The U.S.-China trade frictions have escalated again. U.S. President Donald Trump announced a 10% tariff on Chinese goods worth US$200 billion, and China has since announced a counterattack with a US$60 billion tariff on U.S. imports. If the two sides still do not make concessions in the future, trade frictions would continue to deteriorate.
A day after Trump's announcement, U.S. Commerce Secretary Wilbur Ross said that the American government is doing this in the hope that China would modify its behavior, and the United States has seen that China is "out of bullets" when it comes to tariffs. He also said that the tariff war has negligible effects on the overall inflation. The financial market viewed the latest development of the U.S.-China trade war positively and believed that the impact on the global economic growth is limited, and the European and American stock markets rose on September 18. On September 19 local time, the U.S. stocks continued to rise. At midnight on the September 20 Beijing time, the Dow Jones index stroke 26,650 points. In contrast, China's SSE Composite Index barely rose above 2,700 points.
Judging from the reaction of the capital market, the situation in China and the United States seems to be vastly different, but is the contrast between the two countries really that big? Anbound's chief researcher Chan Kung expressed his doubts. He pointed out that one of the problems that China must seriously consider is that China and the United States are the two major economies and the two largest markets in the world. Based on market size, the gap between China and the United States may not be so huge. Chan Kung personally believes that it is necessary for China to rethink the spatial value of the Chinese market, carefully evaluate the situation and give full play to the value of market space and scale; such should be the stable way for China to deal with the U.S.-China trade war.
In the current globalization, how big is the market space in China and the United States? Let us compare the economic scale of China and the United States and the market space represented by different economic data.
(1) In terms of economic scale, in 2017, the GDP of the U.S. has reached US$19.3869 trillion, while China's GDP was about US$12.7238 trillion in the same period. The Chinese economy is equivalent to 65.6% of the U.S. economy.
(2) From the scale of trade in goods, according to the statistic of the World Trade Organization, the total volume of global trade in goods in 2017 was US$35.75 trillion, of which the trade volume of goods in mainland China was about US$4.1 trillion, being the largest in scale in the world, accounting for 11.48% of global trade in goods; the volume of the U.S. trade in goods was about US$3.96 trillion, being the second largest in the world, accounting for 11.06% of global trade in goods.
(3) In terms of trade in business services, the United States is ahead of China. In 2017, the U.S. import and export of business services ranked first in the world. The trade deficit in China in 2016 and 2017 exceeded US$260 billion. According to the statistics from the United States, the U.S. trade deficit with China accounts for 15.9% of the total service trade deficit in the United States, which is about 12% higher than that of 2008 (4%). In terms of the value, the U.S. trade deficit with China for 2017 was US$38.5 billion, nearly eight times that of 2008. Throughout 2017, Chinese residents spent US$32.18 billion in the United States. The United States is currently the largest source of technology imports in China, and nearly one-third of China's technology import contracts are purchased from the United States. In 2017, China's purchase of intellectual property from the United States cost US$8.53 billion, an increase of 7.2% year-on-year. Except for a few years, China's growth in technology imports to the United States is as high as double digits.
(4) In terms of domestic consumption, according to the statistics from Mizuho Securities of Japan, in 2000, the domestic retail sales of domestic goods was US$3.3 trillion, and in China it was only US$472 billion; by 2018, China's domestic retail sales may be ahead of the United States and reaches US$5.8 trillion. Among some important commodity categories, China has surpassed the United States. For example, in 2016, the U.S. market sold 17.6 million cars, but it was far lower than the 24 million cars sold in China.
(5) China and the United States differ greatly in terms of the populations. In 2017, the population of the United States was 325.7 million, and the population of China has reached 1.39 billion. Such a large population base means that the amount of labor is sufficient, which also shows that the scale of consumption and the potential for upgrading are huge.
Overall, the market space of China and the United States is not small, and each has its own merits. In this case, the evaluation and utilization of the market space value are very important for both countries. We believe that China's size and potential value of market space are not much different from that of the United States. The essence of the trade war is the battle of market space; the country that utilizes the market space well will prevail; if not that country will have to adapt to changes and become very passive.
Multiple statistics show that China's market space size and value are not much different from those in the United States. The main problem is that China's policy thinking mode is that of a production-oriented society. Such thinking mode should be transformed into a consumer society; otherwise even though being the largest economy in the world, China will still be controlled by others. This means that in the future, in addition to expanding the scale of the economy, China will also need to change its policy thinking mode and shift from a production-oriented society to a consumer-oriented society, such as the value of the market space.
Final Analysis Conclusion:
If China can properly utilize its market space and exert its value, this will be highly important in the future U.S.-China trade war.
