China pushed back this week against U.S. criticism of its mercantilism policies and attempts to force U.S. companies to transfer technology to Chinese firms.
Reacting to a speech by U.S. Trade Representative Robert Lighthizer this week, the Communist Party-controlled Chinese newspaper the Global Times published a scathing editorial titled “Lighthizer needs more trade common sense.”
Lighthizer described China’s mercantilism as “an unprecedented threat” to the global trade system. Earlier this year, the U.S. government announced a probe into China’s forced technology transfers and theft of intellectual property.
“Lighthizer better not think he can make China yield just because he leads a probe into alleged intellectual property violations. China won’t easily fall victim to U.S. bullying. Beijing also has sticks behind the door,” the Global Times wrote.
The enormous trade deficit the U.S. runs with China results in a surplus of dollars in China. Much of that money gets invested in U.S. government bonds, which are essentially a U.S. government savings account for China’s dollar surplus. Our budget deficits create a service for China’s savers. But the Global Times thinks that China status as major buyer of U.S. Treasury bonds means the U.S. needs to tread lightly.
“Lighthizer should realize China increased its purchases of US Treasuries for a sixth straight month in July,” the Global Times writes. “China again became the biggest holder of U.S. debt in June, the epitome of mutually beneficial trade relations.”
China is not, in fact, the biggest holder of U.S. debt. About 27 percent of U.S. debt is owned by another arm of the federal government itself. The Federal Reserve, thanks to its bond-buying quantitative easing program, owns around 12.5 percent. China is, at best, third in line.
Perhaps more accurately, the Global Times credits China with helping prop up America’s beleaguered Hollywood studios.
“Many U.S. products are not favored by Chinese. But it still imports them for its trade balance. Some terribly produced Hollywood movies have profited handsomely on the Chinese market,” the Global Times writes.
China’s government also directly addressed Lighthizer’s accusations.
“The nature of the China-U.S. trade relations is mutually beneficial,” said Lu Kang, a spokesperson for China’s foreign ministry, according to CNBC. “China and the U.S. should work together to uphold the authority of WTO rules.”