Beijing must offer subsidies and policy support to companies harmed by US tariffs
Trade frictions between China and the US continue to escalate. Now, it’s time for China to take further self-defense measures including offering fair subsidies for the companies and industries that may suffer great losses due to unfair actions taken by the US.
The ongoing trade tensions are now spilling over into the technology sector as media reports said US President Donald Trump plans to bar Chinese companies from investing in key technologies in the US. Although Peter Navarro, one of Trump’s top trade advisors, was quoted by US business channel CNBC as saying that there “were no plans to impose investment restrictions,” we cannot rule out the possibility that Chinese technology companies may still be treated unfairly and thus become the victims of Trump’s trade war.
China does not want a trade war with the US. If Trump continues to drag the US into a trade war with China, the first thing the Chinese government should do is to protect Chinese companies and investors from losses resulting from Trump’s protectionist trade policy. China can offer export subsidies to Chinese companies under the WTO framework and provide policy support to them. Hightech industry is one key area where efforts should be made to protect Chinese companies from the attack launched by Trump.
The era of cheap labor in China is over, and Chinese manufacturing must reinvent itself. As China’s economic transition continues, it’s definitely impossible that the government will allow the US to interrupt the process and hurt Chinese technology companies.
In an op-ed piece in USA Today on Monday, Sonny Perdue, a secretary of agriculture in the Trump administration, said Trump had instructed him to craft a strategy to support US farmers in the face of China’s retaliatory tariffs. China also has tools at its disposal to support Chinese companies faced with possible losses that might occur due to Trump’s protectionist policy.
If China’s ZTE Corp and some other enterprises become the first to bear the brunt of Trump’s trade war, they will be also the first to receive support from the Chinese government. This will help foster greater social and economic endurance in China for a full-blown trade war with the US.
The Chinese government has established policies to boost the economy and further open up its market to foreign investors. But economic uncertainty unleashed by trade friction requires those established policies to be flexible enough to safeguard the interests and rights of Chinese enterprises. We cannot rule out the possibility that China might finetune its opening-up policies as needed.
The threat of a full-blown trade war is having an impact on both investor sentiment and stock prices. It’s time for China to take further self-defense measures, which will help boost market sentiment and lift investor confidence.