RESEARCH: Economics and Trade REPORTS

October 2019 Trade Bulletin
Highlights of This Month’s Edition • Bilateral trade: The U.S. trade deficit in goods with China totaled $31.7 billion in August, down 17.6 percent year-on-year; U.S. exports rose to a five-month high. • Bilateral policy issues: Members of Congress are scrutinizing risks posed by Chinese companies on U.S. exchanges and in federal retirement plans; the Trump Administration is rumored to be assessing similar risks; the U.S. Department of the Treasury published proposed regulations implementing FIRRMA’s expansions of CFIUS’s jurisdiction. • Policy trends in China’s economy: China’s Corporate Social Credit System, while still in the early stages of development, could pose significant compliance risks for U.S. companies and add to the Chinese government’s geopolitical toolkit; Beijing removes foreign institutional investment quotas and grants first foreign payments license in latest financial opening moves. • In focus – China’s pork supply: U.S. pork exports to China rose this year despite tariffs in response to falling hog populations devastated by African swine fever; China’s tariff exceptions announced on September 13 included pork and pig feed ingredients; China’s government forecasts pork supplies will continue to be strained into the first half of 2020.
10/09/2019
September 2019 Trade Bulletin
Highlights of This Month’s Edition • Bilateral trade: The U.S. goods deficit with China totaled $32.8 billion in July, down 11 percent year-on-year. • Bilateral policy issues: The United States and China agreed to resume trade negotiations following a month of tariff escalations; new rounds of tariffs will hit consumer goods the hardest; after months of propping up its value, China’s government allows the currency to weaken to 7 RMB against the U.S. dollar, leading the U.S. government to label China a currency manipulator. • Policy trends in China’s economy: Provincial fiscal data from the first half of 2019 reveal that the tax cuts and stimulus spending Beijing has deployed since the beginning of year have stretched local governments’ ability to balance their budgets; however, Beijing appears unlikely to change course and is preparing to approve another round of infrastructure bonds in December. • In focus – China’s surveillance technology: China’s surveillance technology sector has evolved from making basic equipment to a robust ecosystem spanning cloud computing and artificial intelligence.
09/10/2019
August 2019 Trade Bulletin
Highlights of This Month’s Edition • Bilateral trade: U.S. goods deficit with China reached $87 billion in Q2 2019, down 8 percent year-on-year; U.S. Q1 2019 services trade surplus with China fell for the first time since 2006. • Bilateral policy issues: President Trump announced new tariffs on Chinese goods effective September 1, citing China’s failure to make large purchases of U.S. agricultural goods and curb the flow of fentanyl to the United States; the WTO issued a mixed ruling on China’s challenge of U.S. calculation of tariffs on certain Chinese goods; the Trump Administration issued a memorandum calling out WTO standards on developing country status for China and others. • Quarterly review of China’s economy: China’s gross domestic product (GDP) grew 6.2 percent in Q2 2019 as stimulus deployed earlier in the year wore off; escalating trade tensions also hurt industrial profits as export growth collapsed, prompting fears about employment stability. • Policy trends in China: In an approach different from the recent takeover of Baoshang Bank, China’s financial regulators assisted the struggling Bank of Jinzhou by facilitating investment from three state-run investment firms; trading began on China’s new technology trading platform, but performance has been uneven.
08/05/2019
July 2019 Trade Bulletin
Highlights of This Month’s Edition • Bilateral trade: U.S. goods deficit with China totaled $30.2 billion in May 2019, down 9 percent year-on-year, reflecting a decline in both exports and imports. • Bilateral policy issues: New tariffs on Chinese goods halted as the United States and China agree to resume trade talks; the United States adds five entities tied to China’s development of supercomputers to the Entity List; U.S. importers are attempting to sidestep tariffs on goods from China, but some are reconsidering production in China altogether as a possible fourth wave of tariffs looms; China suspends WTO dispute against the EU over China’s market economy status after it allegedly lost the case, allowing the EU and United States to continue treating China as a nonmarket economy. • In focus – The Baoshang Takeover: In a surprise move, Chinese financial regulators took over Baoshang Bank on May 24, sparking a slowdown in interbank lending to small and regional banks, even as the People’s Bank of China intervened to keep interbank credit channels open.
07/03/2019
June 2019 Trade Bulletin
Highlights of This Month’s Edition • Bilateral trade: In April 2019, U.S. goods exports to China fall, while imports are up, pushing the U.S. goods deficit to $26.9 billion, from $20.7 billion in March. • Bilateral policy issues: An impasse in trade negotiations in early May preceded a volley of policy actions from the United States, including a tariff hike and an additional proposed list of tariffs affecting the remainder of U.S. imports from China. China responded to U.S. actions by threatening rare earths export blockades, stringent cybersecurity reviews, and regulatory retaliation. • In focus – Chinese financial markets: Beijing’s efforts to liberalize financial markets remain stalled, but there have been signs of progress over the last year, increasing foreign access to China’s financial sector.
06/06/2019
China’s African Swine Fever Outbreak: Implications for U.S. Food Safety and Trade
In 2018, China reported several cases of African swine fever, or ASF, a highly contagious disease that is deadly to pigs. The disease has now spread throughout China, where it has already reduced the country’s hog population by more than 50 million, and throughout other countries in Asia. This report provides an overview of the ASF outbreak in China, the implications for U.S. exports of pork and animal feed products, and the risks posed to U.S. food safety and food security.
05/16/2019
May 2019 Trade Bulletin
Highlights of This Month’s Edition • Bilateral trade: U.S. goods deficit with China declined in Q1 2019 to $80 billion, down 12.2 percent year-on-year; in 2018, U.S. services surplus in China grew less than 1 percent, as exports increased 2.2 percent and imports increased 5.5 percent. • Bilateral policy issues: The United States won a WTO dispute against China for unfairly administering its tariff-rate quotas for wheat, corn, and rice; the EU is reported to have won a dispute brought by China over continuing to treat China as a nonmarket economy for the purposes of applying antidumping duties. • Policy trends in China’s economy: Beijing attempted to recast the Belt and Road Initiative’s image in its second forum, following international pushback on debt-trap diplomacy and corruption; regulators released new rules for the highly anticipated high-tech board on the Shanghai Stock Exchange. • Quarterly review of China’s economy: China recorded GDP growth of 6.4 percent in the first quarter of 2019 as key economic indicators rebounded from the end of 2018; policymakers leaned heavily on fiscal measures to shore up growth in place of monetary easing, creating concerns about the sustainability of local government debt growth and an expanding budget deficit.
05/09/2019
How Chinese Companies Facilitate Technology Transfer from the United States
Chinese companies utilize a variety of methods—many of them covert or coercive—to acquire valuable technology, intellectual property (IP), and knowhow from U.S. firms. These efforts are often made at the direction of and with assistance from the Chinese government, part of Beijing’s larger effort to develop its domestic market and become a global leader in a wide range of technologies. These acquisition attempts frequently target advanced technologies such as artificial intelligence, biotechnology, and virtual reality, which are still in the early stages of development but could provide dual military and civilian capabilities in the future. This report explores six methods used by Chinese companies to acquire U.S. technology and IP, including (1) foreign direct investment, (2) venture capital investment, (3) joint ventures, (4) licensing agreements, (5) cyber espionage, and (6) talent acquisition programs. It then examines the effectiveness of existing U.S. regulations to assess and address the risks of increased technology transfers to China.
05/06/2019
April 2019 Trade Bulletin
Highlights of This Month’s Edition • Bilateral trade: In January 2019, U.S. exports of goods to China fell 27.5 percent year-on-year to $7.1 billion—a record-setting decline; the monthly U.S. trade deficit in goods with China totaled $34.5 billion. • Bilateral policy issues: On March 6, Huawei sued the U.S. government, alleging it had been unlawfully and incorrectly banned from U.S. government procurement. • Policy trends in China’s economy: The Chinese government set an annual GDP growth target of between 6 and 6.5 percent in 2019 amid slowing global economic growth projections and ongoing trade tensions with the United States; China’s new Foreign Investment Law aims to address U.S. concerns about intellectual property theft and forced technology transfers; observers expressed concern the law will serve as window dressing and not result in meaningful change. • In focus – China-EU relations: Intra-EU divisions on display amid President Xi’s trip to Europe; the European Commission labeled China a “systemic rival” and France tried to apply greater pressure on Chinese trade and technology policies, while Italy endorsed China’s Belt and Road Initiative.
04/05/2019
March 2019 Trade Bulletin
Highlights of This Month’s Edition • Bilateral trade: In 2018, the U.S. goods trade deficit with China grew 11.6 percent year-on-year to $419 billion due to a 7.4 percent drop in exports to China, while U.S. imports from China grew 6.7 percent to reach a record $539.5 billion. • Bilateral policy issues: U.S.-China trade negotiations continue as the March 1 deadline for tariff increases is delayed until further notice; Huawei’s troubles compound as the U.S. Department of Justice charges the company with violating U.S.-Iran sanctions and stealing trade secrets; countries around the world weigh Huawei’s 5G participation, some push back on U.S. warning of security concerns. • Policy trends in China’s economy: The long-awaited Greater Bay Area Plan, an ambitious blueprint to integrate nine cities in Guangdong Province with Hong Kong and Macau, sets the goal of rivalling Silicon Valley against high barriers to coordination. • Sector focus – Digital Services: With over 800 million internet users, the Chinese digital services market is growing quickly, creating lucrative opportunities for digital services providers in industries such as cloud computing, digital content, and e-commerce. However, U.S. and other foreign digital services companies face significant regulatory obstacles and strong domestic competition.
03/06/2019

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