Cheah Cheng Hye

Opinion | US-China relationship can be saved despite coronavirus and trade war

Renewed cooperation or even a fresh partnership between China and the United States remains a logical and compelling solution to the problems faced by both

The bilateral relationship may sour further as China becomes a major issue in this year’s US election, but mutual benefit should bring both sides back together

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Cheah Cheng Hye

Published: 9:30am, 1 Jul 2020Updated: 9:13pm, 13 Oct 2020

The US-China relationship is on the rocks and possibly headed for a nasty break-up, but don’t rush to write it off. While this may seem like a contrarian view, renewed cooperation or even a fresh partnership between China and the United States remains a logical and compelling solution to the problems faced by both nations and the world.

We need to look past the current crisis. While the politics of blame and rivalry currently prevails, the fundamentals can be summarised thusly. The two countries remain mutually dependent and their economic relationship is more complementary than competitive; the US faces its worst domestic social and economic crisis since World War II and can ill afford another cold war; and the two countries are becoming more alike as the US government and central bank resort to massive intervention in the economy while China softens its version of state capitalism through deregulation and market opening measures.

China, not Canada or Mexico, remains the largest US trade partner. The US still depends on China as a key source of attractively priced consumer goods, credit, students, tourists and talent. Students from China account for more than one-third of all foreign students in America. China remains the world’s factory; for example, Chinese steel factories are responsible for more than half of global output.

China’s domestic consumer market, with an estimated 400 million middle-class consumers, is the world’s biggest. Globally, 31 per cent of annual growth in consumer spending is Chinese. In recent years, this has been one of the largest sources of export demand growth for American goods and services.

The US, meanwhile, is in great difficulty. Its economy is projected to record an 8 per cent contraction in 2020, according to the International Monetary Fund, which projects China to grow 1 per cent this year. According to a public opinion survey by NBC and The Wall Street Journal, eight out of 10 Americans believe things in their country are out of control.

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Although US government figures show a trade deficit of US$345 billion with China in 2019, the real situation may not be so simple. This is because American companies such as Apple, Nike, Starbucks, General Motors and Procter & Gamble have been very successful in China’s domestic market. Their sales don’t show up in US export figures. Chinese companies have been far less successful in building up a domestic US presence.