The 13th Five-Year Plan Consolidates Mutual Trust in China-U.S.Trade and Economic Relations

By YANG HUI

CHINA and the U.S. have their respective stances and requirements of each other in the volatile trade and economic sphere， their common expectation being to exert optimum control to limit unexpected changes. Within that process， mutual trust remains the core test of bilateral relations.

The U.S. expects China to further expand free trade， apply more marketoriented monetary and financial policies， and provide a transparent， fair and predictable environment for U.S. busi-nesses. China， in turn， expects the U.S. to enlarge its investment market， expand cooperation on cutting-edge technology， and separate politics from economics. The foreign trade and economic strategies laid down in the 13th Five-Year Plan will have direct impact on China-U.S. trade and economic relations.

Expand Free Trade

Free trade will expand further to cover more fields， so making China and the U.S. more complementary.

The plans recommendations clearly state that efforts will be made to speed up the optimization and upgrade of Chinas foreign trade， and to elevate China from a large to a strong foreign trading country； to improve the overall arrangement of foreign trade and innovate the development model； to improve marketing and after-sales service networks； to enhance the competitiveness of traditional superior products and consolidate their share in the international market； to promote foreign trade through producing higher quality， cheaper goods； to strengthen new export-oriented industries such as equipment manufacturing； and to develop service trade.

If foreign trade is indeed successfully elevated by means of high quality， low price， better structured imports and exports， U.S. consumers may continue to reap the benefits of inexpensive， quality made-in-China commodities. United States Department of Labor statistics show that the growing share of Chinesemade goods in the U.S. market has lowered the retail prices of commodities in the country – those of home appliances having dropped by nine percent every year， and of sports equipment by three percent. For example， as a result of growing Chinese exports of cookware and kitchen tools the price of a pan has fallen over the space of three years from its original price of US $49.9 to US$29.99. It is likely that development of service trade will bring even more convenience to U.S. consumers.

To remedy the traditionally unhealthy relationship wherein the U.S. is the “ultimate consumer” and China the “ultimate producer，” the plan calls for great efforts towards implementing proactive import policies and further opening the domestic market to the globe as a whole. On the one hand， China needs U.S. technology and brands； on the other， China must consume its domestic savings. Last year saw the first occasion on which Chinas service industry scale exceeded that of its manufacturing industry.

The plan also has indirect impact on China-U.S. trade and economic relations. For example， favorable policies are needed to achieve smooth bilateral free trade and to streamline procedures of people-to-people exchanges and communications. The plan hence proposes that China strives to achieve either mutually exempt or simplified visa procedures with more countries.

In November 2014， the U.S. government announced that Chinese visa applicants would be issued multiple-entry business and tourist visas for up to 10 years. Chinese students and exchange visitors， meanwhile， are eligible for multiple-entry visas valid for up to five years. According to White House statistics， 2013 saw 1.8 million visitors from China to the U.S.， so boosting the latters economy by US $21.1 billion， and creating around 109，000 jobs in the U.S. The White House projects that close to 7.3 million Chinese will travel to the U.S. in 2021， so contributing around US $85 billion a year to the economy and creating 440，000 jobs.

Optimize Business Environment

An optimized business environment， featuring rule of law， internationalization and facilitation， along with a mechanism conducive to win-win cooperation and compatible with international trade and investment rules， is anticipated. Certain U.S. officials and journalists have commented that the U.S. has long expected China to reform its financial sector， in particular its foreign exchange and monetary policies. Perceived RMB manipulation and devaluation have hence been a focus of disputes.

A country like the U.S. that has an ongoing trade deficit needs large inflows of overseas capital to support its financial and monetary system. It is clearly in the interest of China， at a time of slowing economic growth and further diversification of its assets abroad， to support financial market liberalization and a stronger RMB.

The plan emphasizes that China will in future expand two-way opening of its financial industry， realize RMB capital account convertibility， and make the RMB a convertible， widely used currency； transform its ways of managing and using foreign exchange reserves by shifting from positive to negative list management； and ease restrictions on overseas investment exchange settlements. China will moreover strive to maintain a fundamental international balance of payments， meanwhile enhancing two-way openness of the capital market and gradually easing， or even canceling restrictions on domestic and overseas investment quotas.

All those measures imply that in the coming five years， China will speed up the opening of capital market and promote market-oriented reform of its economic system. China hopes to win the support of international society for the RMB through its pragmatic actions. It has also intimated that， as a large and responsible country， it will proactively promote economic reforms and shoulder its due responsibility in the global economy.

The Chinese government has in the past helped multinational corporations deal with many social problems. Today， along with establishment of the market economy， a complete domestic “eco-system” has been formed whose stakeholders include consumers， suppliers， employees， government departments and community residents. All participate in the supervision of corporate ethics and social responsibility. Such organizations， therefore， need to adopt standardized management and legalized operations. China will eradicate unlawful practices such as monopoly， trade secret theft， intellectual property infringement， fraud， production of fake， poor quality commodities and bribery.

The plan stipulates that China will fully implement the management system of pre-establishment national treatment plus negative list， treat domestic and foreign-funded companies equally and without prejudice and so strengthen fair competition， improve management of overseas investment and improve poli- cies and services to promote investment abroad. It will also expand in an orderly way the opening-up of the service industry to broaden bank， insurance， securities and senior care market access. China will moreover do its utmost to participate in high-level bilateral investment treaties and judicial assistance agreements， and strive to mutually exempt or simplify visa procedures with more countries.

Promote Complementarity

A transparent， safe and fair investment environment will promote China-U.S. investment complementarity. China expects big progress in Bilateral Investment Treaty negotiations with the U.S. The BIT applies to all investments other than those specifically excluded from the negative list. This will， in the short term， affect the interests of certain industries in both countries， and cause problems in national security， infrastructure and technology transfer. The plan specifically proposes implementation of the management system of preestablishment national treatment plus negative list. This demonstrates Chinas resolve to overcome structural and institutional problems and so promote trade fairness and transparency.

The U.S.-China Business Council has predicted that if the BIT can be achieved during Obamas term of office， U.S. capital to the tune of US $200 billion is likely to pour into the Chinese market； also that the scale of total U.S. investment is likely to reach US $400 billion， taking into account the relevant deals. Meanwhile， Chinas investment to the U.S. is expected to expand on the current basis of Chinese enterprises covering 44 U.S. states in 2014， and that in 2015 Chinese enterprises invested US $15.7 billion in the U.S.

The market entails not only competition， but also international cooperation. For example， the U.S. has launched“Power Africa” and China the Belt and Road Initiative， with the common aim of developing the third country investment market.

In 2015， GE and Sinomach （China National Machinery Industry Corporation） signed a strategic agreement to collaborate on the Kipeto Wind Power Project and so promote clean energy development in Africa. This is of benefit to the third party and also explores more room for investment. The carrying out of similar projects around the globe will both boost and stabilize world economic and social development.

Special Significance of the Belt and Road

The Belt and Road strategy can po- tentially remedy certain shortcomings in U.S. foreign policy. The Silk Road Economic Belt passes through Central Asia and the Arab regions， and will boost economic development in both. This is in contrast to the U.S.， which overthrew Saddam Hussein， but withdrew its troops before the situation in Iraq became stable， so plunging Iraq into turmoil and bringing about the rise of ISIS.

Professor John J. Mearsheimer of the University of Chicago believes that U.S. actions have nurtured a hotbed of terrorism， and that it should take the bulk of responsibility for the chaos in Iraq. The very foundation of terrorism would be substantially weakened if the Belt and Road Initiative were to play a substantive role in those regions. Similar opinions are expressed in Rome and China： A Study of Correlations in Historical Events by American historian Frederick John Teggart. It holds that communication and exchanges between the East and the West are conducive to peace in Western Asia and most of Europe.

Relationships between big countries involve cooperation， competition and collaboration， but mutual trust remains the key. Such trust， however， is built on the basis of deepening exchanges and communications rather than on treaties of alliance and constraint. A simple example of what constitutes trust is： if you believe someone to be a bad guy， you see his actions as hostile. If， on the other hand， you think he is good and trustworthy， the two of you can negotiate even if you have disagreements.

The plan indeed states that， under the principles of amity， sincerity， mutual benefit and inclusiveness， and of wide consultation， joint contribution and shared benefits， China will perfect the bilateral and multilateral cooperation mechanism. The country will implement market-based operations wherein enterprises play a major role， and promote win-win pragmatic cooperation with relevant countries and regions in multi-fields. It will moreover develop a new comprehensive model of internal and external land-sea interconnectivity and eastward and westward two-way opening-up. The measures discussed above lay a solid foundation on which to enhance mutual trust between China and the U.S.