China and US need each other more than ever

Six years on from the financial crisis, amid a still gloomy world economic outlook, now is exactly the right moment for the world's two largest economies to establish closer ties of trade and investment with more open markets, and less protectionism and discrimination.



While the monetary spell of central banks is losing its charm, a solid agreement as such and its substantial potential could unquestionably shore up the business sentiment of not only the two countries, but also the rest of the world.



Therefore, also it's hard to tell whether the recently concluded eighth China-US Strategic and Economic Dialogue (S&ED) was a success or just a bumpy start toward another marathon of debate, this enormous, wide-ranging dialogue mechanism has still has been attracting global attention given the escalating China-US trade and investment conflicts.



The spotlight of economic concerns concentrated on more open trade and investment, regional cooperation mechanism, trade frictions and whether China can be considered a "market economy." Another clear trend is that the emphasis of bilateral economic relation is gradually shifting from trade to investment. Despite the good momentum of mutual investment, and the former consensus against trade protectionism, how to avoid redundant security investigations and ensure equal treatment of both sides' enterprises has became a hot topic.



It's fair to say that security checks regulating the behavior and market-access of foreign funds seems reasonable. Nevertheless, overly high security will block most candidates yet too low a threshold could be easily bypassed by those with hidden agendas. That is why, ever since its launch in 2008, the 24-round marathon battle over a bilateral investment treaty still failed to reach an agreement on the negative list.



Since 2015, China has run its own pilot program on "negative list" in four Free Trade Zones - Shanghai, Guangdong, Tianjin and Fujian. It implies that the "negative list" of China is now being tested on the ground, and is close to be declared. US Treasury Under Secretary Nathan Sheets also expressed his wish for a successful bilateral investment treaty negotiation within Obama's presidency.



Nonetheless, the difficulties of a completely agreed package remain large. It is commonly assumed that China could be the tougher one to sell it to, once a shorter list is forced upon. However, US also puts strict conditions on Chinese investors, mostly due to non-business factors. While Chinese are trying to protect their sensitive turf in culture, value-added telecom services, finance and national security sectors, the US is also playing hard-ball with Chinese investors in similar areas. When Bank of China aimed at setting up its US branch, it possibly ran into as much as hardship as its American counterparts in China.



Yet, as a potential win-win, a good treaty could greatly serve the interest of both sides. As a freer and more matured economy, US is taking in more investment from China rather than reversely. With a clear defined negative list and better market environment, the investment imbalance between two countries is very likely to be corrected, and be more in favor of the US. Therefore, for the first time, both sides, not China alone, are paying equal attention to this consultation.



A broadly accepted negative list is the most key yet the most difficult part during the whole process. However, the emphasis shifting from trade to investment demonstrates a fundamental change of both people's mindset, based on their escalated economic relations.



30 years ago, neither side would have predicted the future of the two countries; 30 years later, we cannot imagine any issues of global importance that can be solved by US or China alone. The two countries might need to think twice about the bigger picture when they are entangled with their own interest.



The author is a research fellow of the International Monetary Institute at the Renmin University of China. bizopinion@globaltimes.com.cn





