AeA, the high-tech trade association, released the 15th edition of its ongoing Competitiveness Series. The report analyzes the growing economic relation between the United States and China in terms of high-tech trade and foreign direct investment.

"China's economic rise poses less a threat than a host of challenges and opportunities to the rest of the world," said Rob Mulligan, AeA's Senior Vice President International. "Public policy responses on both sides of the Pacific need to recognize the interdependent nature of the U.S.-China relationship and avoid the temptation toward protectionism and distorting trade practices. As history shows, such policies restrain trade, damage the global economy, raise prices for consumers, and hurt the country that enacts them as much or more than the country being targeted."

"China needs to act fairly and responsibly in its trade policies, including not manipulating the exchange rate of its currency, respecting intellectual property rights, complete WTO compliance, and a host of other factors that currently strain the economic relationship between China and the United States," said William T. Archey, AeA's President and CEO. "These concerns about China's trade policies have not only been raised by protectionists and anti-China pundits, but also by analysts who are traditionally considered to be strong supporters of free trade."

"Unfortunately, China's trade policy is being driven by policies that are remarkably similar to Japan's during the 1980s," continued Archey. "China needs to heed the full cost of Japan's policies. These kind of protectionist policies only serve to stifle competition, which in turn prevents the type of innovation culture that China is seeking to promote."

Between 2000 and 2006, U.S. high-tech exports to China more than tripled, from $4.6 billion to $14.1 billion. Only the United States' two NAFTA partners, Canada and Mexico, are now larger export destinations for American tech products than China. On the other side, U.S. tech imports from China nearly quadrupled, from $26 billion to $102 billion between 2000 and 2006.

Total U.S. direct investment in China was $16.9 billion in 2005, a 12 percent increase over 2004. Chinese investment in the United States is small but is rising, up 11 percent from 2004 to 2005.