Written by student-Xuhui(Emma)

1. Spillover effect of US-China trade war to ferment continuously, reconstructs the global industry, value and supply chain

The US-China trade war not only increases the cost of bilateral trade in the short term, but also affects the production decision-making layout of multinational corporations in the world, greatly improves the cost of intermediate goods and industrial chain, and accelerates the relocation and transfer of some industrial chains, thus triggering the reconstruction of global value, industrial and supply chain. Specifically, labor-intensive production links will mainly accelerate the transfer to South Asia, Southeast Asia and other regions, and production links with high capital and technology content may be transferred to Japan, South Korea, Europe and other countries or regions. And the trend of this kind of reconstruction will not even stop because of the stop of trade war.

Actually, many Japanese companies have take actions against the backdrop of trade trade between china and the united states, with Mitsubishi motors moving back metalworking machines exported to the U.S. from China to japan, and Toshiba machinery moving parts of its manufacturing stronghold from Shanghai to Japan and Thailand, according to information. In response to the trade war, most Japanese companies said they would choose to move to factories or discuss the cost burden with their customers. Trade war also provides "alternative opportunities" for some other countries. In recent years, with the rise of labor, resources, energy and environmental costs, the international competitiveness of China's traditional processing and manufacturing industry has been weakened, and the labor-intensive industrial ladder has shifted to Vietnam, Malaysia, Indonesia, India and Southeast Asian countries. China's investment in ASEAN manufacturing has accelerated in recent years, with year-on-year growth of 73.4% and 34.3% in 2015 and 2016, respectively, according to the data. Against the backdrop of a trade war, the shift in labor-intensive industries to Southeast Asia and other low-cost countries seems likely to accelerate further, with the impact of tariffs shifting the capacity of some of the assembled products from China to other countries. The share of U.S. imports has been redistributed, according to research by Panjiva, a global market intelligence trade data firm at Standard & Poor's. U.S. imports from China have fallen 13.5 percent in the first quarter of 2019, whereas imports from Vietnam increased by 37.2%.

Overall, industrial transnational transfer is difficult and long time. For multinational corporations, the high cost of replacing the industrial chain is not only a tariff issue, but also the logistics cost, infrastructure, supply chain, the perfection and maturity of supporting industries, etc. The production investment and industrial chain of Chinese multinational companies are all in China, so it is not realistic to withdraw large-scale in the short term. At the same time, China's relatively complete industrial supporting system, and the status of deep integration with the global value chain is not easy to replace in the short term. However, once a trade war lasts for several years, the impact of such an industrial shift on China will undoubtedly be huge, and it needs to be prepared ahead of time to help China to win enough time to deal with and strategic initiative.

2. US-China trade war extends to a wider range, there is a risk for industry, value and supply chain

Judging from the relevant provisions of the U.S. Defense Authorization Act 2019 and a series of recent acts against China, such as economic cutting, industrial cutting, cutting of science and technology," decoupling "from China in science and technology, comprehensively curbing the rise of China's high technology, has become a consensus across party lines in the United States. The US neither wants China to acquire these core technologies through independent R & D or M & A to form an alternative industrial chain. The United States has also begun to adopt a comprehensive competition policy against China in science and technology. At present, the United States has comprehensively revised the current export control regulations to strengthen the "long arm jurisdiction" behavior. Trump's signature of the 2019 fiscal year's Defense Authorization Act, the Export Control Reform Act, which is an important part of it, has boosted foreign-held companies. Especially the restrictions on Chinese companies have increased export controls on "emerging and basic technologies" and cross-departmental consultation mechanisms have been established to enhance law enforcement capabilities. The Commerce's Department of PRC made a list of 14" representative emerging technologies "proposed by the U.S. government on November 19,2018, covering areas such as 5G, artificial intelligence, microprocessor technology, advanced computing technology, robots, 3D printing, quantum information, advanced materials and biotechnology. The United States has added 44 Chinese institutions to the "entity list" to strengthen the technology export embargo against China on the grounds of "violating the interests of the United States national security or foreign policy ".

3. The strategy of "containment and blockade" will change the development track of China’s "market for technology"

To deny China access to any advanced US technology resources, cutting and even "decoupling "has become an important strategic option for the United States at present and in the future, which will change the track of China’s "market-for-technology "and the path of catching up with other countries through the "learning curve ".

Looking back on the gradual development and improvement of China's modern industrial system, China's sustained high proportion of manufacturing investment laid the foundation for the subsequent economic take-off, especially through the "reform and opening up" policy to absorb the world's scientific and technological achievements, deep participation and integration into the global value chain are the key to promote the process of industrialization, modernization and factor efficiency in China. The US launched a trade war focused on intellectual property protection and technology competition, preventing technology outflow through visa means, talent policy, immigration policy, and then achieving the effect of technology blockade, which made it impossible for China to rely on the new technology upgrade path that was introduced – digested – absorbed – in the future.

In recent years, China's upward climb to global value chains and industrial chains has been dominated by capital goods (goods used to make other goods) and parts, which have also changed trade between China and developed countries. China's share of the global capital goods market rose from about 5% to more than 20% in 2007-2017, according to data released by the World Bank. In terms of trade structure and commodity structure, China's exports of US goods accounted for an increase in telecommunications and transport equipment and auto parts, while textiles and footwear accounted for a decrease. As companies continue to invest in R & D facilities and work more with academia, Chinese industry is expected to move toward emerging and complex technologies, according to the National Science Foundation's "American Science and Engineering Indicators 2018" data. In the middle-end high-tech industry, China now dominates, with its global share nearly doubling to 32% over the past decade, surpassing the US in 2009 and the EU in 2012. In 2018, China's total imports and exports of high-tech products were about 30.7% of its total foreign trade, accounting for more than 90% of its exports of industrial goods, and more than 30% of its exports of high-tech products. The far-reaching impact of US technology blocking and "decoupling "to China's high-tech exports in the future will be even more salient.