“I welcomed President Xi Jinping’s commitment in fighting against protectionism,” EU Trade Commissioner Cecilia Malmstrom said at a seminar on China’s reform agenda, organized by Business Europe in Brussels. I think the EU representatives don’t seem to fully understand that China does not intend to deal with Europe as a block, rather it prefers to do bilateral deals with individual countries, of course within the limits of what EU regulation allows since trade policy lives in Brussels and not in the European individual countries.
Morgan Stanley’s research did three scenario analyses, assuming the average tariff to be 15%, 30% and 45%, to see the effect on Chinese export and economy. Under the tariff of 15%, 30%, and 45%, Chinese exports to the US will decrease by 20.7%, 46.2% and 71.7% respectively, resulting in a total decrease of China export of3.7%, 8.2% and 12.8%. China International Capital Corporation claimed that it is relatively impossible for Trump to set 45% as average tariff. The research then predicted what China economy will be like if 30% was the average tariff rate.
Sino-U.S. trade volume grew from 2.5 billion U.S. dollars in 1979 to about 519.6 billion dollars in 2016, surging by 211 times within 38 years, according to MOC statistics. A report from the U.S.-China Business Council (USCBC) showed that bilateral trade and investment in 2015 created about 2.6 million jobs for Americans and contributed to about 1.2 percent of U.S. GDP that year.
Wilbur Ross, American Commerce Secretary on Wednesday stated that China is the most serious trade protectionist country. China is doing well in talking about free trade than actually doing it. When dealing with trade and protectionism issues, a country is always trying to find a balance between protecting the interest of producers’ vs protecting the interest of consumers’. But things get more complicated when policy makers need to find a compromise between making a country better off on average vs making everyone better off.
China’s State Council issued a notice aimed at “efficiently use foreign capital to further expand investment and create a fair competitive environment”. I believe it when I see it. The relevant policies and regulations are to relax the restrictions on access to foreign investment in services, manufacturing, mining and other fields.
Accroding to Hexun.com, State Administration for Foreign Exchange (SAFE), fearing that cross-border M&A may be used by Chinese groups to move capital offshore, indicated that it will crack down on speculative acquisitions. From now on only “Strategic” acquisitions – that is those that have synergies with the buyer’s business at home – will be allowed. The closing of the Capital Account indicates, as I have often argued, that the Internationalization of the RMB is further away than generally assumed.
Geraci and Prof Liu Baocheng from University of international business & economics were guests at CCTV Dialogue on 24, December, 2016. The talks mainly concerns Private capital outflow and challenges in manufacturing sector. Geraci belives the top concern for China is to stabilize the financial system. The west and other emerging markets have had experience of crisis, so China needs to be very careful. China should slow down reforms in the financial markets.
When Trump announced that the U.S. infrastructure will be “second to none”, he was almost inviting China to exchange potentially worse trade conditions for better investment opportunity into the U.S. Black Swans are always opportunities if well understood: China needs to quickly move to value added manufacturing (China 2025) and having some trade issues with the U.S can, actually, only help China’s speed up its transition towards innovation.