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SepCurrently, the stability of foreign trade is facing challenges given the unstable and uncertain international environment. Stabilizing foreign trade is one of the six stabilization tasks put forward at the meeting of the Political Bureau of the CPC Central Committee on July 31, 2018. What is the good news for the development of China’s foreign trade? What should be done to stabilize foreign trade?
At 21:48 on September 19, Chinese Economic Forum, a programme on CCTV-2, CCTV Finance Channel, invited Liu Yuanchun, Vice President of Renmin University of China (RUC) and Cheung Kong Scholar Distinguished Professor, to make a deep interpretation of New Challenges and New Strategies: How Should China Stabilize Its Foreign Trade?
In the first place, we should promote trade diversification. Do not put all eggs in a basket. General Secretary Xi Jinping put forward the Belt and Road Initiative in 2013, which sets forth that it is important to truly diversify our exports, imports, trade pattern and investment pattern, and seek development in different ways. Additionally, we should not only expand the scale of exports and imports, but also raise the quality of imports. Something people would discuss a few years ago was the outflow of some of China’s domestic demand and high-end purchasing power as many people would buy a lot from overseas outlets or famous brands when they went abroad. Why can’t such consumption take place at home? Why can’t these high-quality commodities sell or be produced at home or even be replaced by homemade commodities? China has attached great importance to this issue by organizing China International Import Expo. And more than that, we have taken actions to hedge against U.S. taxes on Chinese exports. First, we have further raised the export rebate rate from 11% to 13%, offering a 2% deduction. Meanwhile, we have cut taxes and duties at home to provide special support for some industries. In particular, improvements in our business climate and import & export procedures have led to a sharp decrease in costs, which is a part of the efforts to hedge against U.S. trade protection in all respects.
Over the past years, some pessimists, especially some international investment banks and international macro researchers, believed that a lot of things would happen in China. Of special concern were that a few Chinese leading high-tech enterprises would go out of business, particularly Huawei and ZTE, main targets of U.S. blow, and that China’s trade would undergo double-digit negative growth. They argued that U.S. taxes on Chinese exports would probably trigger a number of chain effects, especially offshoring of exports and some industries. Many people stated that as Nike, Adidas and even Apple of the U.S. were transferring their production lines to Southeast Asia, exports of shoes and hats from China would slump. By analogy, many predicted a double-digit negative growth rate of China’s trade. The third important corollary is that as small and medium-sized enterprises (SMEs) account for 50-60% of China’s exports and they are vulnerable to attacks, many SMEs would go bankruptcy. The fourth one is that a large amount of foreign capital would flow out of China, disrupting the financial market.
Then, how is it going in China a year later? Let’s see some typical facts. First, Huawei published its performance in the first half of this year on July 30 and instead of going out of business, Huawei run quite well, with the revenue increasing by 23.2% year on year and a net profit rate of 8.7%. What does 8.7% mean? Average companies often have a net profit rate of only 5% or so. The figure indicates high profitability and good business performance of Huawei. Meanwhile, with a rebound of mobile phone sales during the first half, Huawei occupied 40% of the mobile phone market, and signed more than 30 large 5G orders. The prediction that some Chinese leading high-tech enterprises would quickly close down has failed and these enterprises are more resilient than they think they are.
Second, China’s trade has maintained positive growth rather than negative one. From January to June 2019, China’s exports grew by 6.1% year on year, imports rose by 1.4%, and the trade surplus registered more than USD 180 billion, an increase of over 40% year on year. So how do you think of China’s foreign trade? Is it good or bad? Someone would say this year’s growth rate is still lower than the one last year, which was higher than 12%. But we should see the general trend in the world. In a generally sluggish world, China definitely cannot be particularly thriving. Nevertheless, it is already great to grow at a rate of 6.1%.
Third, foreign direct investment increased by 5.6% year on year. Many said that foreign capital would begin to flow out of China, but this is not true. So they wondered whether the data was wrong. With so many foreign companies building factories in Southeast Asia, why hadn’t foreign capital register negative growth in China? We have conducted a lot of research and find that the following phenomena should be noticed: firstly, some of China’s low-end industries do have moved to Southeast Asia. Secondly, Europe and America, especially Europe, Japan and Korea, begin to invest heavily in China’s high and new technologies and services. Given the large size of the Chinese market, U.S. high-tech enterprises can and will not withdraw from China. Case studies suggest that in view of the hugeness of the Chinese market and relative stability of China’s technology chain and industry chain, China is an irreplaceable market.
Fourthly, China witnessed generally sound employment in the first half of this year. There were 3.55 million new firms, an increase of 19,000 ones per day, and 7.37 million new jobs created, with a surveyed unemployment rate of 5.1%. All these indicate great vitality. Therefore, many people often doubt the creditability of China’s data and consider it as window-dressing. I once told my foreign peers that if they went to China and had a look there, they would find almost no idlers or homeless people in the street. Also, we will see a series of figures showing that the number of Chinese enterprises on the list of Global 500 companies has exceeded that of American enterprises for the first time this year, which figures are of epoch-making and symbolic significance. Of the Fortune Global 500 companies, 129 are Chinese and only 121 are American.
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http://tv.cctv.com/2019/09/20/VIDE2HLjSdlDJhOwxHAdVk5V190920.shtml
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