This report analyzes changes in China’s trade strategy in response to US measures to check China’s influence at a time when strategic competition between the US and China intensifies, going on to draw implications for Korea. While there are a number of studies that have analyzed the recent US-China conflict from the perspective of the US movements against China, there are insufficient studies on how China responds to these movements on the part of the US and what kind of trade strategy it pursues. Therefore, this study examines changes in China’s trade strategy in response to the US measures against China in order to provide a balanced perspective on changes in Korea’s trade environment amid the US-China conflict.
Chapter 2 analyzed the shift in the US’s perception of China and the Biden administration’s strategy for China. With the rise of the Chinese economy, the US’s perception of China has shifted from a “cooperation partner” to a “strategic competitor,” defined as a threat to US national and economic security. US measures to keep China in check have been in full swing since the former Trump administration, and the US Biden administration is further expanding its pressure front on China. Accordingly, we looked at the US measures against China from the perspective of high-tech sectors, supply chain stability, and new trade norms (digital trade, labor, environment).
The Biden administration’s strategic stance toward China emphasizes the right to China’s unfair practices and a comprehensive and systematic approach to safeguard national and economic security. By utilizing various means such as entity list, export control, stronger foreign investment screening, and financial sanctions, it is countering China’s growth in advanced technology, which could threaten the national security of the United States. In addition, in the course of strategic competition with China, it is promoting the establishment of a stable supply chain in the United States by reviewing the supply chain for key industries related to national security such as semiconductors, batteries, core minerals, and pharmaceuticals in the United States. Unlike the former Trump administration, the Biden administration is emphasizing joint response and pressure with its allies. The Trade Technical Committee (TTC) was formed with the EU, and the Indo-Pacific Strategy, Quad, and AUKUS were used to build a pressure front against China. In terms of global trade norms, the US is taking the lead in digital trade rules to check China’s digital overseas expansion and lead the digital trade order in the Asia-Pacific region, while also putting pressure on China through worker-centered trade policies. What sets the US strategy apart from the previous ones is that: ① it emphasizes national security and economic security, ② takes a joint response with allies that share values and trust, and ③ leads the global trade order including new trade norms.
The paradigm of China’s trade strategy is undergoing a major shift as the US’s efforts to check China’s rise have deepened. Chapters 3 to 5 examine changes in China’s trade strategy. China’s response strategy was analyzed in terms of economic security, alliance utilization, and norms, which are the main characteristics of the US trade strategy with China drawn in Chapter 2.
Chapter 3 analyzes the linkage of China’s economic and security strategy, which is the most fundamental change in China’s trade strategy. China proposed a twin cycle strategy in the 14th Five-Year Plan, which is intended to minimize external risks by transforming the Chinese economic structure to enable independent circulation at home, as economic security is emphasized in order to respond to the US checks on China. Accordingly, China’s trade strategy is shifting from the existing global production base and export expansion focus to emphasizing supply chain stability and creating a huge domestic market. First, the Chinese government plans to promote technological independence, foster core industries, and secure strategic resources to stabilize the supply chain. To this end, China’s trade policy is promote localization and foster the competitiveness of China’s technology and core industries through the advancement of trade and investment. In addition, China plans to raise its status in the global market by nurturing the Chinese domestic consumption market in order to reduce its dependence on foreign countries in terms of demand. To this end, China is promoting import tax preferential policies, expanding service trade, and creating new business models for foreign trade through digitalization and smartization. In addition, by reducing the negative list in areas such as high-tech industries, digital industries, and service industries, which are necessary for the advancement of China’s economic industry, it is expanding the market opening by easing the barriers to entry for foreign investment. In addition, we looked at the establishment of a cooperative platform (FTZ, state-level events, etc.), as well as the revision of laws and systems to expand the attraction of foreign investment in China. China’s trade strategy is undergoing fundamental changes as it is pursued in connection with the economic and security strategy in response to the US measures to check its expansion.
Chapter 4 analyzed the regional network establishment strategy pursued by the Chinese government in response to the US’s containment measures based on its alliances. China’s regional network strategy is being promoted through the establishment of an FTA network and Belt and Road cooperation projects. China’s FTA network establishment has been actively pursued with neighboring countries or developing countries, mainly for the purpose of revitalizing China’s trade and investment. However, the escalation of US-China conflicts has made geopolitical factors other than economic motives more important, and competition for leadership with the US in the Asia-Pacific region is intensifying. In addition to bilateral FTAs in the Asia-Pacific region, China is actively participating in regional FTAs such as the RCEP and CPTPP. In particular, China’s application to join the CPTPP can be interpreted as considering both the aspect of establishing a high-standard FTA and the geopolitical purpose at the same time. Accordingly, we analyze the current status of the Belt and Road Initiative, which is another important economic cooperation platform in building a regional network led by China, and the problems it faces, and changes after the US-China conflict. The existing One Belt, One Road initiative was promoted with the main purpose of revitalizing trade and investment between China and neighboring countries and linking infrastructure. However, due to internal and external obstacles such as countering measures by advanced countries (the Indo-Pacific strategy, B3W, Global Gateway, etc.), dissatisfaction on the part of partner countries (debt trap, environmental or labor issues), problems inherent in the BRI project (deteriorating profitability, increase in Chinese corporate debt), and the outbreak of the COVID-19 pandemic, the implementation of the BRI Initiative has been somewhat delayed. To overcome these US checking measures and other problems, China is emphasizing international norms compliance, transparency, and sustainability in the process of promoting BRI projects, and the scope of BRI cooperation is being expanded to digital, green, and health/medical fields. In addition, by utilizing these BRI projects, China plans to strengthen cooperation in global governance such as standards and norms. Lastly, the strategic value of ASEAN is expected to increase further as the competition for leadership in the Asia-Pacific region between the US and China intensifies. The recently promoted cooperation in network building between China and ASEAN was analyzed upon this backdrop.
Chapter 5 analyzes the global trade governance-led strategy that China is pursuing. When China joins the CPTPP, the issues are reviewed by norm, and in particular, China’s response strategy related to the state-owned enterprise norms is analyzed. China’s response to each norm is likely to be different. China accelerates domestic reform in line with high global norms for matters that are consistent with the long-term development direction of national development, while delaying as much as possible on sensitive matters related to the national system, or it is expected that a strategy will be pursued that reflects the position. In order to participate in global governance, domestic laws and institutions must be improved. The current status of domestic legalization related to commerce, which China is currently promoting, is analyzed by dividing it into sectors such as economic and commerce, digital, and competition law. China is building a legal system similar to that of the United States in order to respond to the US enactment of legislation to keep China in check in the fields of economic, trade and competition law. In the digital field, the Chinese government’s reform of the legal system for cyber security and data security and the status of domestic regulations were reviewed. This is interpreted as a preliminary step towards establishing data sovereignty in China and promoting the digital market’s openness to the outside world and participation in global norms. Through this, it was evaluated and predicted whether it is possible to change the role from the recipient of the global trade norms to a participant or maker, whether it is possible to join the CPTPP with a high level of norms, and what the intentions of the Chinese government are.
Based on the above analyses, the implications for Korea were derived as follows.
① First, the importance of economic security in the era of the US-China conflict and the necessity of establishing a trade strategy in consideration of economic security were emphasized. While preparing for the strengthening of economic and national security examinations in major global countries such as the US and China, policy implications for Korea’s export control system, foreign investment examination system, and supply chain stabilization policies were presented.
② The necessity of establishing a high-standard regional network strategy centered on Korea was emphasized in preparation for the competition for leadership in the Asia-Pacific region between the US and China in relation to the establishment of a regional network in Korea. Implications for Korea’s regional network expansion and active diversification strategy to ASEAN, India, Africa, Latin America, etc. were presented. In addition, we discussed how to utilize the Korea-China FTA and the Korea-China-Japan FTA as testbeds for global trade norms.
③ In the area of trade norms and legal systems, the necessity of reorganizing the domestic legal system in line with high global standards in preparation for competition in global trade norms was emphasized. This drew implications such as the need for active response to new trade agendas and norms such as climate change and digital trade, preparation for new trade norm issues such as the prevention of forced labor led by the Biden administration, strengthening US monitoring of China-related bills and preemptive response to ripple effects.