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US actually gets great benefits from its trade deficit with China

chinadaily.com.cn | Updated: 2019-06-13 20:22
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At a May 25 financial forum hosted by Tsinghua University, Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, entrusted a senior official of the commission to deliver a speech on his behalf. The followings are excerpts:

The United States has run a trade deficit for most of the years since 1971 when it unilaterally de-pegged the dollar from gold. One of the major reasons for the US' long-term trade deficit is that under the dollar's hegemony as the main international settlement and reserve currency, the US needs to provide dollar liquidity to the rest of the world and thus needs to maintain a current account deficit in order to maintain the balance of international payments, resulting in its trade deficit.

If the US had no trade deficit, it would not be able to meet the needs for the dollar in international trade, and it would not be possible to maintain the dollar's status as the main international currency. So under the current monetary system, the US cannot eliminate its trade deficit and can only shift it from one country to another.

In its trade deficit with China, the US has benefited a lot, gaining the lion's share of profits for its importers and transnational companies, cheap but good-quality goods for domestic consumers, long-time "high consumption, low inflation", a huge amount of reflux of cheap capital and China's long-time holding of enormous dollar reserves.

Any imposition of tariffs on Chinese goods and a ban on Chinese enterprises will only escalate its trade frictions with China and deal blows to the US itself. The world has formed a whole chain of trade, and trade protectionism will hurt other countries, the whole world and the US itself. Brandishing the trade tariff stick everywhere will harm the international trade structure and order, run counter to the principles and spirit of the World Trade Organization, and thus inevitably encounter resistance and opposition from all countries. It will also weaken the influence of the US in the world.

From China's point of view, the US could raise tariffs on Chinese goods to the maximum, but the impact on its economy will be very limited, because the impact of trade frictions is fully under China's control and Beijing has the ability and confidence to cope with it.

History has proved and will continue to prove that blockades and sanctions cannot stop China's development, but will instead only increase the determination to start businesses, make innovations and accelerate its transformation and development. China's resilient economy, complete industrial structure, vast market and long-term positive economic fundamentals will greatly boost its ability to tackle any risks and challenges.

  
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