US tar­iffs loom at China’s big­gest trade fair

Oman Daily Observer - - PERSPECTIVE - RYAN WOO

Amid gath­er­ing gloom over the state of the Chi­nese econ­omy, ex­porters of mo­tor­cy­cles, trac­tors, pho­to­copiers and Christ­mas tree light­ing will join thou­sands of other com­pa­nies ped­dling their wares at China’s largest trade fair. Many of those ex­porters will have some­thing in com­mon — un­cer­tainty over fu­ture US or­ders as a trade war with the United States rages. The tur­moil has added to con­cerns over the health of the Chi­nese econ­omy, al­ready un­der pres­sure from a cool­ing prop­erty mar­ket, a crack­down on cor­po­rate debt and risky lend­ing prac­tices, and a na­tion­wide anti-pol­lu­tion cam­paign.

The United States over the sum­mer levied tar­iffs of up to 25 per cent on $250 bil­lion of Chi­nese goods as pun­ish­ment for what it says are un­fair trade prac­tices by China. The lat­est tar­iff salvo rep­re­sented half of the $500 bil­lion of prod­ucts that the United States bought from China last year.

The rapid es­ca­la­tion of the trade dis­pute has taken many Chi­nese ex­porters by sur­prise. At the spring ses­sion of the twice-a-year Can­ton Fair in Guangzhou, only a quar­ter of the ex­porters whom Reuters spoke to said they ex­pected a full­blown trade war.

As ex­porters gather at the au­tumn ses­sion of the three-week gath­er­ing that starts on Mon­day, a far more som­bre out­look is ex­pected to per­vade the tens of thou­sands of ex­hi­bi­tion booths at the fair.

US Pres­i­dent Don­ald Trump has re­peat­edly threat­ened to slap tar­iffs on more Chi­nese im­ports in an in­ten­si­fy­ing trade war that has led many fore­cast­ers, in­clud­ing the In­ter­na­tional Mone­tary Fund, to cut their global eco­nomic pro­jec­tions for 2018 and 2019.

Bei­jing has been urg­ing Chi­nese ex­porters to di­ver­sify their over­seas des­ti­na­tions and rely less on the United States — China’s big­gest trad­ing part­ner — or turn their fo­cus to do­mes­tic cus­tomers in­stead.

“Our ex­ist­ing US or­ders are rel­a­tively sta­ble, but our US clients are not in­creas­ing their or­ders,” said an of­fi­cial at a Guangzhou-based bat­tery maker, one of many fac­ing higher US tar­iffs on Chi­nese bat­ter­ies.

“We’re keep­ing prices sta­ble and swal­low­ing the tar­iffs our­selves,” the of­fi­cial said.

As ex­port-re­liant cities and prov­inces like Guang­dong show the strain, pol­i­cy­mak­ers are in­creas­ingly rolling out mea­sures to help busi­nesses weather the trade storm.

The cen­tral bank has cut the amount of cash that com­mer­cial banks need to set aside as re­serves four times this year to spur lend­ing to small busi­nesses. The fi­nance min­istry has re­duced taxes and in­creased tax re­bates to help lower the over­heads of busi­nesses. Bil­lion-dol­lar in­fra­struc­ture projects have been put on the fast track to stim­u­late growth.

The au­thor­i­ties, while say­ing they will not re­sort to com­pet­i­tive de­val­u­a­tion of China’s cur­rency to boost ex­ports, have al­lowed the yuan to fall about 6 per cent against the dol­lar this year.

Over­all Chi­nese ex­ports have been mostly re­silient, with data on Fri­day show­ing that Septem­ber ship­ments soared 14.5 per cent year-on-year, far ex­ceed­ing ex­pec­ta­tions for an 8.9 per cent uptick.

The trade war with the United States is com­pli­cat­ing an al­ready weak­en­ing pic­ture of growth in China this year. Bei­jing has set a GDP growth tar­get of around 6.5 per cent for 2018. The econ­omy ex­panded 6.9 per cent last year.

Growth has been slow­ing as China sheds ex­cess pro­duc­tion ca­pac­ity and shuts pol­lut­ing fac­to­ries, with fixed as­set in­vest­ment slump­ing this year and monthly in­dus­trial out­put growth stuck in a rel­a­tively low range of 6-7 per cent.

Mean­while, curbs and re­stric­tions put in place to fend off prop­erty spec­u­la­tors have re­sulted in a slow­down in the res­i­den­tial real es­tate mar­ket, hit­ting con­struc­tion and other re­lated sec­tors.

BEI­JING HAS BEEN URG­ING CHI­NESE EX­PORTERS TO DI­VER­SIFY THEIR OVER­SEAS DES­TI­NA­TIONS AND RELY LESS ON THE UNITED STATES — CHINA’S BIG­GEST TRAD­ING PART­NER — OR TURN THEIR FO­CUS TO DO­MES­TIC CUS­TOMERS IN­STEAD.

— Reuters

A vis­i­tor stands next to so­lar pan­els dur­ing the China Im­port and Ex­port Fair, also known as Can­ton Fair, in the south­ern city of Guangzhou, China.

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