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US policies are root cause of trade crisis

By LI XIANG | China Daily | Updated: 2018-03-31 02:07
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China has boosted market access for foreign firms, says former minister

The huge trade deficit the United States has with China was caused by its own policies, and both countries are facing domestic problems that should be resolved through structural reforms, former Chinese finance minister Lou Jiwei said.

The root cause of the China-US trade problems is Washington's own policy choices, which have led to low saving rate of the US residents and an excessively high fiscal deficit of the federal government, Lou, currently chairman of the National Council for Social Security Fund, made the remarks at an economic forum in Beijing this week.

The former finance minister pointed out that the US has enjoyed the benefits of the dollar being the global reserve currency and yet it has abused such privilege.

Lou said that a trade war would only harm US's own interest, and it is in Washington's own interest to embrace and push globalization.

Meanwhile, the former finance minister argued that China has made great strides in opening its market and has fully fulfilled its commitments to the World Trade Organization.

For instance, China promised to open 100 sectors in service trade and now the country has opened 120 sectors. The opening level has exceeded its early promise and is close to the level of developed countries and is far higher than the level of developing countries. China also fulfilled its duty on tariff reduction by 2010 with the tariff level dropping from 15.3 percent to 9.8 percent, according to Lou.

Lou said that China is facing similar side effects of globalization such as job losses as a result of the shift of labor-intensive industries to overseas markets. And the country is actively dealing with the problems through domestic structural reforms.

China's current account surplus is less than 1.5 percent of the GDP, and the trade surplus of goods accounts for only about 3 percent of the GDP. The contribution of consumption has risen to 58.8 percent, and the proportion of added value of the service industry has risen to 51.6 percent, indicating that the Chinese economy has relied more on domestic demand, according to Lou.

When it comes to the issue of intellectual property rights, Lou said it is unfair that the US and its European allies have blocked technology exports to China while their companies are reaping huge profits in the Chinese market.

China has made substantial progress in IPR protection and it is imperative for the country to better protect its IPR, failing which it would be unable to build a proper credit system and make technological advancements, Lou added.

In his conclusion on the China-US relationship, Lou said he agreed with the analogy that describes the two countries' relationship as a married couple, but he said the US cannot threaten China and simply demand it eliminate the massive trade surplus.

"The US once threatened Japan this way and it worked, but it is ineffective against China," Lou said, adding that the two countries must return to the negotiation table and they are capable of doing so.

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