The report examines the Chinese government’s actions to promote the use of its currency, the renminbi (RMB), in the global monetary system as a payment currency for cross-border trade and financial transactions, a vehicle currency for foreign trade and international capital transactions, and a reserve currency. The report analyzes the potential effects of the rising prominence of the RMB on the financial clout of the United States and the U.S. dollar’s role in denominating international trade transactions and settling cross-border financial transactions.
On January 16, 2016, Taiwan held its presidential and parliamentary elections. Focusing on economic and local issues in the campaign, the Democratic Progressive Party (DPP) presidential candidate Tsai Ing-wen and her running mate Chen Chien-jen won the election with over 56 percent of the vote, while the traditionally pro-independence DPP captured an outright majority in the Legislative Yuan (LY) for the first time in Taiwan’s history, winning 68 of 113 seats. With the DPP’s victories in the presidential and LY elections, the party can pursue its economic and cross-Strait goals. This issue brief analyzes the results of Taiwan’s elections and discusses the implications of the elections for cross-Strait relations and the United States.
After the stock market turmoil last August, Chinese regulators were hoping for a peaceful start to the year, preparing to wind down the ban on sales for big shareholders and launching a new mechanism (a circuit breaker) designed to prevent dramatic falls on par with those seen last year. The plan backfired. China’s Shanghai and Shenzhen stock markets crashed on January 4, the first day of trading, followed by another crash on January 7; in both cases, the circuit breaker halted trading. The combined rout erased more than $1 trillion of value. The government’s attempts to stem the meltdown only worsened the situation, confusing investors and raising fresh doubts over the ability of the Chinese government to manage a slowdown in the economy. They also exposed the contradiction inherent in the Chinese Communist Party (CCP) leadership trying to introduce market-oriented policies for the broader economy while maintaining control over the composition and behavior of the Chinese stock markets—an approach that leads to greater volatility and moral hazard.
Highlights of this month’s edition:
• Bilateral trade: U.S. goods deficit with China slowed in November 2015 as imports from China declined. • Bilateral policy issues: USTR challenges China’s discriminatory taxation policy for domestically produced small aircraft; the PBOC creates a multicurrency index for the RMB in a bid to deemphasize links to the dollar. • Policy trends in China’s economy: Beijing announces a slate of new reforms to improve quality of life, including changes to the household registration system; China a party to the Paris climate change agreement, but questions remain about reliability of China’s pledges. • Sector focus – Internet Privacy and Freedom of the Press: China passes antiterrorism law requiring decryption and other technological assistance from telecommunications and Internet services providers; Xi Jinping defends “Internet sovereignty” at Beijing-sponsored World Internet Conference despite China’s status as worst abuser of Internet freedom and jailer of journalists in 2015.
Leading up to the 2016 election, Taiwan’s electorate has grown largely dissatisfied with the state of the domestic economy and increasingly worried about Taiwan’s growing dependence on China. Amid stagnant growth and wages, the Democratic Progressive Party (DPP) has focused its campaign on improving Taiwan’s domestic economy through expanded social welfare benefits, a higher minimum wage, and new local sources of innovation. Meanwhile, the economic platform of the Chinese Nationalist Party (Kuomintang, or KMT) has largely been defined by promoting Taiwan’s external economic relations, especially with China, as a means of supporting export-led growth. This report provides an objective review of major economic indicators in Taiwan, and evaluates the implications of political transition for Taiwan’s economic relations with China, the United States, and the international community.
Despite China’s rapidly growing overseas engagement and recent multilateral initiatives, the country still receives development finance from a variety of governments and institutions. From a development perspective, China thus challenges convention and, like other middle-income countries, straddles the divide between a developing nation requiring external assistance and an emerging power assuming global leadership roles. This report examines China’s concurrent positions as a recipient and a provider of development finance, evaluating the objectives driving global finance flows, and assessing the impact of these flows on U.S. economic and diplomatic interests.
Highlights of this Month’s Edition • Bilateral trade: October U.S. goods trade deficit with China at $33 billion, the smallest deficit in seven months. • Bilateral policy issues: RMB added to the SDR basket; a U.S.-China agreement on joint inspections of accounting firms falls through, placing U.S. regulators in violation of their mandate. • Policy trends in China’s economy: Chinese e-commerce soars as Singles’ Day eclipses Black Friday and Cyber Monday in online sales. • Sector spotlight – Traditional Chinese medicine: Internationalization and modernization key for increasing quality and regulatory acceptance and boosting exports to Western market.
Highlights of this Month’s Edition
• Bilateral trade: In September, the U.S. deficit in goods trade with China hit $36.3 billion, the highest monthly deficit on record; quarterly service imports from China reach highest level on record, weakening the U.S. trade in services surplus.
• Policy trends in China’s economy: Fifth Plenum sets course for the 13th Five-Year Plan; President Xi’s state visit to the UK nets expanded international role for the RMB.
• Quarterly review of China’s economy: China’s GDP grew 6.9 percent in third quarter; government moves to support the economy.
• Sector spotlight – Aluminum: Chinese subsidies and preferential policies have created overcapacity that has lowered global prices and eroded the profitability of the U.S. aluminum sector.
China’s strict regulation of entertainment imports, including foreign films, violates the country’s World Trade Organization (WTO) commitments, as determined in a 2007 WTO decision calling for China to open its film market to foreign films. After years of noncompliance and inaction, China partially opened its film market in 2012 following a deal with the United States. The deal allowed for the import of 34 films each year—up from the previous limit of 20 films—in exchange for a temporary suspension of further U.S. WTO actions against China’s film importation policies. During Chinese President Xi Jinping’s September 2015 visit to the United States, the Motion Picture Association of America and China Film Group reached two new film agreements, which could increase market access for foreign films in China. Based on recent history, however, promises that China will further open its film market should be viewed skeptically.
Chinese box office sales have increased alongside China’s standard of living, resulting in China surpassing Japan as the world’s second largest film market (behind the United States) in 2012. If global film market growth rates remain consistent over the next few years, many experts expect China to surpass the United States as the largest film market in the world as early as 2018. Hollywood relies on China’s film market for revenue, but the process to get films into China is arduous due to strict and opaque regulation of film imports. China’s regulations and processes for approving foreign films reflect the Chinese Communist Party’s position that art, including film, is a method of social control. As a result of these regulations, Hollywood filmmakers are required to cut out any scenes, dialogue, and themes that may be perceived as a slight to the Chinese government. With an eye toward distribution in China, American filmmakers increasingly edit films in anticipation of Chinese censors’ many potential sensitivities.
Highlights of this month's edition:
• Bilateral trade: U.S. goods deficit in August hits $34.9 billion, the highest monthly deficit this year. • Xi Jinping’s state visit to the United States: Presidents Obama and Xi announce cooperation in several areas, including agreement that neither government will support cyber-enabled theft of information for commercial advantage; joint initiatives to combat climate change; and narrowed scope in national security reviews of foreign investments. President Xi announces China will begin a national cap-and-trade program in 2017; pledges over $18 billion in total to development assistance, peacekeeping, climate change, and women’s rights initiatives. • Policy trends in China’s economy: New state-owned enterprise reform plan repeats ongoing reform efforts and lacks clear direction.
The U.S.-China Economic and Security Review Commission was created by the United States Congress in October 2000 with the legislative mandate to monitor, investigate, and submit to Congress an annual report on the national security implications of the bilateral trade and economic relationship between the United States and the People’s Republic of China, and to provide recommendations, where appropriate, to Congress for legislative and administrative action.