US-China Relationship through Economic Interdependence

Abstract

The United States and China are economically interdependent and neither can afford to see the other fail. This paper first discusses how China-U.S. trade benefits both countries. Two important issues, U.S. outsourcing to China and U.S. trade deficit, were also discussed. Followed, this paper explores the attractiveness of China market for U.S. firms at both macro and consumer levels. Finally, the authors discuss the interdependence of U.S.-China trade relationship and the future of these two countries' strategic trade cooperation.

Table of Contents

Introduction2

Discussion2

China's exports to the U.S. benefit both countries2

A Rising Popularity of Chinese Products in the U.S. Market3

Outsourcing Is Not Bad3

The U.S. Trade Deficit4

The attractiveness of china market for U.S. Exporters5

Analyzing the Attractiveness of China Market at Macro-Level6

Attractiveness of China Market and Rising Purchasing Power of Chinese Consumers7

Trading Relationship and the Future Strategic Cooperation7

Conclusion9

US-China Relationship through Economic Interdependence

Introduction

The United States and China are the current two largest economies in the world. Ever since the implementation of China's open-door policy in 1978 and these two countries' reestablishment of diplomatic relations in 1979, the trade and economic co-operations between these two countries have surged. In 1979, the total U.S.-China trade was $2 billion. China was the 23rd largest U.S. export market and ranked the 45th largest source of U.S. imports. In 2010, the total U.S.-China bilateral trade jumped to $457 billion, and China was the third-largest U.S. export market (after Canada and Mexico), and the largest source of U.S. imports (Morrison, 2011).China has moved from 32nd U.S. trading partner in 1978 to the current second largest U.S. trading partner (after Canada). The importance of U.S.-China trade relationship is further expected. The U.S. and China's mutual profitable relations rooted in economic ties. With these ties are getting tighter and stronger, media and people from both countries are raising a debatable question: Are the United States and China friends or enemies? Are they strategic rivals or strategic partners? Our answer is that at least from the perspective of trade and economy co-operation, the U.S. and China cannot decouple from each other now. This study discusses why it is important for the U.S. and China remain strategic partnership and how these two countries could do for their continuous mutual benefits and sustainable developments in future.

Discussion

China's exports to the U.S. benefit both countries

China has relied heavily upon export-led growth. Through trade, the U.S. contributed to the fast rise of China in the past three decades. The combination of low-cost labor, growing employee skills, firms' weaning on western advanced technology, and coupled with government incentives, China has achieved scale of economy and equipped itself into a world export engine. In 1978, China's trade was $20.6 billion and 0.8% of the world total, in 2010 this figure and ratio have skyrocketed to $2.97 trillion and about 7.8% of the world total. The U.S. has been a vital market for China's export. In 1978, 10% of Chinese goods are exported to the United States, while in 2010, this figure jumped to ...