Zhiqun Zhu: "China continues to be a highly competitive market"

Zhiqun Zhu, PhD, is professor of political science and international relations at Bucknell University. He was Bucknell's inaugural director of the China Institute (2013-2017) and MacArthur Chair in East Asian politics (2008-2014). He has also taught at University of Bridgeport, Hamilton College, University of South Carolina, and Shanghai International Studies University. In the early 1990s, he was Senior Assistant to Consul for Press and Cultural Affairs at the American Consulate General in Shanghai. He is a member of the National Committee on United States-China Relations and is frequently quoted by international media to comment on Chinese and East Asian affairs. Dr. Zhu's teaching and research interests include Chinese politics and foreign policy, East Asian political economy, and US-China relations. He is the author and editor of over 10 books, including Understanding East Asia's Economic "Miracles" (Association for Asian Studies, 2016); China's New Diplomacy: Rationale, Strategies and Significance (Ashgate, 2013); New Dynamics in East Asian Politics: Security, Political Economy, and Society(Continuum International, 2012); and US-China Relations in the 21st Century: Power Transition and Peace (Routledge, 2005). Professor Zhu has received several research fellowships and grants, including two POSCO fellowships at the East-West Center in Hawaii, a Korea Foundation/Freeman Foundation grant to do research in Korea, two visiting fellowships at the East Asian Institute of National University of Singapore, a visiting professorship at Doshisha University in Japan, and a research grant from the American Political Science Association.

Professor Zhiqun Zhu gave an interview to Eurasia.Expert.

-Tell our readers in detail about the consequences of the trade war between the United States and China. How does this war affect the economies of the two countries?

-Most analysts believe that the trade war will hurt both the United States and China as well as many other economies given the interdependence of the global economy. For China it means a huge decline in exports, which will make bad economic conditions even worse as more unemployment is expected. For the United States, it means higher prices consumers have to pay from shoes to electronics, adding pressure for inflation. American farmers will also suffer as China stops buying agricultural products from the United States. The two countries have so far imposed tariffs on roughly $360 billion of commodities. As the global supply chain is disrupted, other economies such as South Korea, Japan and Taiwan that are highly dependent on either the US or Chinese market will experience collateral damage.

- How do you assess the state of implementation of American projects in China? Some experts say that some projects are already “frozen” ...

-American businesses in China have not been severely affected so far. There has been no exodus of American businesses to other markets. After all, the vast Chinese market, the insatiable purchasing power of the Chinese middle class, and China's first-rate infrastructure, among other things, still make China a more appealing and profitable market than many other developing countries such as Vietnam and India. Meanwhile, China continues to welcome foreign investment, although certain sectors are not open to foreign businesses. As part of its own deepening reform and opening up, China continues to increase its market access for foreign businesses, and the so-called "negative list" of sectors where foreign businesses are prohibited or restricted from investing continues to shrink.

- And what about the implementation of projects of Chinese companies in the United States?

-Chinese investment in the US peaked in 2016 and has declined in recent years due to China's own tight control of capital outflow and American government's more stringent screening procedures. Chinese investment is barred from certain sectors for national security reasons. The Committee on Foreign Investment in the United States (CFIUS) has beefed up its review process of foreign investment in the United States, and Chinese businesses often become the target of such reviews.

- By the way, according to a survey of the American Chamber of Commerce, most US companies operating in southern China (70%) are considering options for transferring production capacity to other countries and plan to abandon investment in the region. What do you think about it? Is it so?

-I have not seen this survey, but I highly doubt that 70% of US companies are considering moving their production to other countries. As I mentioned before, China remains one of the most attractive and profitable markets for foreign businesses. In recent years, some American businesses have complained about China's weak enforcement of protecting intellectual property rights and its alleged practice of forced technology transfer, which may have caused some companies to look for other markets, but the majority of American businesses are likely to stay in China.

- Is it true American companies going to go to the markets of Vietnam, Germany, Japan, and South Korea? It is said that China’s competitors began to lower price.

- We all know that labor in China is not very cheap any more today, so it is understandable that some foreign businesses are shifting to locations with cheaper labor such as Southeast Asia. But for a business to succeed, you need to take into account other factors, such as labor skills, size of market, infrastructure, etc. In such areas, China continues to be a highly competitive market.
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- What was the trade turnover before the trade war and what is the trade turnover now between US and Chine?

- Trade includes both goods and services. Commodity trade between China and the United States may have slightly declined as a result of the trade war, but the impact on the overall trade is too early to tell.

- How does the trade war between the US and China affect the implementation of projects in the framework of the “Belt, the Road”?

- I think the impact will be minimal since the Belt and Road Initiative mainly covers developing countries in Asia, Africa, Middle East and Latin America. China's economic relations with these countries remain dynamic.

- In your opinion, how long will the trade war go on?

- How long the trade war will last depends to a large extent on when President Donald Trump thinks he is satisfied. Given his unpredictability and maverick inclination, it is hard to predict exactly when he will stop the trade war. Most recently Trump and Xi Jinping had a phone conversation on November 1 and both indicated they would work together to bring this dispute to a satisfactory end. They will meet again at G-20 in Argentina at the end of November. Perhaps by then the two governments will reach a compromising deal to end the trade war soon. If so, it will be good news for the global economy.

Seymur Mammadov