China-Trump The First 30 Days中国 - 特朗普首 30 天的经济关系

Antonio Graceffo, PhD, China-MBA ( 安东尼博士 )School of Economics Shanghai University 上海大学经济学院

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On November 8, 2016 Donald Trump was elected US president. His election sparked protests across the United States and demonstrated how divided the nation is on Trump.  

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He assumed office on January 20th, with an approval ratings of only 48% one of the lowest of all time.

Immediately after the election the NASDAQ, the Dow Jones, the S&P, and the US dollar rose (The Guardian 2016).

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Leading US investment manager Jack Welch was quoted as saying, “Trump's economic plan offers "unlimited" opportunities” (The Guardian 2016).

Both stocks and the US Dollar have continued to rise since the election. And all major indexes have hit all-time highs (Business Insider 2016).

He has been credited with saving jobs when he convinced Carrier to keep 1,000 jobs in the US which they had been planning to move to Mexico (Gambino 2016).

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On January 19th, Stern, a leading German language news magazine ran a cover, depicting Donald Trump seated on a throne, with the title “The New Emperor.” The caption read “How Donald Trump will change the world, and why that is so dangerous for the rest of us.”

Trump offends a lot of people around the world

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On January 28, Trump signed an executive order banning immigration from 7 Muslim countries.Which, according to Aljazeera, “European leaders, the United Nations and international groups have condemned”

Trump insults Australia "Do you believe it? The Obama Administration agreed to take thousands of illegal immigrants from Australia. Why? I will study this dumb deal!" Trump Tweet, quoted in Quartz

Trump Insults German Chancellor Angela Merkel “Donald Trump accuses Angela Merkel of making 'catastrophic mistake' on refugees” (The Independent 2017)

Trump insults the President of Mexico "Heroin overdoses are taking over our children and others in the MIDWEST. Coming in from our southern border. We need strong border & WALL!" (Trump Tweet, quoted in Sky News)

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And Donald Trump said “China” a lot. In this viral video, he said China 234 times.

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Antonio Graceffo ( 安东尼博士 ))

The China-US economic relationship is the most important in the world.

Between 1990 – 2015, US FDI into China totaled $228 Billion

Chinese FDI into the US totaled $64 Billion (Glenn 2016)

China and the US are each other’s number one trading partnerIn 2016, US-China trade totaled $527,580.3 with a US trade deficit of $319,282.

The United States is the world’s largest economy, with a 2016 GDP of $18,561,930. China is second, with $11,391,619.

Trump's Anti-China Triumvirate: Robert Lighthizer - US trade representative Wilbur Ross – Secretary of CommercePeter Navarro -  Newly created White House National Trade Council

US-China trade relations are worsening

President Trump has packed his cabinet with advisors who are pro-Taiwan and anti-China.

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Most notably:

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Peter Navarro was my online professor for at least two or three of my courses. The signature on my macroeconomics diploma is his.

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Donald Trump has removed the US from the Transpacific Partnership (TPP)He has also vowed to raise a 45% tariff on products imported from China, He has threatened to raise a 35% tax on US companies abroad.

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Donald Trump’s mantra “America First”

China-US Trade

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In 2015, China exports to the US totaled $481.9 for US exports to China totaled only $116.2 billion (Amadeo 2016).

The US accounts for a total of 20% of China’s exports (Elliott 2016). And this number increases almost every year.

 The US runs a trade deficit with China美国是中国第一大出口伙伴，占中国出口总额的 20 ％（ Elliott 2016 ）。 它几乎每年都增加。 美国与中国发生贸易逆差2015 年，中国对美出口总额 4819亿美元美国对华出口总额仅为 1162 亿美元

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Valuation of the Chinese currency, the Yuan is not simple, but, while it is allowed to fluctuate within a narrow band, set by Beijing, the Yuan is more or less pegged to the US dollar. This is one of the main reasons why China holds so much US debt. Purchases and sales of US debt are used to regulate the price of the Yuan.

US Foreign Debt

As of October, 2016, China is the second largest foreign holder of US debt, $1.115 trillion (Investopedia 2017)

( 安东尼博士 ))Antonio Graceffo ( 安东尼博士 ))

Donald Trump says China is beating the US in trade because Chinese wages and Chinese currency are too low. Therefore, he wants to raise a 45% tariff on Chinese products to make them more expensive and make trade between US and China more even.

他说，中国有一个贸易优势，因为中国的工资和中国的货币太低。因此，他想对中国产品征收 45 ％的税，使它们更贵，使美中贸易更平均。

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Lower wages

The average factory worker in US earns $11.93/hour $1,908/month (Payscale.com)While the average factory worker in China earns around 3000 RMB per month ($463) (Thayer Consulting, 2016)

Chinese products are cheaper than American products on world markets, including inside of the US. One reasons for this is that Chinese wages are very low compared to other developed countries.

他说，中国有一个贸易优势，因为中国的工资和中国的货币太低。因 此 ， 他 想 对 中 国 产 品 征 收45 ％的税，使它们更贵，使美中贸易更平均。 ( 重复了 ?)

美国的平均工厂工人每小时得到11.93 美元，每月 1,9080 美元（ Payscale.com ）中国的平均工厂工人每月约3000 元（ 463 美元）（ Thayer Consulting ， 2016 ）

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Many economists feel that China’s wages are too low, given how rich China is.

Per capita GDP (used as average income)  China $7,924.7Malaysia $9,766.2Gabon$10,966 

A number of countries which are much poorer than China have higher incomes.

许多经济学家认为，考虑到中国的富裕程度 , 中国的工资太低。 许多比中国贫穷的国家收入更高。人均 GDP （用作平均收入）中国 7,924.7 美元马来西亚 $ 9,766.2加蓬 $ 10,966西欧经济最差的国家是希腊，人均 GDP为 18,035.6 美元The country in western Europe with the worst economy is Greece, which has a per capita GDP of $18,035.6 .(Worldbank 2016)

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One reason why Chinese products are cheaper and wages are lower is because the Chinese currency is low. 1 US Dollar equals6.81 Chinese Yuan (XE Converter 2017, viewed February 7, 2017) If the exchange rate were 1 USD = 3.46 Yuan, The income of Chinese people would double, but Chinese products would become more expensive.

Low currency value

中国产品更便宜，工资更低的一个原因是因为中国的货币很低。1 美元等于 6.91 元（ XE Converter 2017 ，阅读1 月 6 日）如果汇率是 1 美元 = 3.44 元，中国人的收入会增加一倍，但中国产品会变得更贵。

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Through September, 2016, China was the largest holder of US foreign debt. The People’s Bank of China, the China Central Bank was holding CNY 3,121 billion of foreign reserves, mostly US Dollars (Trading Economics 2016).

Macroeconomic theory says: If the Chinese government spent this money, it would increase the number of US Dollars on the world markets, decreasing the value of US Dollars, and decreasing the number of Yuan, which would make the Yuan go up in value.

Donald trump accuses China of currency manipulation

截至 2016 年 10 月，中国人民银行拥有外汇储备 31.2亿元。 大多数外汇储备是美元。如果中国政府花这笔钱，就会增加世界市场上美元的数量。 美元的价值会下降。 此外，世界市场的人民币数量也会减少。 而元的价值会增加。

Charges of currency manipulation are not as simple as they seem.

Over the past two years, China has had three major selloffs of US debt. In August, 2015, they sold $94 Million. In December, 2015, China sold $18 billion of U.S. Treasury debt. In October 2016, after the Offshore Yuan hit a record low of more than 6.92 to the US dollar. In December of that year, the government dumped $41.3 billion in US debt. And yet, in December, the Yuan (domestic RMB) continued to drop to 6.94.

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China, and many China watchers reject the charges of currency manipulation say that China is actually doing everything they can to prop up the Yuan. The argument is that market factors are driving down the price of the Yuan and the government is not to blame.

Whether China is a currency manipulator or not, the problem for US companies is that the Yuan is extremely low and appears to be trending downward.

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One way of dealing with this issue would be for President Trump to increase tariffs on Chinese imports in order to bring the prices in line with American products.

To this end, Donald Trump hwants to levy a 45% tariff against Chinese imports.

 "The Trans-Pacific Partnership (TPP) is a 12-nation trade pact that would cut tariffs and deepen economic ties between the signatories" (Haas, B. 2016). The trade agreement, signed in 2016, comprised of 12 member states: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States, and Vietnam (but not China) represents 40% of global commerce (Haas 2016)

Donald Trump has removed the US fromthe Transpacific Partnership (TPP)

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Senator Sanders even published a paper entitled The Trans-Pacific Trade (TPP) Must be Defeated (Sanders n.d.).

President Trump wanted to leave the TPP because theTPP commission would make decisions for US workers.

US labor unions wanted the US to leave the TPP , because they say the TPP will export American jobs.

US Environmentalists wanted to leave the TPP because of potential environmental damage.

Obama administration Democratic party members, such as Senator Bernie Sanders and Senator Elizabeth Warren, also opposed the Partnership.

Donald Trump 说他希望美国退出跨太平洋伙伴关系 (TPP) 。唐纳德 · 特朗普希望美国退出跨太平洋伙伴关系因为TPP 委员会是为美国工人做出决定。美国工会希望美国退出跨太平洋伙伴关系，因为他们说 TPP 将输出美国工作。由于潜在的环境破坏，美国环保人士希望美国退出跨太平洋伙伴关系。奥巴马政府民主党成员，如参议员伯尼 · 桑德斯和参议员伊丽莎白 · 沃伦，也希望美国退出跨太平洋伙伴关系参议员桑德斯出版了一篇题为“跨太平 洋 贸 易 （ TPP ） 必 须 击败”（ Sanders n.d. ）的文件。

 The US runs a trade deficit with nearly all of the TPP members.Most TPP members charge higher tariffs on US exports than we charge on their importsMany TPP countries have barriers preventing American companies from investing in certain sectors. TPP partners have state-owned banks, and grant unfair trade subsidies to their state-owned enterprises.

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The US leaving the TPP creates opportunity for China, whether to fill the vacant seat in the TPP, or through promoting the RECP (Campbell 2016)

Reasons for leaving the TPP

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China is ASEAN’s largest trading partner.

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China is one of ASEAN’s largest source of FDI.

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Since ACFTA began in 2010, ASEAN has been running a trade deficit with China.

“China has the potential to buoy the ASEAN economies, but also to create structural imbalances that damage the region in the long run” (Salidjanova and Koch-Weser 2015).

Economic dependence on China?

With the exception of Thailand and Malaysia, all of the ASEAN countries, individually, run a trade deficit with China.

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US Foreign Direct Investment (FDI) in ASEAN has increased from $50 billion in 2000 to $226 billion in 2014, which represents more than 30% of total US investment in Asia US FDI represents 11% of ASEAN’s total FDI (UNCTAD 2016).

There are over 1,500 US companies in Southeast Asia, more than any other region in Asia.

The US is also important for ASEAN

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The US is ASEAN’s fourth largest trade partner

Singapore is the greatest importer of US goods, followed by Malaysia, and, Thailand, Indonesia, and Philippines

In 2013, ASEAN was the US fifth largest import partner and fourth largest export partner (USTR 2016)

Among the ASEAN countries, Malaysia is the greatest exporter to the US, followed by Thailand and Vietnam.

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Three motivations for US FDI in ASEAN

1. Gain a local production platform, 2. Produce goods for local and regional markets3. Gain access to raw materials and resources.

Sixty percent of US products produced in ASEAN are sold outside of the host country and 90% are sold outside of the US (UNCTAD 2016).

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The US runs a trade deficit with ASEAN in goods

ASEAN runs a trade deficit with the US in services (USASEAN 2016)

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China proposed forming the Regional Economic Comprehensive Partnership (RECP), RECP includes the ten Asian countries: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam, plus 6 states with whom ASEAN has standing free trade agreements: China, Japan, India, South Korea, Australia New Zealand (Carlson 2016).

The US leaving the TPP would benefit China 美国退出 TPP 将有利于中国中国提议成立区域经济全面伙伴关系（ RECP ）， RECP 包括十个亚洲国家：文莱，柬埔寨，印度尼西亚，老挝，马来西亚，缅甸，菲律宾，新加坡，泰国和越南，加上东盟有 6 个国家 贸易协议：中国，日本，印度，韩国，澳大利亚新西兰（ Carlson 2016 ）。 美国离开 TPP 为中国创造机会，无论是填补 TPP 中的空缺席位，还是通过推广 RECP （ Campbell 2016 ）

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A third option for Beijing is to promote the Free Trading Area of the Asia Pacific (FTAAP). Chinese President Xijinping has also called on his trading partners to increase the FTAAP (Carlson 2016).

The Free Trading Area of the Asia Pacific (FTAAP).

北京的第三个选择是促进亚太自由贸易区（ FTAAP ）。中国总统习近平也呼吁他的贸易伙伴增加 FTAAP（ Carlson 2016 ）。

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 Donald Trump has stated that he would levy a 45% tariff on Chinese goods. Some argue that this tariff would be in violation of WTO agreements (Reuters 2016).

Donald Trump’s Proposed Tariffs on Chinese goods

唐纳德 · 特朗普对中国商品的建议关税唐纳德 · 特朗普表示，他将对中国商品征收45 ％的关税。 一些人认为，这种关税将违反WTO 协议（路透社 2016 ）。

Trump says that China’s unfair trade practices are already a violation of the WTO.

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If the US raises tariffs against Chinese products, China could raise tariffs against US products. American airplane manufacturers, automakers and makers of farm machinery, and US soybean exporters (Bradsherbov 2016 and Smith et. al. 2016).

Economists argue that a trade war could start

Although a trade war would most likely hurt the surplus country, China, more, it would also hurt the US.

经济学家认为贸易战争可以开始如果美国提高对中国产品的关税，中国可以提高对美国产品的关税。 美国飞机制造商，汽车制造商和农业机械制造商，以及美国大豆出口商（ Bradsherbov 2016 和 Smith 等人 2016 ）。

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US consumer goods manufacturers, such as Nike or Apple, could simply relocate their China-based manufacturing facilities to Indonesia or Vietnam (Smith et. al. 2016). But even if they relocate, most of the jobs will not return to the US.

因为中国有贸易顺差，贸易战争很可能伤害中国，超过美国。 但贸易战争也会伤害美国。美国消费品公司，如耐克或苹果，可能将他们在中国的制造设施迁移到印度尼西亚或越南（ Smith 等人 2016 ）。 但即使他们搬迁，工作也不会回到美国。。

And these US companies would lose their China markets.

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Moody’s ran a simulation to see what the effects of the Trump-China Tariff would be. In the short run, it hurt the Chinese economy, but in the long run, it caused a recession in the US, and eventually crippled the global economy. The Trump tariff was compared to when President Herbert Hoover increased tariffs in 1929, with the Smoot-Hawley Act, which experts feel is what drove the US and the world deeper into The Great Depression (Schmitz 2016).

穆迪的计算机模拟确定，贸易关税将在短期内伤害中国经济。 但从长远来看，这将导致美国经济衰退。 它最终会削弱全球经济。一些专家说，特朗普的关税类似于美国总统赫伯特 ·胡佛在1929 年增加关税。专家认为这种关税恶化了 1929 年的经济大萧条（ Schmitz 2016 ）

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 Currently, The Office of the United States Trade Representative (2016) sets US exports to China at more than $161 billion. Fears are that if a trade war escalated US exports to China would stop. And this number could increase with a free trade agreement.

Experts against a China tariff

Schuman (2016) reporting for Bloomberg.com, suggested that Trump’s best China strategy would be to arrange a free trade agreement.

China has a tremendous population with an economy growing at the rate of around 6% per year. China now represents an extremely attractive market of more than 1.3 billion consumers with a per capita GDP of over $7,000 per year, according to the World Bank (2016).

有的专家建议不要对中国进口增加关税Schuman (2016) reporting for Bloomberg.com, 他建议特朗普最好的中国战略是安排自由贸易协定。中国人口众多。 经济增长率超过 6 ％。 现在，中国是一个非常有吸引力的市场。 中国有 13 亿消费者，每年人均 GDP超过7000 美元，根据世界银行（ 2016 ）。

Opponent’s of Donald Trumps proposed 45% tariff against China have claimed that it is illegal for the US president to levy such a high tariff without approval. This may be the case, but CNN Money found several loopholes to the tariff rules.

Unlimited tariffs 'during time of war' – The president has the right to limit all trade during times of war. And the war doesn’t have to be with China, having US troops in Syria may qualify.

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Hit specific industries or low tariffs on everything – Irrespective of war or other emergency, the president can levy a 15% tariff, for 150 days, on a specific productsTrade Expansion Act of 1962. – Under this act, the president can raise tariffs on specific industries. (Gillepsie 2016)

Unlimited tariffs during 'national emergency' - the International Emergency Economic Powers Act of 1977. The president can declare an emergency, on almost any grounds, including severe unemployment. Under this act, he can not only raise tariffs but also seize assets.

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Donald Trump has pledged to build a wall on the Mexico border as well as leaving or renegotiating NAFTA.

The connection between Mexico and China

This is important for China because it means that President Trump is serious about trade protectionism

Moving production from Mexico to the US will increase the cost of consumer goods, making Chinese products appear even cheaper and thus more of a target for tariffs.

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Donald Trump has threatened US companies overseas with a 38% tax if they export products to the US. 

Taxing the exports of US companies in China is significant because, according to the Financial Times, more than 50% of China’s total exports are by companies that are at least partly foreign owned.

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In early February, 2017,Donald Trump acknowledges the One China policy in a phone conversation with Xi Jinping.

The phone call between Trump and Xi served to mend some of the damage done to US-China relations since the campaign began.

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US Secretary of State Rex Tillerson met with Chinese Minister of Foreign Affairs, Wang Yi . In this discussion Tillerson asked for China’s cooperation in limiting North Korea’s nuclear program.

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Shortly afterwards Chinese courts granted Donald Trump a win in his long running lawsuit to copyright the Trump name in China. Critics have shouted conflicts of interest and quid pro quo.  But the lawsuit predates his presidency by a long time.  China continues to brace for a trade war and Trump continues to move the US toward a more protectionist posture 

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In December, 2016, The U.S. Federal Reserve Open Market Committee (FOMC) increased the interest rate by 0.25%.

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Increase capital flight – Possibly increased private Chinese investment in the USThe Dollar will continue to riseThe Yuan will continue to dropChinese foreign investment may slow down. Chinese companies borrowing in US Dollars will decreaseChinese non-performing loans will increaseServicing foreign debt will become more difficult for Chinese firms.Chinese products will become even cheaper in the US.US exports will become even more expensive in China.

The impact on the Chinese economy

Author’s recommendation: The US and China could come to the negotiation table and see if a compromise could be reached by which the US leader would feel the playing field was fair, after which, a free trade or expanded freed trade agreement could be reached.

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Outcomes

The US leaving the Transpacific Partnership (TPP) may benefit China, either through China filling the US seat in the TPP, or leading the the Regional Economic Comprehensive Partnership (RECP), or the Free Trading Area of the Asia Pacific (FTAAP).

The US levying a 45% tariff against Chinese imports would probably hurt China worse than the US, but in the long run, it would hurt both countries, and in an extreme scenario, it could destroy the world economy.

结论美国离开太平洋伙伴关系（ TPP ）将使中国通过填补美国在 TPP 中的席位，或领导区域经济综合伙伴关系（ RECP ）或亚太自由贸易区（ FTAAP ），而受益。美国对中国进口征收 45 ％的关税可能与美国相比会更加伤害中国，但从长远来看，它会伤害两国，在极端情况下，它可能摧毁世界经济。作者的建议：美国和中国可以进入谈判桌，看看是否可以达成妥协，美国领导人认为公平竞争的领域之后，可以达成自由贸易或扩大的自由贸易协定。

Antonio Graceffo ( 安东尼博士 ))

1. The Fed rate hike is going to wreak havoc with the Chinese economy and drive the Chinese currency down even further2. Foreign goods exported to China will become more expensive.3. Imports from China will become cheaper. 4. Components imported from China will be cheaper.6. Chinese FDI will most likely decrease7. The massive infrastructure and construction projects abroad may slow down. 7. Increased Chinese Private investment in foreign markets, particularly US dollar denominated currencies (Such as in Cambodia)

What this all means for China and the world

If taxes and tariffs are increased on US firms in China, they will relocate. This may cause unemployment in China.

Antonio Graceffo ( 安东尼博士 ))

What this means for China

Nonperforming debt from state owned enterprises will increase and may be a good investment.

Dr. Graceffo is available to give presentations about China-US economics, Please contact him at Antonio_graceffo@hotmail.comAntonio is also looking for publishers for his economics researchpapers on China-US economicsAndAntonio needs a publisher for his new book which is an overview of the Chinese economy Antonio Graceffo, PhD, China-MBA ( 安东尼博士 )

School of Economics Shanghai University 上海大学经济学院

Dr. Antonio Graceffo, PhD, China MBA (安东尼博士 )School of Economics Shanghai University 上海大学经济学院Contact: antonio_graceffo@hotmail.comLinkedin: https://www.linkedin.com/in/antoniograceffo

Antonio Graceffo ( 安东尼博士 )

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