The Research On Sino-U.S. Trade Imbalance Problem

In the early 1970s, China and U.S. thawed their relations. Although they increased their economic relation, the total quantity wasn't significant. By the end of 1978, China implemented opening-up policy. In 1979, the countries'governments signed "Sino-U.S. Trade Agreement", they gave reciprocal trade treatment to each other, so China and U.S. formed a new situation in bilateral trade development. From 1979 to 2008, the average annual growth rate of Sino-U.S. bilateral trade was 27%, it was the most in the world. Currently, U.S. is the second trade partner of China. China is United States' second trade partner, the first importing market and the third exporting market. When Sino-U.S. trade volume increased rapidly, the imbalance problem of Sino-U.S. trade also surfaced. According to U.S. Census Bureau Statistics data, the trade imbalance between U.S. and China expanded during the past two decades. In 1990, U.S.-China trade deficit was 10.43 billion dollars; it increased 83.83 billion dollars in 2000. In 2006, it was over 200 billion dollars, in 2008, it was 266.33 billion dollars. In 2008, the trade surplus that China counted was 170.86 billion dollars. China's trade surplus with U.S. overtaken Japan and became the largest trade deficit country in 2000 and in 1994 that China's Ministry of Commerce counted and United States' Ministry of Commerce counted. When the trade deficit problem highlighted, it must affect the normal development of trade relations, therefore through comprehensively researching the Sino-U.S. trade imbalance problem, it could find effective solutions to solve it. It was not only good for resolving the Sino-U.S. trade friction, but it also guaranteed the healthy and stable development of the two countries future economic and trade relations.The researching methods of this thesis included history analysis method, empirical analysis method, comparative analysis method, mathematical model and quantitative analysis method. That means it analyzed the huge trade deficit between U.S. and China from historical perspective, the parts of complementary analysis of Sino-U.S. trade, Sino-U.S. trade friction and foreign direct investment in China that affected Sino-U.S. trade imbalance problem used empirical analysis method. The part of America exporting control to China used empirical analysis method and comparative analysis method. The part of development trend of Sino-U.S. trade imbalance completed through establishing model to quantitatively analyze.This thesis includes seven parts:The first part was the introduction part. In this part, it introduced background and significance of choosing this issue, and the researching status quo of domestic and foreign scholars in the following aspect:trade statistics difference with Sino-U.S. trade imbalance, unsound origin rules with Sino-U.S. trade imbalance, America exporting control dislocation problem, RMB exchange rate with Sino-U.S. trade imbalance, foreign direct investment in China and international industrial structure transferring with Sino-U.S. trade imbalance, and then it introduced writing ideas, structure, researching method, innovations and limitations of this thesis.The second part was theoretical summary of related trade imbalance. It gave the definition of international payment according to the《International Payment Manual》that IMF drew up, and led to the contents of trade balance and trade imbalance. It introduced related theories of trade imbalance; it mainly included mercantilist theory, absolute advantage theory and relative comparative advantage theory, mutual demand theory, factor endowment theory, free trade theory and protection trade theory, flexibility analysis method, absorption analysis method and monetary analysis method.The third part introduced development history of Sino-U.S. trade; it illustrated trade dependence between China and United States, and analyzed total quantity, commodity structure, change process and characteristic of Sino-U.S. trade imbalance. China and United States had differenct ideas about imbalance size. This part amended imbalance size between China and United States, it included that using free on board amended bilateral trade data, adjusted Hong Kong re-export trade factor and service trade, and excluded foreign direct investment factor. Through amending above factors, China counted trade surplus reducing 57%, U.S. reducing 63% compared with data without adjustment in 2005.The fourth part was the core of this thesis. It analyzed the reasons of Sino-U.S. trade imbalance. It included external reasons and internal reasons. External reasons were international industrial structure transferring and foreign direct investment in China which caused Sino-U.S. trade imbalance, that's to say, U.S. trade deficit transferred from East Asian countries to China, China-Sino trade imbalance problem not only included China and United States, but also it included China, United States and East Asian, at the same time, foreign-invested enterprises were the main bodies that China got trade surplus, trade deficit of United States and China was directly related with foreign direct investment in China. Internal reasons included imbalance of United States' saving and investment, U.S. export control policy to China which caused Sino-U.S. trade imbalance. China's internal structure imbalance, development of China's processing trade which caused Sino-U.S. trade imbalance. What's more, the complementary of Sino-U.S. trade was bigger than competition, therefore it was inevitable that Sino-U.S. trade appeared imbalance problem to some degree.The fifth part analyzed the effects to China and US and bilateral trade that trade imbalance brought. Firstly, it introduced positive and negative effects that Sino-U.S. trade imbalance brought to U.S., positive effects included that U.S. got benefits from China's processing trade and complementary advantages, the U.S. enterprises in China got profits, it promoted U.S. industrial structure to upgrade. The negative effects that Sino-U.S. trade imbalance brought to U.S. was small, for example, it made U.S. fall into the vicious cycle of depreciation of U.S. dollar-the outflow of capital-depreciation of U.S. dollar, brought unemployment problem and expanded income gap. The negative effects that Sino-U.S. trade imbalance brought to China were bigger than positive effects. Negative effects included that it decreased value of China's foreign deposite, increased speed of using resources, and increased pressure on RMB appreciation, fell into the trap of comparative advantage in international division, made China's GDP suffer huge loss and so on. The positive effects included that it increased foreign exchange reserve; it was benefit for solving China's employment problem and changed exporting product structure and so on. Lastly, it introduced the trade friction problem that Sino-U.S. trade brought.The sixth part analyzed factors that expanded Sino-U.S. trade imbalance or factors that reduced Sino-U.S. trade imbalance. It introduced factors that expanded Sino-U.S. trade imbalance, for example, processing trade factor, Hong Kong's re-export factor, foreign direct investment factor, U.S. export control policy to China, Asia-Pacific region industrial structure transferring factor and so on. It analyzed factors that reduced Sino-U.S. trade imbalance, for example, the weak trend of U.S. dollar, service trade factor, income elasticity of products that China and U.S. exported, the governments of China and U.S. used policy factor and American economy regression caused China's reduced export. Therefore, the trend of Sino-U.S. trade imbalance size depended on game process of expanding factors and reducing factors. Then it established model to predict trend of Sino-U.S. trade imbalance, the result of prediction was that from 2009 to 2015, the size of Sino-U.S. trade imbalance will expand, but in the long term, Sino-U.S. trade will be balanced.The seventh part introduced the countermeasures to solve Sino-U.S. trade imbalance. China should improve statistic regulation, continue to expand domestic demand, adjust industrial structure and trade strucdture, and make processing trade realize upgraded, implement strategy of market diversification, increase direct investment in United States, caustiously treat RMB appreciation, make full use of WTO dispute solution mechanism and so on. At the same time, the two countries should improve the dialogue mechanism and then make Sino-U.S. trade relations be healthy and sustainable development.Conclusion:with Sino-US trade developing rapidly, Sino-US trade imbalance problem was more and more serious. Sino-U.S. trade imbalance had internal factors and external factors; it should not be blamed on one side. Although China and U.S. had serious difference in trade imbalance size, after considering trade statistic method, re-export trade, service trade and foreign direct investment trade factors, the size of trade imbalance will reduce. At the same, trade imbalance problem made Sino-U.S. trade friction increase, China and U.S. should actively use strategy to cope with trade friction and made two countries economic and trade relation move forward. Through using model, China-Sino trade imbalance size will expand in the short term, but from the long run, China-Sino trade imbalance will be balanced.Innovations and limitations:the innovations of this thesis included that it quantitatively analyzed wrong position problem of United States export control to China through vertical and horizontal comparision. What's more, many scholars quantitatively analyzed the effects of American direct investment in China on Sino-U.S. export and import trade; this thesis qualitatively analyzed potential growth of Sino-U.S. trade from investment aspect. The future trend of China-Sino imbalance depends on game theory's process of some factors, this thesis found making China-Sino trade imbalance expand and reduce factors to qualitatively analyze the development trend of Sino-US trade. The limitations of this thesis were using short length to illustrate that Sino-U.S. establish FTA will solve Sino-U.S. imbalance problem, but it didn't analyzed possibility of establishing FTA, it need to further research. At the same time, whether changes of RMB exchange rate will be better to solve Sino-U.S. trade imbalance, it didn't use model to quantitatively analyze, it need to further research.