoupling from the Chinese economy as well, there are some people at home who think that we should simply cut ties with the U.S. economy while we have the chance; that way, we avoid the risk of the U.S. using market and economic interests as blackmail to gain a competitive edge against China. There are others who have a one-sided understanding of the concept of internal circulation, believing that we should proactively eliminate any reliance on the U.S. market and form a new international economic model that stands in contrast to the United States. These viewpoints are quite representative of some of the current sentiment within China. However, considering our present economic interests and the overall international economic situation, we should focus on maintaining and expanding our ties to the U.S. market now more than ever.
First, the U.S. market is still the primary destination for Chinese exports. Although China’s total volume of trade in goods with Association of Southeast Asian Nations and EU countries is greater than with the U.S., the U.S. is still China’s No. 1 export market. Chinese customs data show that from January to August, 16.9% of Chinese exports were to the United States, while 14.8% and 15.6% were to ASEAN countries and the EU respectively. Looking at the newest data from July and August makes that even more clear; Chinese exports to the U.S. accounted for 18.4% of all Chinese exports in July. Meanwhile, the proportion of exports to ASEAN countries and EU countries were 15.2% and 15.6% respectively. In August, the proportion of exports to the U.S. grew to 19%. Exports to ASEAN and EU countries made up 14.4% and 15.2% each. Although suffering under both tariffs and the pandemic, Chinese exports to the U.S. are still growing rapidly. Additionally, the current increase in China’s foreign trade exports has exceeded expectations, and the restoration of exports to the U.S. was an important factor in that achievement. It’s fair to say that exports to the U.S. have become crucial in allowing China to maintain overall stability in exportation. This calculation is solely based on a single indicator, the proportion of exports. If we look at total export amount, although the total value of U.S.-China trade was down 0.4% for the first eight months of this year compared to last year, that difference has narrowed by 2.9 percentage points compared to the numbers from the previous seven months. The U.S. is still China’s third largest trade partner, with total trade valued at 2.42 trillion yuan (approximately $353 billion). That’s 12.1% of the total value of China’s foreign trade. We need to capture and expand into the U.S. market in terms of scale as well.
The U.S. market is even more important for China’s economy if technological and financial factors are also taken into consideration. Although United States sanctions on companies like Huawei are oppressive and high-handed, they also illustrate China’s tremendous need for the United States in the technology sector. The reason many Chinese citizens are worried about unrestrained financial sanctions from the U.S. is because some day these sanctions will have a massive negative impact on the normal functioning of our economy. We greatly depend on the United States for anticancer drugs and other high-end medicines. At the moment, we absolutely must adopt measures to avoid risks brought on by U.S. sanctions. Meanwhile, continuing to strengthen our connection to the U.S. market and cultivating the ability to mitigate risk within the U.S. market are still crucial as well.
We should point out that China’s interest in the U.S. market does not arise from a one-sided reliance on the United States. The proportion of exports to China among the United States’ total foreign exports is also growing markedly. In the second quarter, American exports to China were up 3.8% from last year, and up 23% from the previous quarter. Likewise, the proportion of U.S. trade good exports to China rose sharply to 10% of all U.S. exports in the second quarter, while in the first quarter it was only 5.8%. This growth of exports to China is particularly striking, as U.S. exports to other major economies have fallen substantially across the board. Clearly, the Chinese market is important to the United States.
As conflict between China and the U.S. becomes more intense, this growing trade interdependence between the two countries holds important strategic significance. In this time of uncertainty and turmoil, it could help foster optimism and friendliness within each country, stabilizing China-U.S. relations. This real growth in interdependence between China and the U.S. as well as the rise in U.S. exports to China are a powerful response to the clamor of voices crying for decoupling from and containment of China, particularly for American war hawks. The most recent data clearly show that no matter how troubled the trade relationship has become, it remains an anchor for the China-U.S. relationship. No matter what measures American war hawks take to sever trade ties between China and the U.S., it will not be easy to break apart the deep interdependence the two have formed over the past several decades.
As the importance of Chinese exports to the U.S. continues to grow, pessimistic conclusions about China drawn by some Americans, including the view that “engagement” has failed, will face growing skepticism domestically. China is paying close attention to the U.S. market, while simultaneously opening its market up to the U.S. China will continue to boost trade interdependence between the two countries. And this interdependence is no longer characterized only by increased Chinese exportation to the U.S., but also by the trend of rising U.S. exports to China. China-U.S. trade will grow increasingly more balanced in the future, or, as American politicians like to say, more “reciprocal.”
Essentially, China attaches importance to the U.S. market because it believes in the logic of the market and opening up. Right now, the effective use of market logic is still the best method for withstanding the national security mindset held by some U.S. politicians. The actions of the current U.S. government — attempting to use national security rhetoric to threaten its own domestic economic entities, intimidating foreign countries and interfering in and even suspending China-U.S. trade — all embody anti-market ways of thinking. But if China voluntarily gives up on the U.S. market, or if it balks under U.S. pressure and intentionally bypasses the U.S. market, then China will instead fall right into the American war hawks’ trap. It will prove the validity of their national security mindset. It will damage our interests and faith in the power of the market. It could even hasten the arrival of an age of total separation between China and the U.S.
The author is the deputy director of, and a professor at the Center for American Studies, Fudan University.