Prospects and challenges for China-U.S. economic and trade cooperation

Editor's note: Zhou Mohan is a researcher at the School of Economics, Zhejiang University. The article reflects the author's opinion and not necessarily the views of CGTN.

The relationship between China and the U.S. is pivotal, not only to their own futures but also to global economic trends and geopolitical dynamics. Over the past four decades since the establishment of diplomatic ties, economic and trade interactions between the two countries experienced remarkable development, amid both collaboration and contention.

Since diplomatic relations were established, bilateral trade between China and the U.S. has surged. In 2022, U.S. exports of goods to China increased to $154 billion and imports from China rose to $536.3 billion. Total goods and services trade between the U.S. and China were estimated at $758.4 billion in 2022, reflecting the critical role this bilateral relationship plays in the global economy. Foreign direct investment (FDI) inflows also underscored the depth of economic ties, with U.S. FDI into China reaching $126.1 billion and China's FDI into the U.S. at $28.7 billion in 2022. The economic interdependence between China and the U.S. is vital for global economic stability, innovation and the functioning of international supply chains, making the bilateral relationship a cornerstone of the world economy despite existing challenges and tensions.

However, the China-U.S. economic relationship is characterized by its complexity, navigating between cooperation and competition. Competition from China creates pressure on some U.S. industries and regions, leading to domestic negative sentiments toward China, which could potentially trigger a tariff war. Initiated by the Trump administration, tariffs have significantly strained the China-U.S. relationship, affecting economic, political and strategic engagements. Beyond economic costs, the trade war has highlighted vulnerabilities in global supply chains, prompting businesses to reconsider their configurations, leading to further instability and costs. 

Moreover, the trade war has exacerbated strategic and political tensions, broadening the scope of competition into areas such as technology and security, contributing to a decoupling trend in critical sectors. This standoff has raised concerns about the stability of the global trading system, undermining international trade agreements and institutions like the World Trade Organization. The unpredictability stemming from the trade war has created a challenging environment for businesses and investors, potentially hindering economic growth.

The technology war initiated by the Biden administration against China could have a potential negative impact on both China and the U.S., eventually hurting the global economy. 

The Biden administration's efforts to constrain China's semiconductor and AI development may reflect a multifaceted geopolitical strategy aimed at maintaining global technological supremacy and safeguarding national security. However, these measures can inadvertently harm not only the U.S. but also the broader global community. 

By imposing restrictions on AI collaboration and technology sharing with China, the U.S. risks stifling the international flow of innovation and knowledge that drives global technological progress. Such restrictions can lead to a fragmented technological landscape, where advancements occur in silos, reducing the overall pace of innovation and making it harder to address global challenges that AI could help solve, such as climate change, disease and poverty. 

Furthermore, these tensions could provoke retaliatory measures from China, leading to a technology war that hampers economic growth and innovation worldwide. As nations become more insular in their technological development, the global community loses out on the potential benefits of cooperation, shared knowledge and united efforts to leverage AI for the common good.

Resolving China-U.S. disputes and enhancing cooperation requires a strategic, respectful approach that emphasizes mutual interests like climate action, health security and economic revival following the COVID-19 pandemic. Constructive dialogue and shared initiatives in these areas can pave the way for addressing more contentious issues through bilateral working groups on trade, intellectual property and cybersecurity, aimed at formulating mutually acceptable dispute resolution frameworks, potentially incorporating third-party mediation. Building trust through reciprocal official visits, joint research, and cultural programs, alongside economic strategies to ease tariffs and barriers in less sensitive sectors, is vital. Clear, equitable rules for tech collaboration could alleviate security concerns, fostering mutual advances in AI, biotech and green energy.

This journey, marked by patience, diplomacy and compromise, is crucial not only for China-U.S. relations but also for global prosperity, given the interconnectedness of the global economy and shared global challenges. Prioritizing coexistence and cooperation enhances international stability, progress and benefits all.

(Cover via CFP)