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US tariffs threaten economic interdependence

By Chen Weihua | China Daily | Updated: 2018-08-23 07:16
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General Motors' Cadillacs park outside a car dealership in Shanghai. GM sold more than 4 million vehicles in China last year. [Photo/Agencies]

China-US economic interdependence stretches far beyond agriculture to almost every sector of the economy.

Last year, Boeing forecast that Chinese airlines would buy 7,240 commercial jets worth $1.1 trillion in the next two decades.

China has announced retaliatory tariffs on small planes, not on large Boeing jets. But as the trade war escalates, such immunity may not last. A deteriorating trade relationship between the two countries could spell opportunities for Airbus, Boeing's major rival in the Chinese market.

China is Boeing's largest commercial market, with one in four planes delivered to Chinese customers. The International Air Transport Association has predicted that by 2024, China will replace the US as the world's largest aviation market by passenger numbers.

China and the US have seen their economies become increasingly interdependent since the late 1970s when China began its reform and opening-up drive. A rapidly growing export-oriented economy, fueled partly by foreign direct investment, has provided cheap Chinese exports to US consumers.

General Motors sold more than 4 million vehicles in China last year, more than the 3 million it sold in the US.

China's accession to the World Trade Organization in 2001 accelerated its integration with the world economy, making the country a vital part of global supply chains, including for many US companies.

By the end of last year, the cumulative value of US foreign direct investment transactions in China had passed $256 billion, and the cumulative value of Chinese FDI in the US, a relatively recent phenomenon, reached $140 billion, according to the Rhodium Group in New York, which tracks two-way investment.

Bilateral trade in goods between the two countries has expanded more than 200-fold since 1979, reaching $636 billion last year, with a $375 billion surplus in China's favor. But the US ran a $38.5 billion surplus in services trade with China in 2017, and that figure is expected to rise rapidly as China further opens up its financial services sector.

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