Future China Global Forum

Tension set to linger even if US and China reach a deal

Neither country is dependent on trade for its growth, says Mr Seong Jeong Min, senior fellow at consultancy firm McKinsey. China has been unwilling to address the issues, many of which are "intrinsically difficult" to solve, says Professor Steven Dav
China has been unwilling to address the issues, many of which are "intrinsically difficult" to solve, says Professor Steven Davis (centre). With him in the photo are (from left) AFP journalist Patrick Baert, Bank of China's Dr Chen Weidong, the Chinese Embassy's Mr Zhang Xumin and Singapore Exchange CEO Loh Boon Chye.ST PHOTO: NG SOR LUAN
Neither country is dependent on trade for its growth, says Mr Seong Jeong Min, senior fellow at consultancy firm McKinsey. China has been unwilling to address the issues, many of which are "intrinsically difficult" to solve, says Professor Steven Dav
Neither country is dependent on trade for its growth, says Mr Seong Jeong Min, senior fellow at consultancy firm McKinsey. ST PHOTO: NG SOR LUAN

Some issues have broader concerns among political and opinion leaders in America, says Chicago professor

Even if a trade deal was signed between China and the United States within President Donald Trump's current term, certain sticking points will remain for some time between the world's two largest economies, an economist has said.

This is because some of these problems are of broader concerns among the Americans, said Professor Steven Davis of the University of Chicago Booth School of Business. Among them, he listed intellectual property protection, making technology transfers a condition for operating in China, an uneven playing field for foreign and domestic firms and China's aggressive pursuit of its sovereignty claims in the South China Sea.

"These are issues that have broader concerns in the United States among political and opinion leaders and I think they are likely to persist for some time," said Prof Davis at the FutureChina Global Forum organised by Business China.

China, too, had been unwilling to address these issues, many of which are "intrinsically difficult" to solve, he added.

Negative rhetoric on both sides would not only build tension but also make it harder to reach agreement, he warned.

Mr Zhang Xumin, deputy chief of mission at the Chinese embassy in Singapore, countered that China does not wish animosity with the US and that it is merely explaining the real story behind the 11 rounds of negotiations.

He added that China has been making great efforts to protect intellectual property rights. While it still lags behind in some areas, "please do not underestimate our ambition and sincerity" to protect IPR, he said, adding that it is in the interest of Chinese firms as well.

 
 

As for how US trade tariffs are affecting China's economy, Mr Seong Jeong Min, senior fellow at consultancy firm McKinsey, said that neither country was dependent on trade for its growth.

China's net trade export surplus, he said, made up just 1.3 per cent of its gross domestic product. Instead, 76 per cent of its GDP growth came from domestic consumption.

"Much of China's growth is driven by its own people," he said.

To continue its growth momentum, he said, China needs to move from an investment-led model to one driven by productivity. That was why it spent 1.96 trillion yuan (S$393 billion) or 2.18 per cent of its GDP last year on research and development. Mr Seong said the jury was still out on how the trade war would affect the region.

Surveys showed that 30 per cent to 50 per cent of companies in China said they would move part of their production somewhere else with South-east Asia top on their list of places to relocate to, so countries that are ready can benefit from this. At the same time, the negative sentiment would hurt trade and the region, he said.

The forum also saw a session on China's Belt and Road Initiative to build infrastructure in developing countries. While many agreed it was a force for the good, rather than a debt trap for poor countries, they said there should be more transparency and its projects should be more sustainable.

A version of this article appeared in the print edition of The Straits Times on June 08, 2019, with the headline 'Tension set to linger even if US and China reach a deal'. Print Edition | Subscribe