US bilateral relations fact sheets: China

US State Department

US bilateral relations fact sheets ChinaThe United States seeks to build a positive, cooperative, and comprehensive relationship with China by expanding areas of cooperation and addressing areas of disagreement, such as human rights. The United States welcomes a strong, peaceful, and prosperous China playing a greater role in world affairs and seeks to advance practical cooperation with China in order to build a partnership based on mutual benefit and mutual respect. The annual Strategic and Economic Dialogue (S&ED) has served as a unique platform to promote bilateral understanding, expand consensus, discuss differences, improve mutual trust, and increase cooperation. The strategic track of the S&ED has produced benefits for both countries through a wide range of joint projects and initiatives and expanded avenues for addressing common regional and global challenges such as proliferation concerns in Iran and North Korea, the conflict between Sudan and South Sudan, and climate change. The United States has emphasized the need to enhance bilateral trust through increased high-level exchanges, formal dialogues, and expanded people-to-people ties. The U.S. approach to China is an integral part of reinvigorated U.S. engagement with the Asia-Pacific.

U.S. Assistance to China
U.S. Agency for International Development (USAID) and State’s assistance programs in China focus on four principal areas: assisting Tibetan communities; addressing the threat of HIV/AIDS and other pandemic diseases; advancing the rule of law and human rights; and supporting environmental protection and climate change mitigation efforts. U.S. assistance programs are targeted, scalable with Chinese resources, and directly address U.S. interests such as limiting the transmission of infectious diseases such as tuberculosis, malaria, HIV/AIDS, and avian influenza that pose threats throughout the region and globally. Programs in Tibetan areas of China support activities that preserve the distinct Tibetan culture and promote sustainable development and environmental conservation in Tibetan communities through grants to U.S. organizations.

Bilateral Economic Relations
The U.S. approach to its economic relations with China has two main elements: the United States seeks to fully integrate China into the global, rules-based economic and trading system and seeks to expand U.S. exporters’ and investors’ access to the Chinese market. Total two-way trade between China and the United States grew from $33 billion in 1992 to over $503 billion in goods in 2011. The United States is China’s second-largest trading partner (after the European Union–EU), and China is the fourth-largest trading partner for the United States (after the EU, Canada, and Mexico). During the economic track of the May 2012 S&ED, the two countries announced measures to enhance macroeconomic cooperation, promote open trade and investment, enhance international rules and global economic governance, and foster financial market stability and reform.

President Obama has put a high priority on expanding exports, particularly to China’s fast growing market.  Since early 2009, U.S. exports of goods to China have almost doubled, growing twice as fast as exports to the rest of the world.  In 2011 alone, the United States exported $130 billion in goods and services to China, supporting well over 600,000 jobs here at home.  Since 2008, the year before President Obama took office, China’s trade surplus, as a share of its GDP, has fallen from 8 percent to less than 3 percent.

Creating New Opportunities for U.S. Workers and Firms:  China is the fastest growing major economy and the third largest destination for U.S. goods and services exports.  Reducing Chinese barriers to U.S. exports will help the United States take full advantage of the opportunities in this growing market, creating more jobs for U.S. workers.

Creating a level playing field for U.S. firms and workers
•    China agreed to participate in negotiations for new rules on official export financing with the United States and other major exporters, with the first meeting to take place this summer in Washington, DC.  China is one of the world’s largest providers of export financing today, and China’s participation in negotiated rules governing the terms and conditions of official export financing is critical to making sure that competitive U.S. exports are not undercut by subsidized foreign government financing.

•    In order to create a more level playing field for U.S. firms competing against Chinese state-owned enterprises (SOEs), China committed to providing non-discriminatory treatment to all enterprises, regardless of type of ownership, in terms of credit, taxation, and regulatory policies.

•    China agreed to increase the number of SOEs that pay dividends as well as to increase the amount of dividends actually paid.  China will further encourage listed SOEs – which include China’s largest and most profitable SOEs – to increase the portion of profits they pay out in dividends so as to be in line with market levels.  SOE profits, as a share of China’s GDP, rose from 1.7 percent in 2001 to a peak of 3.7 percent in 2007, just prior to the global financial crisis, contributing to China’s imbalanced growth pattern.  Unlocking the profits maintained in the corporate sector will help boost China’s domestic consumption, creating new opportunities for U.S. producers.
•    China committed to submit this year a revised comprehensive offer to join the WTO Agreement on Government Procurement (GPA) – one that responds to the requests of the United States and other GPA parties.  The United States is focused on ensuring that China’s offer is commensurate with other WTO GPA parties.  Opening one of the largest and fastest growing procurement markets would provide substantial opportunities for U.S. exports.
•    To help level the playing field and increase protections for U.S. investors, the United States and China agreed to intensify negotiations for a U.S.-China Bilateral Investment Treaty.
•    China committed to open up further, including new sectors, to foreign investment.  China also committed to further simplify and enhance the transparency of its investment approval system, and to focus its security review of foreign investment solely on national security concerns and adhere to specific timelines and review standards.

•    Following its commitment from last year’s S&ED, China issued measures providing that departmental rules and administrative regulations have to be posted for public comment on an official government website for a period of no less than 30 days, except under special circumstances.  This is intended to give all interested parties, including U.S. companies, a better opportunity to learn about and comment on rules and regulations that affect their business.

Ensuring greater protection of intellectual property rights (IPR)

Innovation is fundamental to America’s core competitiveness and future growth, and preventing theft of our inventors’ and researchers’ intellectual property remains a top priority.  China recognized the importance of increasing sales in China of legitimate IP-intensive products and services in line with China’s status as a globally significant consumer of these goods.

•    China committed to extend its efforts to promote the use of legal software by Chinese enterprises, in addition to more regular audits of software on government computers.

•    China agreed to prioritize trade secrets in its IPR protection policies and to increase enforcement against trade secret misappropriation.

•    China agreed to treat IPR owned or developed in other countries the same as IPR owned or developed in China.

•    China agreed to intensive discussions on the implementation of its commitment that technology transfer is to be decided by firms independently and not to be used by the Chinese government as a pre-condition for market access.

Shifting China Toward Consumption-based Domestic Demand-led Growth:  China has committed to greatly increase its reliance on domestic demand – particularly household consumption – for growth, and to reduce China’s dependence on exports and investment.  For American exporters, this means a much more rapidly growing Chinese market for U.S. goods and services, as well as a pattern of Chinese growth that supports stronger and more sustained growth of the global market.

China’s commitment to continued exchange rate reform is a critical part of this effort.  While important progress has been achieved, more remains to be done.

•    China’s exchange rate has appreciated and is up about 13 percent against the U.S. dollar when accounting for differences in inflation since June 2010, and 40 percent since 2005. China also recently announced that it is widening its trading band to allow market forces to play a greater role in setting the exchange rate.

•    China committed to enhancing exchange rate flexibility, letting supply and demand play a bigger role, and reiterated its determination to implement fully its G-20 commitments to move more rapidly to a more market-determined exchange rate system.

China also is taking a number of steps to raise household income and to lower the prices of consumer goods and services that ordinary Chinese purchase, including from the United States.

•    China cut import tariffs on certain consumer goods in the run up to the S&ED this year and has committed to another round of tariff cuts before the end of 2012.

•    China agreed to expand its pilot program to reduce taxes on services to other regions and sectors.  U.S. services firms are among the most competitive in the world and stand to benefit as China’s services market grows.

Expanding Opportunities for U.S. Firms Through Promoting More Resilient, Open, and Market-Oriented Financial Systems:  Financial sector reform is critical to our goals of leveling the playing field and promoting home-grown, consumption-led growth in China.  China’s current financial system provides low returns and few choices to consumers, leading them to save too much, and channels cheap financing to state-owned enterprises through large state-owned banks. Financial opening will support more competition and give Chinese households higher income on their savings and better access to a range of financial products so they can meet their financial goals and insure against life’s risks.

Developing China’s financial markets and promoting consumer financing
•    China now has amended its regulations to implement last year’s S&ED commitment to allow U.S. and other foreign insurance companies to sell mandatory auto liability insurance in what is the world’s largest market for automobiles.

•    China committed that foreign and domestic auto financing companies – currently dependent on China’s state-owned banks for funding – will be able to issue bonds regularly, including issuing securitized bonds.  This will help boost the competitive edge in China of U.S. auto firms, which are global leaders in auto financing.

•    China committed to increase the total dollar amount that foreigners can invest in China’s stock and bond markets under its Qualified Foreign Institutional Investor (QFII) program from $30 to $80 billion.  This will reduce restrictions on the free flow of capital and increase opportunities for U.S. pension and mutual funds and other investment management firms.

•    China committed to allow foreign investors to take up to 49 percent equity stakes in domestic securities joint ventures, going beyond China’s WTO commitment of 33 percent.  This provides U.S. investors greater ability to control their operations and protect proprietary technology and know how.   China also agreed to shorten the waiting period (“seasoning period”) for securities joint ventures to apply to expand into brokerage, fund management, and trading activities that are essential to building competitive securities businesses.

•    China agreed to allow investors from the U.S. and other economies to establish joint venture brokerages to trade commodity and financial futures and hold up to 49 percent of the equity in those joint ventures.

•    China reaffirmed its intention to promote more market-based interest rates.  Raising the ceiling on deposit rates also would allow Chinese households to earn a higher return on their savings, supporting greater household consumption.  And it would make it more costly to continue exchange rate intervention.


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