US, Chinese economies likely to get even closer
Updated: 2013-05-22 11:06
By Chris Davis in New York (China Daily)
What does the future hold for US-China economic relations?
A new study calls the stakes "enormous" and says that if "the most important economic partnership in the world" is able to keep doing what it's doing, by 2022, the two countries' economies will be more interdependent than ever, and hopefully provide the basis for a healthy relationship.
The study, US-China Economic Relations in the Next Ten Years: Towards Deeper Engagement and Mutual Benefit, was sponsored by the China-United States Exchange Foundation and released on Tuesday at an event at the Asia Society in New York City.
"Both countries want to establish a pattern of secure, high-quality sustainable growth and employment for their people," the study finds. "During the next decade, this important economic relationship has the potential to create enormous economic opportunities and millions of jobs."
After being introduced by Hong Kong's first chief executive, Tung Chee-hwa, as the architect and builder of China-US relations, former US secretary of state Henry Kissinger, 89, told the audience: "The fate of China and the US has become linked in a way far beyond what any of us could have imagined when the relationship opened. "When we started this relationship there was next to no trade between China and the US. One of the first moves the Nixon administration made was to commit to the purchase of $100,000 worth of goods manufactured in China by tourists who visited Hong Kong. That was considered a daring move, and an important signal to China."
The study projects growth of about 3 percent for the US and 7.5 percent for China between 2012 and 2022, by which time US GDP will be $21 trillion compared to Chinese GDP of $17 trillion.
GDP per capita for the US would be $63,000, for China, $12,000.
"Ten years from now the US will still be ahead of China but the gap is closing," said Lawrence Lau, economist at Stanford University, who gave an overview of the study. China's GDP, he said, was about a fifth of the US' and would catch up by the middle of the century.
Noting a huge difference in savings rates between the two countries - the US is at about 12 percent, the Chinese is almost 50 percent - Lau said "China saves and invests too much, and the US saves too little. Between them there is actually some room for cooperation."
The authors call on both nations to consider a free trade agreement and a bilateral investment treaty to facilitate investment flow between the two countries," Lau said.
With US exports to China projected to be around $530 billion by 2022, three times the current value, and Chinese exports to the US to reach $805 billion, the study says the rate of growth of US-to-China exports over the next decade is projected to be far higher than of Chinese exports to the US.
Lau said US investments into China not only brought in capital, but also technology, know-how and business models.
Ma Xiuhong, vice-chairwoman of the Foreign Affairs Committee of the Chinese People's Political Consultative C and chairwoman of the China Foreign Trade Center, said that both China and the US should adopt an open mind to studying the idea of a free trade zone between the two nations.
"Both countries play a very important role in the world economy," she said. "From a purely economic point of view, if the two countries can enter into some kind of special free trade zone relationship, this will generate great benefits for both our countries.
Nobel economist Michael Spence, co-author of the study, said: "If these two countries can't cooperate in some form or another, there's very little chance that we will start to solve global governance problems.