RESEARCH: Economics and Trade REPORTS

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.
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.
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.
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.
May Trade Bulletin
Highlights of this Month’s Edition · Bilateral trade: The U.S. goods trade deficit with China rose 1.2 percent year-on-year in the first quarter of 2017; in services, the United States the U.S. trade surplus in China for 2016 hit an all-time high of $37.4 billion. · Bilateral policy issues: At their first summit, Presidents Trump and Xi agree to reform a flagship bilateral dialogue and launch a 100-day plan for addressing economic and trade issues; the U.S. Treasury does not cite China as a currency manipulator and notes China’s intervention to strengthen its currency; the USTR calls China’s barriers to cloud computing incompatible with its WTO commitments, and identifies market access restrictions and domestic support for China’s agricultural sector; the United States challenges China at the WTO over its failure to fully report its subsidies and launches investigations to protect its domestic steel and aluminum industries. · Quarterly review of China’s economy: China’s economy grew 6.9 percent year-on-year in the first quarter of 2017, fueled primarily by surging industrial activity, property investment, and credit growth.
Evaluation of China’s Nonmarket Economy Status
This two page issue brief lays out the U.S. statutory test for determining whether a country is a market economy, and assesses China’s eligibility based on those criteria.
April 2017 Trade Bulletin
Highlights of This Month’s Edition • Bilateral trade: In February, U.S. deficit with China reached $23 billion, down 26.6 percent month-on-month and 18.3 percent year-on-year. • Bilateral policy issues: The United States is poised to maintain China’s status as a nonmarket economy; at Beijing’s request, WTO establishes panel to review the EU’s treatment of China as a nonmarket economy; Chinese outbound investment reached record levels in 2016, but an unprecedented number of Chinese investment transactions were canceled as Chinese authorities adopt measures to control capital outflows; additional measures to restrict outbound FDI will likely lead to an investment decline in 2017; China expands foothold in the U.S. rail market with a new $137.5 million contract to build train cars for Philadelphia’s transit system. • Policy trends in China’s economy: Work reports from China’s National People’s Congress stress the centrality of the CCP in policymaking, with President Xi at the helm; priority given to clamping down on financial instability; China is planning to establish a trading link connecting bond markets in China and Hong Kong. • Sector focus – Artificial Intelligence: China is aggressively closing gap with the United States for global leadership in artificial intelligence.
Chinese Investment in U.S. Aviation
The report examines Chinese investment in U.S. aviation and related university connections with Chinese entities and assesses the implications of the resulting technology transfer on U.S. national security and aviation industry competitiveness. This report was prepared for the Commission by the RAND Corporation.
Chinese Product Safety: A Persistent Challenge to U.S. Regulators and Importers
Chinese imports account for a disproportionately high number of product safety recalls in the United States, and China’s position as the largest supplier of U.S. consumer imports challenges U.S. safety regulatory agencies who must apply finite resources to screen out risky products. This staff paper explores unique product safety problems posed by Chinese imports, including legal difficulties associated with holding China-based firms accountable for unsafe products, gaps in China’s safety regulatory structure, and difficulty in identifying Chinese products that have been shipped through third party countries. The report also summarizes U.S. import safety procedures followed by the U.S. Consumer Product Safety Commission and U.S. Food and Drug Administration and the resources available to these agencies to detect unsafe imports.
March 2017 Trade Bulletin
Highlights of this month's edition: •Bilateral trade: U.S. exports and imports both rebounded in January increasing 22.6 percent and 11.4 percent year-on-year respectively. •Bilateral policy issues: IP Commission issues an updated report on harm to U.S. economy from IP theft, spotlights China’s continued outsized role; China bans four synthetic opioids, including carfentanil, in a decision hailed by U.S. law enforcement as a “game changer” for U.S. counternarcotic efforts. •Policy trends in China’s economy: Chinese steel capacity increased in 2016, despite plant closures and claims of cuts; despite persistent overcapacity, China dramatically reduces its 2017 targets for cutting capacity in coal mining compared to 2016, while many redundant coal power plants are still being planned or under construction. •Sector focus – Fertilizer: Chinese fertilizer exports fall due to rising coal prices as U.S. fertilizer capacity grows alongside natural gas production; the U.S. Department of Commerce issues antidumping duties of 498 percent on Chinese ammonium sulfate fertilizer imports.