Trade conflict may not intensify again

A year and a half since the start of the China-US trade war and after months of negotiations, the two sides have finally reached an agreement on a phase-one trade deal, which is expected to be signed next month.

There are at least two popular views on the future of China-US trade and economic relations. The first is that China-US trade conflicts will ease from here for mutual benefit. And the other is that the phase-one deal is only a temporary ceasefire in the Sino-US trade war, and a new round of trade war will intensify to full-scale confrontation after the US presidential election in November 2020.

Both views are biased and lack understanding of the essence of the China-US trade war and related factors. To understand and predict the direction of the Sino-US trade war, it is necessary to analyze its causes. The immediate cause of the trade war was the misgivings and panic that China's rise created in the United States and other Western economies.

According to some projections, while China's economic growth over the past two decades has been two to three times higher than that of the US, the Chinese economy is expected to surpass the US economy by 2030, even 2025.

Historically, existing powers have always tried to check the rise of emerging powers. But this time, unlike the rise of Spain, Britain or the US, the rising power is a "non-Western" country with an economic system different from the West. Although private enterprises have grown and market economy has taken shape in China after four decades of reform and opening-up, in many Western economists' eyes, many Chinese enterprises still have a strong "government gene".

So long as China's economy was relatively small and closed, the West lived with China's different system. However, this tolerance apparently exhausted when Chinese companies-and large amounts of Chinese goods-started "going global" and competing with Western high-tech companies.

The West has strict definitions and regulations for fair competition. In Western markets, any enterprise found to have market power, or special advantage from vertical domination or government subsidy would be denied market access or excluded from the market. That's the logic of US resistance to Chinese products: if large amounts of Chinese goods or Chinese enterprises enter the market for competition, the resistance will be inevitable. This kind of defense comes not only from the upper echelons but also multiple levels of market participants. The differences between Chinese and US systems determine that the China-US trade war is unlikely to ease in the short term. In other words, the economic and trade conflict between China and the US will continue to a considerable extent at various levels.

But will the China-US trade conflict intensify again? It's possible, but not likely. Washington, which was waging a trade war, is becoming increasingly aware that the calculations about the Chinese economy overtaking the US economy in the short term are unreliable. China's economy has begun to shift from a period of high growth to a period of sustainable, higher-level development, which is evident in its growth rates-14.23 percent in 2007, 10.62 percent in 2010, 7.29 percent in 2014, 6.6 percent in 2018 and 6 percent in the third quarter of 2019.

Furthermore, since it may have to resume its deleverage policies to avoid financial risks, China's economic growth could slow down further in the next three to five years. On the other hand, the US economy continues to expand even after a decade of growth, breaking the pattern of five-year growth periods in the business cycle. And its unemployment rate has remained below 4 percent in recent years with low inflation.

Since 1950, the US has experienced periods of low inflation and low unemployment, but never as long as it does now. And the fact that the US now boasts full employment means it is using all available labor resources to drive its growth.

China is right in defining its status as the largest developing country. The calculation that China will overtake the US on the economic front is premised on old statistics of the US boom cycle and the average of China's high growth period. It's time to review and revise these empirical data. With these revisions, China may fail to catch up with the US for a longer period of time-a scenario that could weaken the West's defensive mind.

As China's reform deepens and the US becomes more resilient to different systems, the Chinese economy will need a longer period to overtake the US economy, which would provide enough time to develop a compatible model for the two countries to coexist peacefully. As such, there is not much legitimacy in the argument that the China-US trade war will intensify.

The author is a professor of economics at the University of Maryland. The views don't necessarily represent those of China Daily.