Doctoral (PhD) dissertation JIANDONG SHI 2021 i NATIONAL UNIVERSITY OF PUBLIC SERVICE Doctoral School of Public Administration Sciences Jiandong Shi Sino-US Trade Imbalance Doctoral (PhD) dissertation Supervisor: Prof.Dr. Szabolcs Pasztor ………………………………….. Budapest, 2021 ii DECLARATION Hereby I certify that the Ph.D. thesis entitled “Sino-US Trade Imbalance” is solely my own work. It contains no material that has been previously written or /and published by any other academic degree or diploma. Any previously published materials that have been used in this thesis are for bibliographical reference. January 2021 Jiandong Shi ………………………………….. iii ABSTRACT In general, the government of a country should try to maintain a basic balance between imports and exports in foreign trade, somewhat surplus, which contributes to the healthy development of the national economy. The issue of Sino-US trade imbalance occurs with the establishment of Sino-US economic and trade relations and is aggravated with the expansion of Sino-US trade scale. The long-term trade imbalance not only leads to a series of economic issues, but also in recent years, the Sino-US trade imbalance has gradually evolved from an economic issue to a political issue. Sino-US trade is a significant part of the world economic progress and trade development. The adjustment of Sino-US trade imbalance is not only crucial to the economic balance of the two countries, but also plays an important effect on the global economic rebalance. The study aims to seek out the principal factors and consequences of Sino-US trade imbalance, and figure out the measures to deal with the Sino-US trade imbalance. Mixed method is adopted in this study. In this study, quantitative research methods are used for data collection and econometric models are used to analyze the factors, influences and trends of Sino-US trade imbalance by using analysis software of Eviews and Excel. Meanwhile, qualitative research method is adopted in this study to analyze the regularity of Sino-US trade imbalance via historical analysis, literature analysis and case study. Notwithstanding the impact of exchange rate and savings on the Sino-US trade imbalance, the research results show that the difference in the national savings ratio between China and the United States has a more significant impact on the Sino-US trade imbalance. Foreign direct investment is an important reason for enlarging the Sino-US trade imbalance. Despite some adjustment measures have been taken by the two countries, the study has found that the Sino-US trade imbalance will further enlarge in the short run. In spite of the surplus status for China in Sino-US trade, China has been caught in the trap of comparative iv advantage, resulting in the widening of the economic gap between the two countries. While the United States runs a trade deficit with China, but trade between the United States and China is still favorable to the growth of US economy. In addition to these, the study also discusses the issues of mercantilism, the history of Sino-US trade, the history of Sino-US trade disputes and other causes and effects of Sino-US trade imbalance existing in Sino-US trade. Based on the findings of the research, this study puts forward some recommendations for the government and industry associations relevant to Sino-US trade. v ACKNOWLEDGMENTS My research experience has been full of excitement and I would like to express my sincere gratitude to people for helping me during my Ph.D. study. First and foremost, I would like to show my deepest gratitude to my supervisor, Prof. Dr. Szabolcs Pasztor, a respectable, responsible and resourceful scholar, who has provided me with valuable guidance in every stage of the writing of this thesis. Secondly, I would like to extend deepest gratitude to the Hungary, the Hungary people, the Tempus Public Foundation, National University of Public Service, Doctoral School of Public Administration Sciences, and very able and distinguished Professors. Special thanks to all my professors namely: Prof. Dr. Kiss György Árpád, Prof. Dr. Halmai Péter, Prof. Dr. Kutasi Gábor, Prof. Dr. Elekes Andrea, Prof. Dr. Magdolna Csath, Prof. Dr. Szemlér Tamás for providing me and my classmates’ necessary knowledge and wisdom needed for our course and our academic competence. I extend my deepest gratitude and heartfelt thanks to my friends and classmates for sharing good times at National University of Public Service. Culture nights, trips and all other activities with good friends made my life much more interesting than I ever expected. Finally, none of this would have been possible without support from my family. Without their endless love and selfless support, I would not have come to Hungary to do my Ph.D. degree. My parents, my wife were a constant source of enthusiasm and encouragement and I would like express my warm hearted gratitude to my family. vi TABLE OF CONTENTS DECLARATION ...................................................................................................................................... iii ABSTRACT.............................................................................................................................................. iv ACKNOWLEDGMENTS ........................................................................................................................ vi LIST OF TABLES .................................................................................................................................... xi LIST OF FIGURES ................................................................................................................................. xii LIST OF ABBREVIATIONS...................................................................................................................xiii 1. INTRODUCTION ................................................................................................................................. 1 1.1 CHAPTER OVERVIEW ............................................................................................................. 1 1.2 TOPICALITY OF THE ISSUE ................................................................................................... 1 1.3 THESIS OUTLINE ...................................................................................................................... 3 1.4 REASONS FOR CHOOSING THE SUBJECT........................................................................... 5 1.5 RESEARCH QUESTIONS.......................................................................................................... 7 1.6 RESEARCH OBJECTIVE .......................................................................................................... 7 1.7 RESEARCH HYPOTHESIS ....................................................................................................... 7 1.8 CONTRIBUTION AND SIGNIFICANT OF THE STUDY ....................................................... 8 1.9 SUMMARY ................................................................................................................................. 9 2. HISTORY OF TRADE BETWEEN CHINA AND USA ..................................................................... 10 2.1 CHAPTER OVERVIEW ........................................................................................................... 10 2.2 THE SINO-US TRADE FROM THE QING DYNASTY TO THE ANTI-JAPANESE WAR .. 10 2.3 SINO-US TRADE FROM THE OUTBREAK OF ANTI-JAPANESE WAR TO THE ESTABLISHMENT OF PEOPLE’S REPUBLIC OF CHINA ........................................................ 13 2.4 SINO- US TRADE FROM THE ESTABLISHMENT OF PEOPLE’S REPUBLIC OF CHINA TO THE ESTABLISHMENT OF SINO-US DIPLOMATIC RELATIONS .................................... 14 2.5 THE CHANGES OF TRADE DEVELOPMENT OF THE TWO COUNTRIES AFTER THE ESTABLISHMENT OF SINO-US DIPLOMATIC RELATIONS .................................................. 18 2.5.1 The Development of Sino-US Trade from 1978 to 1990 ................................................ 19 2.5.2 The Development of Sino-US Trade in the William Jefferson Clinton period (1993.1-2001.1)........................................................................................................................ 22 2.5.3 The Development of Sino - US Trade in the George Walker Bush Period (2001.1-2009.1) ................................................................................................................................................. 24 2.5.4 The Development of Sino-US Trade in the Obama term (2009.1-2017.1) ..................... 26 2.5.5 Sino-US trade relations under President Trump .............................................................. 28 2.6 SUMMARY ............................................................................................................................... 30 3. THEORETICAL FRAMEWORK ....................................................................................................... 33 3.1 CHAPTER OVERVIEW ........................................................................................................... 33 3.2 TRADE IMBALABCE CORRELATION THEORIES ............................................................. 34 3.2.1 Definition of trade imbalance.......................................................................................... 34 3.2.2 Mercantilism ................................................................................................................... 36 3.2.3 Theory of absolute cost advantage .................................................................................