RESEARCH: Economics and Trade REPORTS

September 2018 Trade Bulletin
Highlights of This Month’s Edition • Bilateral trade: The U.S.-China goods trade deficit reached $36.8 billion in July 2018, the highest monthly deficit on record. • Bilateral policy issues: President Trump signs FIRRMA into law, expanding CFIUS’s authority to screen foreign investment for national security threats; midlevel U.S. and Chinese financial officials meet to resume trade negotiations but accomplish little. • Policy trends in China’s economy: Beijing is shifting toward monetary stimulus, stepping up efforts to boost bank lending amid cooling economic growth and fears that an intensifying trade conflict with the United States might trigger a sharper slowdown; China introduces new measures to curb risks from peer-to-peer lending in response to rising defaults across the industry; Chinese regulators enhance controls on currency movements, stabilizing the renminbi exchange rate after months of rapid depreciation against the dollar; although the Hong Kong Stock Exchange’s revised listing rules have improved its global competitiveness, the number of Chinese firms listed and the amounts raised are below initial expectations. • Sector Focus – Pork: According to the U.S. Department of Agriculture, U.S. pork exports to China fell by 27 percent in May, then 19 percent in June relative to the previous year; Chinese tariffs on U.S. pork were raised to 62 percent in early July.
09/05/2018
August 2018 Trade Bulletin
Highlights of This Month’s Edition • Bilateral trade: In the first half of 2018, the U.S. goods trade deficit with China reached $185.7 billion, up about 9 percent year-on-year; in the month of June, U.S. agricultural exports to China declined 34.4 percent and livestock declined 39.2 percent year-on-year; in services, the United States reached a record high trade surplus with China in Q1 2018, but exports of travel—the main driver of U.S. service exports to China—slowed to their lowest year-on-year growth in 14 years. • Bilateral policy issues: Following tariffs imposed July 6, the United States initiated WTO cases against five trade partners, and published a list of tariffs on $200 billion worth of additional Chinese imports, as China threatens retaliation; Chinese regulators fail to approve Qualcomm’s proposed acquisition of NXP. • Quarterly review of China’s economy: China’s officially-reported GDP growth slowed to 6.7 percent year-on-year in Q2 2018 as fixed asset investment, industrial output, and retail sales lose steam; Chinese policymakers implement measures to increase credit growth and spur economic activity despite pledges to focus on deleveraging; the RMB’s value falls due to trade tensions and signs of an economic slowdown in China, raising concerns Beijing could use currency devaluations to offset the impact of U.S. tariffs.
08/06/2018
Trends in Trade: U.S.-China Goods Trade 2012-2017
Since joining the World Trade Organization in 2001, China has leveraged relatively cheap labor, large economies of scale, industrial policies, and the manufacturing capabilities of neighboring countries to become an export powerhouse in an increasing range of industries, while often limiting market access for foreign products. China’s scale as a trading power coupled with its protectionist policies have contributed to rising tensions in bilateral trade relations. This report describes and analyzes patterns in the U.S.-China trade relationship in 2012–2017 and is an update to a staff research report published by the Commission in November 2012 which covered trends in trade in 2000–2011.
07/19/2018
July 2018 Trade Bulletin
Highlights of This Month’s Edition • Bilateral trade: U.S.-China goods trade deficit reached $33.2 billion in May 2018, and $152.2 billion year-to-date. • Bilateral policy issues: U.S. tariffs against $34 billion worth of Chinese imports go into effect as China implements retaliatory action and takes steps to dull the impact of U.S. tariffs on China’s economy; U.S. Department of Commerce reverses ZTE exclusion order, but Members of Congress are working on legislation to reinstate sanctions. • Policy trends in China’s economy: Chinese investment in the United States fell 90 percent year-on-year to $1.8 billion in the first five months of 2018 due, in part, to Beijing’s intensified scrutiny of outbound flows; China issues new foreign investment negative list, lifting ownership restrictions in 22 industries, including airplane design and manufacturing, agriculture, automotive, banking, railway construction, and shipping. • Sector Focus – China Pursues Foreign Semiconductor Technology: Since 2015, U.S. semiconductor firm Micron has been subject to a persistent, wide-ranging technology acquisition campaign from multiple Chinese actors, involving an attempted purchase, alleged IP theft, a direct challenge of Micron’s IP in China, and an on-going antitrust case.
07/09/2018
June 2018 Trade Bulletin
Highlights of This Month’s Edition • Bilateral trade: U.S. goods deficit with China increases 11.8 percent in the first four months of 2018 as growth in U.S. imports from China outpaces exports. • Bilateral policy issues: The United States and China issue a joint statement on the ongoing trade negotiations, but outcomes remain in flux as tariff and investment action deadlines near; the U.S. government considers alternative penalties for ZTE’s violation of its 2017 settlement with U.S. authorities; China drops antidumping probe into U.S. sorghum, but U.S. soy exports still threatened. • Policy trends in China’s economy: China compels multinational companies to list Taiwan as a Chinese territory, increasingly using Chinese domestic laws as leverage. • Sector Focus — Autos: China’s auto market continues to grow, albeit slower than in previous years; as China prepares to lower tariffs on auto imports, European firms are better positioned to take advantage of increased market access than U.S. firms, most of which manufacture cars in China through joint ventures.
06/06/2018
SOE Megamergers Signal New Direction in China's Economic Policy
The Chinese government is seeking to revamp its state sector through a series of billion dollar “megamergers” involving central state-owned enterprises (SOEs). These megamergers consolidate state control in strategic sectors of economy and eliminate intra-state competition in China. However, they also contribute to increased debt levels among Chinese SOEs and undermine the competitiveness of U.S. businesses and other global firms. This report assesses the objectives of China’s megamergers strategy and evaluates the implications of SOE megamergers (and, more broadly, Chinese government control over the economy) for the global competitive landscape.
05/24/2018
China's Digital Game Sector
China’s digital game market has emerged as the largest in the world but remains heavily restricted to U.S. game companies. U.S. companies are required to license their games to Chinese operators who appear to claim a majority of the revenue a U.S. game earns in China. Intellectual property rights conditions in China create significant challenges for U.S. firms, facilitating piracy in other international markets through China’s manufacture of piracy-enabling devices and restricting the commercial viability of certain gaming genres and platforms within China due to widespread piracy. Chinese companies have acquired several foreign game companies, raising data privacy concerns given the power of the Chinese government to request information from domestic companies and the broad array of data that can be collected by mobile games.
05/17/2018
May 2018 Trade Bulletin
Highlights of This Month’s Edition • Bilateral trade: In the first quarter of 2018, the U.S. goods trade deficit with China grew about 15.5 percent year-on-year due to increased imports; in services, the United States reached record high trade surplus with China in 2017, but export growth was the lowest in over 13 years. • Bilateral policy issues: U.S. Department of Commerce bans U.S. firms from exporting to ZTE due to ZTE’s repeated violations of its settlement with U.S. authorities; Chinese government strengthens long-standing policies to replace foreign technology with domestic equivalents; the EU and Japan join the United States in a challenge of China’s licensing regulations, while the EU joins China in its request for consultations regarding Section 232 tariffs; Beijing increases retaliatory pressure on the U.S. agriculture sector by imposing a 178.6 percent antidumping deposit on U.S. sorghum; 82 percent of all U.S. agriculture exports to China are subject to planned or enacted retaliatory Chinese tariffs. • Quarterly review of China’s economy: The Chinese economy grew 6.8 percent year-on-year in the first quarter of 2018, benefitting from strong consumer demand and increased real estate investment. • Policy trends in China’s economy: At the Boao Forum, President Xi pays lip service to globalization and economic liberalization, but offers modest commitments.
05/04/2018
Supply Chain Vulnerabilities from China in U.S. Federal Information and Communications Technology
The U.S.-China Economic and Security Review Commission released a report entitled Supply Chain Vulnerabilities from China in U.S. Federal Information and Communications Technology, prepared for the Commission by Interos Solutions, Inc. The report examines vulnerabilities in the U.S. government information and communications technology (ICT) supply chains posed by China, and makes recommendations for supply chain risk management.
04/19/2018
April 2018 Trade Bulletin
Highlights of This Month’s Edition • Bilateral trade: In February 2018, U.S. goods deficit with China hit $29.3 billion, a 27.4 percent jump year-on-year; U.S. exports stall at their 2017 level. • Bilateral policy issues: The USTR’s Section 301 report details unfair Chinese government technology transfer and IP practices; the USTR subsequently launched a WTO complaint regarding China’s licensing regulations and is working to identify imports to target with tariffs; a GAO report recommends Treasury review staffing and resource levels for CFIUS to determine whether they are sufficient for handling an increasingly difficult workload; President Trump blocks Qualcomm acquisition by Singapore-based Broadcom amid concerns it could weaken Qualcomm’s long-term ability to compete with Chinese firms. • Policy trends in China’s economy: China’s National People’s Congress passes measures tightening the CCP’s control, including eliminating presidential term limits and approving a sweeping government reorganization plan; sweeping reforms to China’s government bureaucracy highlight government priorities and seek to reduce regulatory confusion, increasing efficiency and Party control over policy. • Sector focus – 5G: China’s drive for global leadership in 5G creates new economic and national security concerns for the United States.
04/06/2018

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