RESEARCH: Economics and Trade REPORTS

February 2018 Trade Bulletin
Highlights of This Month’s Edition • Bilateral trade: In 2017, the U.S. goods trade deficit with China climbed 8.1 percent on the previous year to $375.2 billion, the highest deficit on record; U.S. services exports to China grow at the slowest rate since 2009 due to a slowdown in tourism to the United States. • Bilateral policy issues: The Office of the U.S. Trade Representative’s 2017 report on China’s adherence to WTO commitments criticizes China’s noncompliance, noting “it is now clear that the WTO rules are not sufficient to constrain China’s market-distorting behavior.” • Quarterly review of China’s economy: China’s economy grew 6.9 percent year-on-year in 2017, driven by greater domestic consumption, higher industrial output, and global demand. • Policy trends in China’s economy: The Chinese government takes steps to discourage bitcoin mining in its latest crackdown on the cryptocurrency; China’s central bank adjusts exchange rate management regime. • Sector focus – Chinese Outbound Investment: Chinese investment into the United States drops 35 percent following China’s imposition of capital control measures; newly announced Chinese investment deals in the United States are 90 percent lower in 2017 than 2016; concerns over espionage activity, opaque ownership structures, and a lack of privacy protections for U.S. customers cause HNA and Ant Financial’s U.S. acquisition transactions to flounder and terminate Huawei’s mobile phone partnerships with U.S. carriers.
02/07/2018
January 2018 Trade Bulletin
Highlights of This Month’s Edition • Bilateral trade: The U.S. trade deficit in goods with China totaled $35.4 billion in November 2017, its highest monthly level in the past two years and a 16.2 percent increase year-on-year. • Bilateral policy issues: President Trump issues National Security Strategy calling for more assertive policies to combat Chinese influence campaigns and economic coercion; the U.S. government is pursuing multilateral and bilateral approaches to confront China’s market-distorting support for sectors such as steel and aluminum. • Policy trends in China’s economy: At the Central Economic Work Conference, Chinese leaders maintain last year’s focus on financial risks and supply-side structural reform but place less emphasis on deleveraging; IMF cites China’s credit growth, regulation, and implicit credit guarantees from banks and government actors as top concerns in its most recent financial system stability report. • Sector focus – Consumer Goods: U.S. consumer goods exports to China experience consistent growth from 2003 to 2016 despite accounting for a small portion of U.S. exports to China; on December 1, the Chinese government cut tariffs on several products, including top U.S. consumer good exports.
01/08/2018
December 2017 Trade Bulletin
Highlights of This Month’s Edition • Bilateral trade: In October 2017, U.S. goods trade deficit grew 13.2 percent year-on-year to reach $35.2 billion; year-to-date, the deficit reached $309 billion, up 7 percent year-on-year. • Bilateral policy issues: President Trump traveled to China for a presidential summit with President Xi, which culminated in a series of business agreements worth about $250 billion, but no resolutions on higher-priority issues; citing wide-spread shortcomings in China’s economic reform, the U.S. Department of Commerce maintains its classification of China as a nonmarket economy, prompting China to launch a new WTO case against the United States. • Policy trends in China’s economy: China announces plans to relax or eliminate caps on foreign ownership in Chinese financial institutions; NDRC launches third wave of mixed-ownership SOE reforms, seeking to introduce increased private capital in the state sector while simultaneously strengthening government’s role in the economy; Alibaba’s Singles’ Day reaches new sales record of $25.3 billion, eclipsing U.S. Black Friday and Cyber Monday sales. • Sector focus – Commercial Aviation: U.S. and Chinese aviation regulations will recognize each other’s approvals for aircraft and aviation products, likely increasing U.S. imports of Chinese aircraft and aviation.
12/05/2017
November 2017 Trade Bulletin
Highlights of This Month’s Edition • Bilateral trade: In the third quarter of 2017, the U.S. goods trade deficit with China grew 6.7 percent due to increased imports; U.S. services exports to China reach a new record, driven by increases in tourism, financial services, and intellectual property payments. • Bilateral policy issues: In a setback to China’s pursuit of market economy status, the EU adopts a new antidumping methodology and the United States implements new duties on imports of Chinese aluminum; U.S. experts and industry groups highlight several intellectual property and technology transfer challenges in China as part of the Administration’s Section 301 investigation. • Policy trends in China’s economy: China delays a food safety certification program that would put $22 billion of U.S. exports at risk by two years; after lobbying by the EU, China ends a discriminatory ban on soft cheese imports; China’s government announces changes to China’s drug approval process that—if fully implemented—may reduce approval delays for U.S. drugs by several years. • Quarterly review of China’s economy: Chinese government ensures high rate of growth for China’s economy in the run-up to the 19th Party Congress, but problems remain unaddressed. • Sector focus – Electric Vehicles: China transforms into the global electric vehicle leader by leveraging state support and excluding foreign competitors.
11/03/2017
October 2017 Trade Bulletin
Highlights of This Month’s Edition • Bilateral trade: In August 2017, U.S. goods trade deficit increased 3.1 percent year-on-year to reach $34.9 billion; U.S. exports to China were nearly $11 billion, up 16.3 percent year-on-year. • Bilateral policy issues: President Trump blocks an attempted acquisition of Lattice Semiconductor by a company with links to the Chinese government amid potential national security concerns. • Policy trends in China’s economy: Chinese regulators are putting the brakes on bitcoin and other virtual currencies; U.S. coal and liquefied natural gas exports to China surge due to favorable pricing and growing demand. • Sector focus – Waste and Scrap: China begins closing its waste and scrap market, putting $5 billion of U.S. exports at risk.
10/05/2017
September 2017 Trade Bulletin
Highlights of This Month's Edition: • Bilateral trade: U.S. goods deficit with China reached $33.6 billion in July 2017, a 10.6 percent increase year-on-year, due to robust growth in U.S. imports. • Bilateral policy issues: The USTR launches a Section 301 investigation into China’s industrial policies; the United States imposes new secondary sanctions on Chinese companies over their engagement with North Korea. • Policy trends in China’s economy: To counter declining inbound foreign investment, China’s State Council announces several measures to improve business environment for foreign firms; meanwhile, China’s government continues the crackdown on outbound investment by restricting investment into foreign real estate, hospitality, and entertainment sectors; in its annual review of China’s economy, the IMF warns China’s current credit trajectory is “dangerous.” • Sector focus – Oil: U.S. oil exports to China rise markedly amid declining oil production in China and production cuts in other oil-exporting countries.
09/06/2017
August 2017 Trade Bulletin
Highlights of This Month’s Edition: • Bilateral trade: In the first six months of 2017, U.S. goods trade deficit grew to $171 billion, up 6 percent year-on-year; U.S. deficit in advanced technology products increases 124 percent year-on-year in the second quarter of 2017 as Chinese telecommunications exports soar and U.S. aerospace exports decline; U.S. services exports to China reach a new record, driven by increases in tourism, financial services, and intellectual property payments. • Bilateral policy issues: The inaugural Comprehensive Economic Dialogue concludes with no concrete agreements; China clamps down on the use of VPNs, threatening free flow of data and business operations. • Policy trends in China’s economy: China’s National Financial Work Conference produces modest outcomes; faced with mounting corporate debt and capital flight, the Chinese government introduces new regulations limiting large overseas investments, leading to the withdrawal of several high-profile deals in the United States. • Quarterly review of China’s economy: China’s economy grew 6.9 percent year-on-year in the second quarter of 2017, fueled primarily by surging industrial activity, property investment, and credit growth. • Sector focus – Rice: U.S. rice producers gain access to China’s market, but challenges remain.
08/07/2017
July 2017 Trade Bulletin
Highlights of This Month’s Edition • Bilateral trade: In May, U.S. experiences the highest goods trade deficit with China since October 2016. • Bilateral policy issues: U.S. beef and dairy products regain access to China’s markets, but low levels of traceable U.S. beef remain an obstacle; Chinese chicken in final stages of gaining approval for export to the U.S. market; China approves two U.S. biotech crops for import, but structural causes behind delays for biotech approval remain. • Policy trends in China’s economy: MSCI includes 222 China A-shares in its Emerging Markets Index, an important step toward opening China’s capital markets to foreign investors. • Sector focus – Payments: In China’s payments sector, U.S. companies face regulatory challenges and stiff domestic competition, while Chinese companies are starting to access the U.S. market.
07/06/2017
June 2017 Trade Bulletin
Highlights of This Month’s Edition • Bilateral trade: U.S. goods deficit with China in April 2017 increased 13.7 percent year-on-year due to robust growth in U.S. imports. • Bilateral policy issues: The initial results of the U.S.-China 100-day action plan yield modest outcomes on agriculture, financial services, natural gas, and biotechnology; China’s cybersecurity law restricting overseas data flows goes into effect despite protests from foreign businesses; the Cybersecurity Administration of China prohibits foreign online news providers from operating in China through joint ventures. • Policy trends in China’s economy: China’s banking regulator issues comprehensive guidelines for controlling risks surrounding shady wealth management products (WMPs); new restrictions have caused banks to unwind WMP investment, which has raised costs of borrowing in some markets; China holds May 2017 summit for its One Belt One Road initiative, pledging $124 billion in funding for infrastructure projects and industrial development in participating countries; China plans to invest in a new economic zone called Xiongan New Area. • Sector focus – Beef: China promises to reopen its market to U.S. beef, but the lack of progress on Chinese poultry imports to the United States, use of growth-enhancing drugs in the feed of U.S. cattle, and lack of traceability of U.S. beef remain major hurdles to finalizing negotiations.
06/02/2017
U.S. Financial Exposure to China
China’s direct financial linkages with the United States have been growing but remain very modest when compared to the two countries’ trade linkages. Beijing has taken steps to gradually open its financial sector to foreign investors, but U.S. investors have displayed little interest since the reforms are happening as Chinese policymakers impose tighter restrictions on foreign currency conversions and outbound capital flows. Economic and financial developments in China can affect U.S. financial markets more substantially through indirect channels, as was evident in the reaction of U.S. equities to China’s stock market crashes in 2015 and 2016. More broadly, the impact of China’s slowing growth and economic reforms on trade, commodities demand, and investor confidence affects global financial markets, which in turn influence U.S. financial markets.
05/09/2017

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