China and the United States share many common grounds including trade and economic cooperation, and this cooperation develops rapidly. The bilateral trade value was only US$2.5 billion in 1979. In 2005, however, the trade volume had reached US$211.63 billion according to Chinese statistics. Now the US has become China's largest export country and second largest trade partner while China is the US fourth largest export market and third largest trade partner.

The China-US trade and economic cooperation is beneficial to both sides. For China, it can promote economic development and relieve the pressure on employment. For the United States, in my opinion, it is important as well. Statistics by Morgan Stanley show that using comparatively cheaper Chinese products has saved the Americans about US$600 billion in the last ten years. Some Americans admitted humorously that from the alarm clock used to get up in the morning, to the toothbrush, to the sneakers worn in jogging and to the quilt needed for sleep at night, they are all made in China.

From another perspective, China also buys US treasury bonds, which is tantamount to lending the use of China's foreign exchange reserves to American investors. Americans get returns on the investment made possible by China's bond purchase while China only gets interests on the bonds. Aren't Americans benefiting from it as well?

It is a fact that there is an imbalance in the China-US trade with China running large surplus. This requires both sides to sit down and seriously work out an appropriate solution.

First, the two sides use different statistics calibers and methodologies. For example, statistics from the two countries on the same surplus in 2004 were different, with Chinese statistics putting it at US$80 billion and US statistics at US$160 billion. The US employs the "origin of goods" principle, attributing to China all Chinese exports to the US via the Hong Kong region or other countries. China runs large trade deficits with Japan, South Korea and Southeast Asian countries and according to this principle the goods America exports to these countries that have been resold to China should be counted as well.

Chinese statistics use the free on board (FOB) while the US uses the cost, insurance and freight (CIF), leaving a difference in freight and insurance. US statistics do not include trade in service while as a matter of fact trade in service such as American investment banks and consulting firms doing business in China is also profitable.

Second, the China-US trade has a structural problem in that most Chinese exports to the US are low-end products and a majority of US exports to China are high-end products. American science and technology is the most developed in the world. Statistics show that only about 10 percent of all Chinese imports of high technologies and high-tech products come from the US.

Third, we need to study how to better complement each other in terms of export structure. Some American industries, like the textile industry, also have structural problem. Frankly speaking, even if restrictions are put on Chinese textiles it would still be hard for the American textile industry to compete with those in Mexico or other Southeast Asian countries, since the cost of textile products in these countries is still lower than in the US.

China has no intention of pursuing an excess trade surplus, hoping to realize basic balance in trade. China and the US should together explore a solution to reduce trade imbalance instead of politicizing trade issues. An American senator described the China-US trade imbalance in a speech as "the ships you see from China to America are all loaded while those from America to China are all empty". There is nothing surprising since what China sells to America is shoes, toys and clothes, which must be transported by loaded ships while things American sells to China are software and chips, which need not be so shipped. Moreover, experts providing financial and consulting services to China are sure traveling by air.

We should, on the one hand, see the importance of the China-US trade and economic relations to the two countries or even the world as a whole. On the other, it must be noted that some frictions and problems are inevitable in the process of trade and economic development. They require serious analysis and study by both sides so that appropriate solutions can be found.

This article by Cheng Siwei, Vice Chairman of the Standing Committee of the National People's Congress (NPC), is carried on the front page of People's Daily Overseas Edition on March1 and translated by People's Daily Online.

(People Daily Online March 3, 2006)