SCIO briefing on Sino-US trade
Speakers:
Zhu Guangyao, vice minister of Finance
Wang Shouwen, vice minister of Commerce
Chairperson:
Hu Kaihong, spokesperson of the State Council Information Office of China
Date:
April 4, 2018
Hu Kaihong:
Ladies and gentlemen, good afternoon. Welcome to this press conference. The issues related to Sino-U.S. trade have captured great public attention recently. Today, we invite Mr. Zhu Guangyao, vice minister of Finance, and Mr. Wang Shouwen, vice minister of Commerce and deputy China international trade representative, to introduce relevant issues, and answer some of your questions.
Zhu Guangyao:
Good afternoon, everyone. Please allow me to brief you on the latest developments first. On April 4, the U.S. announced a proposed list of products subject to additional tariffs. It covers 1,333 Chinese export items, which are worth US$50 billion. The additional tariff rate is 25 percent. At 3:30 p.m. today, upon the approval of the State Council, the Customs Tariff Commission of the State Council unveiled a list of U.S. imports that will be subject to higher tariffs. It was decided that an additional tariff of 25 percent will be imposed on 106 items of products under 14 categories, including soy beans, automobiles and chemical products.
Hu Kaihong:
Now the floor is open to questions. Please identify your media outlet before raising any questions.
The Wall Street Journal:
Superficially, the trade conflict between China and the United States now seems to be escalating. We would like to know if the two countries are still keeping up any communication and dialogue. What do you think is the possibility that the two sides will reach an agreement to avoid further escalation of the trade conflict? One more question: With the escalation of the trade conflict, the market is very concerned about whether China will retaliate against the United States by reducing U.S. treasuries or devaluing the RMB exchange rate. How would you respond to this issue, Mr. Zhu?
Zhu Guangyao:
Thank you for your questions. First of all, China has always stressed that China-U.S. economic relations are based on the mutually beneficial win-win principle, which is the essence of China-U.S. economic relations.
At the beginning of the establishment of diplomatic relations in 1979, the trade volume between China and the United States was only US$2.5 billion. That number hit US$580 billion in 2017, an increase of more than 232 times. Such rapid development reflects the essence of China-U.S. economic relations, that is, mutual benefit or win-win. It is the common aspiration of the peoples of China and the United States and it has brought advantages to the peoples of the two countries.
Such rapidly growing economic ties and such a large volume of trade inevitably result in trade frictions. Regarding trade frictions, we have always reiterated the principle of mutual respect and encouraged resolution through policy negotiations as well as the rules of the WTO, which is the principle that China and the U.S. should abide by as key members of the treaty. With this as the premise, our cooperation and constructive methods have successfully addressed many trade frictions in the past. Frankly speaking, the challenges facing us today are truly daunting, because we have seen such a large volume involved. Yet, China's position is very clear. We don't want a trade war, because it is doomed to produce a lose-lose outcome that will hurt both China's and the U.S.' interests, and also undermine the prospect of the world economy. In this crucial moment, we hope China and the U.S. can take a constructive, wise and mutually respectful approach to the issue and challenges, thus putting the Sino-U.S. economic relationship back on the right track.
As for the second question, if the conflict continues to escalate, you journalists can review Chinese history since the founding of People's Republic of China in 1949, and you will find that China never succumbs to any external pressure and the pressure will only make the Chinese people become more perseverant and focused on our own economic development. It can be a kind of impetus to promote innovation and progress.
However, we certainly hope that both sides can start from a foundation of bilateral interests and resolve problems and challenges in a constructive way, rather than treating China-U.S. economic ties, which is of vital importance to the interests of both people, in such a random and reckless way.
Your third question concerns the issue of U.S. government bonds. I know that this issue is a concern of the international community, and the international capital market is now paying close attention to it. Here I would like to remind the reporter with the Wall Street Journal that Chinese Premier Li Keqiang expounded on this issue at the press conference held after this year's National People's Congress session concluded. Premier Li Keqiang emphasized that China makes diversified investments of its foreign exchange reserves on the basis of market principles, and China will remain a responsible long-term investor. This is the solemn announcement made by Premier Li Keqiang at the press conference following China's "two sessions."
To understand Premier Li Keqiang's expression — "a responsible investor," I would like to share with you a basic principle of the operation of China's foreign exchange reserves. First, China does have more than US$3 trillion of foreign exchange reserves, which is the assets of the people. The primary principle of the operation of China's foreign exchange reserves is security, which means to ensure the safety of our investments. The second is liquidity, and the third is modest profitability. China has operated its foreign exchange reserves in accordance with these principles over the years to secure people's property, if we see it from a domestic perspective. As for the international perspective, China is a responsible investor in the international capital market, which is shown in our respect for the rules of operation of the international capital market. We have carried out precise operations under this principle as well. I think this expression of Premier Li Keqiang is a very clear and authoritative answer to the question of the Wall Street Journal today. Thank you.
China National Radio (CNR):
I noticed that Minister Zhu sill used the term "friction" to describe the current trade problem between China and the United States. But we know that China announced to impose tariffs on US$3 billion worth of US imports on April 2, and the Office of the U.S. Trade Representative (USTR) announced tariffs on about US$50 billion worth of Chinese goods on April 3 (EST), leading China to then unveil a list of products worth about US$50 billion imported from the U.S. that will be subject to higher tariffs today. With all those measures on both sides, does it mean that a trade war has already started between the two countries? Is it still possible to solve the problem through negotiation? Are the channels for negotiation still open? What measures do you think will be taken by both sides?
Wang Shouwen:
You have followed the trade frictions between China and the United States in great detail. Thank you for your interests in the trade issues between China and the U.S. On April 2, China announced tariffs of 15 and 25 percent on 128 items of U.S. products. This was in response to the move by the U.S. to impose import restrictions on Chinese steel and aluminum products. The measures taken by the U.S. under Section 232, citing national security concerns, are untenable and unfounded. Moreover, the restrictive measures target only a few countries while many other countries are excluded. It can be seen, therefore, that the U.S. move is not based on security concerns and is discriminatory. This is a flagrant violation of the multilateral trading system and hurts China's interests, so China has already filed a request for consultations on the Section 232 investigation at the WTO. Meanwhile, in order to safeguard our legitimate interests, we also adopted the US$3 billion worth of countermeasures that you just mentioned on April 2. We have noticed that, in response to the Section 232 measures, the EU and other members of the WTO are also considering taking measures.
The United States announced on April 3 a proposed list of products imported from China worth US$50 billion that will be subject to additional tariffs under Section 301. We believe the move fundamentally violates the international obligations of the United States and has no factual basis at all. The move has impaired China's interests, threatened China's economic security and jeopardized the recovery and stability of the global economy. Therefore, according to international law and the Article Seven of the foreign trade law of China, if any country or region adopts discriminatory measures or other similar measures to ban or limit China in trade, we must respond with corresponding measures. So, as just mentioned by Mr. Zhu, we released our list worth nearly US$50 billion. I have to say, we refrained but were forced to make such a move.
You also mentioned the question of a trade war. China has no intention for a "trade war," because there is no winner in a "trade war." However, we are not afraid of it. If there is someone who insists on a "trade war, " we will fight to the end. You asked if there was a channel for dialogue and communication. Our stance has always been that the door is open for resolving the problems through negotiation, dialogue and communication. If the U.S. side has the intention to hold talks, we will certainly agree to negotiate and resolve the differences on the basis of equal negotiation and mutual respect. To make it simple, if somebody wants to have a "trade war," we will not retreat, if they want to talk, the door is always open. Thank you.
