context: There is a lively debate in the PRC policy community on ways to address US decoupling. Some argue the answer to the US trade war lies at home, not abroad. While some like Liu Yuanchun 刘元春 Shanghai University of Finance and Economics president argue for greater planning and coordination via international trade policy.
The next five years will be key for the US to realise and test its decoupling strategy, contends Liu Yuanchun 刘元春 Shanghai University of Finance and Economics president. Liu argues that the PRC must improve coordination between industrial planning and trade policy in response.
Liu urges the PRC to not just consider trade policy from the angles of growth, inflation and interest rates, but also the changes in business and competition modes brought by structural and political interventions. In an article on Aisixiang, Liu further notes
- characteristics of the current world economy
- the global economy has not achieved a post-pandemic rebound in 2023 and the growth rate fell
- there are still a lot of uncertainties in whether or not interest rates will come down quickly
- but what is clear is that the world will be moving towards a stage of lower inflation and interest rates
- it will be difficult for trade to grow in 2024 as the world is still in the process of contraction
- there may be further fragmentation of the multilateral trading system
- trade issues to which the PRC should pay more attention
- soaring demand for Chinese goods (e.g. electromechanical and new energy products) in countries like Mexico and Southeast Asia where the US conducts 'friend-shoring' or 'close scoring' operations may change
- as the US has achieved a stage of completion of restructuring their global supply chains after a few years of work
- the PRC should pay attention to whether the US has succeeded in re-industrialisation and attracting its high-tech supply chains to return
- the PRC should also pay attention to whether US 'friend-shoring' and 'offshoring' efforts are commercialised and sustainable
- competition and complementarity with trade partners
- Mexico and South Asia
- the PRC is positioned differently from these regions and is not in full competition with them
- Japan, South Korea and Germany
- competition is intense between the PRC and these countries, particularly in medium and high-end manufacturing industries like new energy, automobile and shipbuilding
- the PRC should pay attention to the pattern of cost competition with these countries
- emerging economies
- trade complementarity may further increase
- the PRC should pay attention to the difference in the pace of industrial upgrading between itself and these countries
- Mexico and South Asia
- soaring demand for Chinese goods (e.g. electromechanical and new energy products) in countries like Mexico and Southeast Asia where the US conducts 'friend-shoring' or 'close scoring' operations may change