The Star Malaysia - StarBiz

Unwelcome guest: US tariffs loom at China’s biggest trade fair

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BEIJING: 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 today.

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% on US$250bil of Chinese goods as punishment for what it says are unfair trade practices by China. The latest tariff salvo represente­d half of the US$500bil 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 today, 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. Billiondol­lar 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% against the dollar this year.

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