FACTBOX-U.S.-China interdependence transcends trade

Wed Oct 28, 2009 3:46am EDT

By Lucy Hornby

HANGZHOU, China, Oct 28 (Reuters) - U.S. and Chinese officials meet in Hangzhou this week at the annual Joint Commission on Commerce and Trade, a few weeks before U.S. President Barack Obama makes his first official trip to China.

With the two giant economies joined at the hip, the U.S.-China relationship is strained by issues like the value of the yuan, but is unlikely to unravel over any single dispute.

"Made in China" products accounted for less than 1 percent of U.S. imports a quarter of a century ago.

Now, China's high rate of savings is used to buy U.S. treasuries, allowing Americans to buy Chinese exports. That has driven economic growth in China and lifted hundreds of millions out of poverty.

TRADE

By 2008, U.S. exports to China totalled $69.7 billion, but were dwarfed by $337.8 billion in exports from China to the United States, now Beijing's second biggest trade partner.

The U.S. trade deficit with China has grown steadily since 1985, when its exports to China were worth $3.86 billion, $6 million less than the value of Chinese shipments to the United States. Bilateral trade was less than $2.5 billion in 1979.

Rising Chinese exports have alarmed U.S. industry and unions, while China worries that U.S. duties -- like a safeguard duty on tyres -- will threaten its export markets.

DEBT

China held $797.1 billion in U.S. Treasuries at end-August, displacing Japan in September 2008 as the largest foreign holder.

Beijing is concerned the value of its dollar holdings could be eroded by massive debt issuances to fund the U.S. stimulus.

PEOPLE

The 2000 census says 1.19 million people living in the United States were born in China. About half are U.S. citizens.

FOREIGN DIRECT INVESTMENT

As recently as the early 1990s, foreign direct investment accounted for less than 5 percent of total investment in China.

Foreign invested firms in China now employ more people than do China's state-owned and collective enterprises.

Since the joint venture heyday of the 1990s, U.S. non-financial FDI in its trading partner has slid, accounting for 3.2 percent of utilised FDI in 2008, versus 10.5 percent in 1999.

Utilised FDI from the United States slipped to $2.9 billion in 2008, down from $4.2 billion in 1999, even as overall FDI in China nearly doubled to $92.4 billion last year.

China encourages its firms to "go out" and invest overseas, particularly in natural resources -- but ran up against national concerns when China's CNOOC tried to buy U.S. oil firm Unocal.

Chinese non-financial direct overseas investment leapt to $40.65 billion in 2008, almost half of the investment coming in. That is compared with $6.92 billion in outbound investment in 2005, about one-tenth of the investment into China in that year.

DIPLOMACY

China and the United States meet regularly through what is now known as the Strategic and Economic Dialogue.

The two countries are permanent members of the United Nations Security Council.

They are key players in the six-party talks over North Korea, and the Washington is seeking China's cooperation over Iran.

China has become an enthusiastic participant in the World Trade Organisation [ID:nPEK143174].

Sources: American Chamber of Commerce 2009 White Paper; U.S. Census Bureau; The U.S. China Business Council; Chinese Ministry of Commerce; American Chamber of Commerce China Brief.

(Editing by Paul Tait)