China set to be global gi­ant con­sumer

With fur­ther open­ing up of its mar­ket, China ex­pects the to­tal value of its im­ported goods and ser­vices to jump 20 folds to US40 tril­l­lion in the next 15 years.

The Star Malaysia - - Focus - By HO WAH FOON wah­foonho@thes­

CHINA demon­strated its com­mit­ment to be­come a gi­ant buyer of global goods when it went ahead last week to host the world’s first im­port expo de­spite be­ing drawn into an in­tense trade war with the United States.

To wel­come 400,000 buy­ers from all over China, for­eign busi­ness­men, in­ter­na­tional lead­ers, Shang­hai lit up its build­ings on Sun­day night. Roads were shut down and schools closed for two days.

China’s re­solve to boost the im­port el­e­ment in its econ­omy will not only help China cor­rect its trade im­bal­ance with ma­jor trad­ing part­ners but it will also cre­ate more trade and in­vest­ment op­por­tu­ni­ties for the main­land and the world, ac­cord­ing to world lead­ers.

Hav­ing suc­ceeded in be­com­ing the “world’s fac­tory” and ben­e­fited from vast ex­ports and for­eign direct in­vest­ment (FDI) for over two decades, the world’s sec­ond largest econ­omy is sig­nalling that it is ready to open up its mar­ket wider to pur­chase high tech­nol­ogy, quality goods and ser­vices.

The six-day China In­ter­na­tional Im­port Expo (CIIE) from Nov 5-10, with over 1,800 ex­hi­bi­tion booths, con­sumed about 17 months for prepa­ra­tion and or­gan­i­sa­tion.

The expo, to be an an­nual event, was a fol­low-up from the pledge made by Chi­nese Pres­i­dent Xi Jin­ping at the Belt and Road Sum­mit in Bei­jing in May 2017.

“CIIE was held as sched­uled and with metic­u­lous or­gan­i­sa­tion. This re­flects China’s res­o­lu­tion to open wider, re­gard­less of changes in the in­ter­na­tional sit­u­a­tion,” said an ed­i­to­rial by the official news por­tal Global Times.

“When fac­ing the pressure of a trade war, whether to close the door or per­sist in open­ing-up is a com­pre­hen­sive test for China As long as China fol­lows the right path, it can deal with what­ever dif­fi­cul­ties hap­pen,” the ed­i­to­rial added.

The expo, touted as the first im­port-cen­tric event in the world, has at­tracted more than 3,600 com­pa­nies from 172 coun­tries and re­gions to show­case their strong ser­vices and quality prod­ucts.

A to­tal of 11 coun­tries – In­done­sia, Viet­nam, Pak­istan, South Africa, Egypt, Rus­sia, Bri­tain, Hun­gary, Ger­many, Canada, Brazil and Mex­ico – at­tended the expo as guest coun­tries of hon­our.

In­ter­na­tional Trade and In­vest­ment Min­is­ter Darell Leik­ing was a guest of hon­our.

Pres­i­dent Xi, in his key­note ad­dress at the open­ing cer­e­mony of CIIE, said the event “is a ma­jor pol­icy for China to push for a new round of high-level open­ing-up and a ma­jor mea­sure for China to take the ini­tia­tive to open its mar­ket to the world.”

He pledged that China “will take fur­ther steps to lower tar­iffs, fa­cil­i­tate cus­toms clear­ance, re­duce im­port costs, and step up cross-bor­der e-com­merce and other new busi­nesses.”

China has cut im­port tar­iffs on more than 1,500 in­dus­trial goods as of Nov 1, bring­ing the coun­try’s over­all tar­iff rate down to 7.8%.

Xi pro­jected that in the next 15 years, China’s im­ported goods and ser­vices could jump many folds to ex­ceed US$30 tril­lion and US$10 tril­lion re­spec­tively.

Last year, China’s to­tal im­ports stood at US$1.84 tril­lion, rep­re­sent­ing 11.5% of to­tal global im­ports. Its ex­ports last year to­taled US$2.26 tril­lion.

Top­ping the list of China’s im­ports in 2017 were elec­tri­cal ma­chin­ery and equip­ment (US$455.5 bil­lion or 24.7% of to­tal im­ports), mineral fu­els and oil (US$247.6 bil­lion or 13.4%), ma­chin­ery and com­put­ers (US$169.8 bil­lion or 9.2%).

For the past nine con­sec­u­tive years, China has been the world’s sec­ond largest mer­chan­dise im­porter.

World Trade Or­gan­i­sa­tion (WTO) di­rec­tor-gen­eral Roberto Azevedo, in his speech, said: “The CIIE sends out a clear mes­sage about China’s grow­ing role in global trade, and re­minds us that trade is not a ze­ro­sum game, where ex­ports are good and im­ports are bad.”

IMF man­ag­ing di­rec­tor Chris­tine

La­garde said China has helped trans­form the global econ­omy as the progress in China has played a sig­nif­i­cant role in boost­ing pro­duc­tiv­ity, in­no­va­tion and rais­ing the liv­ing stan­dards of coun­tries around the globe.

She agrees with China’s move in re­bal­anc­ing its econ­omy to­wards con­sump­tion-led growth, rather than fo­cussing only on ex­ports and in­vest­ment.

“This tran­si­tion, sym­bol­ized by the CIIE, is good for China, es­pe­cially in terms of the ris­ing stan­dards of liv­ing for the Chi­nese. It is also good for the world, in­clud­ing all those who con­sider China as a vi­tal and vi­brant mar­ket,” said the IMF chief.

China first opened up to the world 40 years ago un­der the lead­er­ship of re­formist Deng Xi­ap­ing. Fur­ther lib­er­al­i­sa­tions and re­forms un­der sub­se­quent lead­ers have led the Mid­dle King­dom to achieve greater heights.

Ac­cord­ing to the pro­jec­tion by HSBC, China will over­take the U.S. to be­come the world’s largest econ- omy by 2030.

As ex­pected, the expo saw many huge pur­chas­ing or­ders signed by China’s state cor­po­ra­tions and pri­vate com­pa­nies.

Last Tues­day, China’s As­sets Su­per­vi­sion and Ad­min­is­tra­tion Com­mis­sion an­nounced that 13 of China’s state-owned en­ter­prises have signed multi-bil­lion deals with large for­eign busi­nesses on im­ports, ser­vices and tech­nol­ogy pro­jects.

Th­ese com­pa­nies in­cluded Volk­swa­gen, West­ing­house Elec­tric, robotics and power grid com­pany ABB, Car­ni­val, Rolls-Royce and Stan­dard Char­tered.

Volk­swa­gen told CNBC it had signed a me­moran­dum of co­op­er­a­tion with its Chi­nese joint venture un­der which the Asian arm will im­port parts and ve­hi­cles worth a to­tal of about 62 bil­lion yuan (US$8.9 bil­lion).

Global Times re­ported that China Na­tional Ma­chin­ery In­dus­try Corp has signed 21 im­port pur­chas­ing con­tracts worth US$8.1 bil­lion, with com­pa­nies from 16 coun­tries that in­cluded the US and In­dia.

Sinochem Group has also signed pur­chase con­tracts worth more than US$11.3 bil­lion with 17 com­pa­nies. The prod­ucts in­cluded high-quality fer­til­izer and high-end chem­i­cals.

On Thurs­day, Sun­ing Hold­ings Group – the com­mer­cial gi­ant ranked sec­ond among the top 500 non-state-owned en­ter­prises in China -- an­nounced that its global pro­cure­ment has hit al­most 15 bil­lion eu­ros.

In a com­men­tary, official me­dia Xin­hua News said: “In a time when pro­tec­tion­ism and uni­lat­er­al­ism threaten global growth, a more ac­ces­si­ble Chi­nese mar­ket with over 1.3 bil­lion peo­ple brings cer­tainty and hope to the world econ­omy.”

It noted that Xi had said in his speech: “China’s ini­tia­tive to ex­pand im­ports is not a choice made from ex­pe­di­ency. It is a fu­ture-ori­ented step taken to em­brace the world and pro­mote com­mon de­vel­op­ment.”

Xin­hua pointed out that China’s com­mit­ment to ease its mar­ket ac­cess had started in June.

In June, China short­ened the “neg­a­tive list” for for­eign in­vest­ment, cutting the num­ber of items to 48 from 63, re­mov­ing in­vest­ment ac­cess re­stric­tions in bank­ing, se­cu­ri­ties, con­struc­tion of power grids and rail­ways.

In re­sponse to th­ese lib­er­al­i­sa­tions, oil and gas group ExxonMo­bil, car­maker Tesla and port­fo­lio man­age­ment firm Bridge­wa­ter have set up new 100%-owned pro­jects in China.

As a re­sult, FDI into China rose last month. The Oc­to­ber re­port of the United Na­tions Con­fer­ence on Trade and De­vel­op­ment re­vealed that FDI flowing into China grew 6.0% to US$70 bil­lion in the first half of 2018, in con­trast to the 41% plunge in global FDI dur­ing the same pe­riod, ac­cord­ing to Xin­hua.

“A higher level open­ing-up is a must for China, with the world’s big­gest mid­dle-in­come pop­u­la­tion de­mand­ing high-quality con­sumer prod­ucts,” Xin­hua said.

China’s mid­dle-in­come group is es­ti­mated to be 500 mil­lion. The Eco­nomic In­tel­li­gence Unit (EIU) of Lon­don has fore­cast China will be­come a mid­dle-in­come so­ci­ety by 2030.

China’s con­sump­tion has his­tor­i­cally cen­tered on es­sen­tial items such as food, bev­er­ages, cloth­ing and footwear.

But as aver­age dis­pos­able in­come in­creases, higher spend­ing is ex­pected to be on cars, lux­ury goods, tourism, fi­nan­cial ser­vices, beauty prod­ucts, sports and health­care.

In his key­note ad­dress, Xi also ad­dressed con­cerns on the Chi­nese econ­omy that has been hit by the in­tense trade war started by the United States in re­cent months.

“There is every rea­son to be fully con­fi­dent in the fu­ture of the Chi­nese econ­omy. China’s econ­omy re­mains gen­er­ally sta­ble and is mak­ing good progress,” Xi as­sured the expo par­tic­i­pants on Mon­day.

China’s GDP grew at 6.7% in the first three quar­ters of this year, al­though the third quar­ter saw a slower growth.

The fun­da­men­tals for sound and sta­ble eco­nomic growth re­main un­changed, the pro­duc­tion fac­tors for high-quality de­vel­op­ment re­main un­changed, and the over­all mo­men­tum for long-term eco­nomic progress also re­mains un­changed, Xi added.

One mes­sage from Xi to his own sub­jects and the world is: Trade war or not, China will not stop open­ing up and will not stop pur­su­ing an open global econ­omy.

To in­stil in­vestor con­fi­dence on China’s econ­omy, Xi in his Man­darin speech likened the China’s econ­omy as a vast ocean that could over­come all forms of chal­lenges:

“The Chi­nese econ­omy is an ocean, not a pond. Strong winds and storms may up­set a pool, but never an ocean. Af­ter ex­pe­ri­enc­ing a se­ries of tem­pests, the ocean is still there. Af­ter go­ing through 5,000 years of pains and hard­ships, China is still here. Look­ing ahead, China will be here for­ever to stay.” Ex­change rate: US$1 = RM4.18

La­garde: The CIIE expo is good for China and the world. - Reuters

Xi at CIIE open­ing: China will take fur­ther steps to lower tar­iffs and re­duce im­port costs. — AFP

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