China’s small and medium-sized enterprises gear up for trade war

In a violation of WTO rules, Washington has finally pulled the trigger on its trade war against China. The largest ever trade war in economic history is sure to bring damage not only to free trade and globalization, but also to multilateral trade systems and the global industrial chain.

At present, affected small- and medium-sized enterprises in China are actively preparing for counter measures, wishing to cut losses as much as possible.

The impact of the trade war is already obvious. The number of orders received by a track equipment manufacturer in eastern China’s Jiangsu province has already plunged over the first half of this year.

“Our preparation to enter the U.S. market started last year, and we have passed all certifications,” said Huang Qiguo, manager of the Jiangsu company. “However, the unfavorable factors (trade war) this year have increased customer concern,” he added.

Faced with such a situation, Chinese enterprises have to seek new markets and make more high value-added products to balance their losses. An overseas sales manager of Zhongke Optic-Electronic Color Sorter Machinery Co., Ltd. said that they will expand their business to more emerging markets such as Southeast Asia and Belt and Road countries.

China’s small- and medium-sized enterprises are now sure of themselves in regards to technological input, human resources and management, said Zhang Jingqiang, executive director of the China Association of Small and Medium Enterprises. They are advancing technologies and lowering costs to cope with the trade friction, he added.

China unveils first private commercial medium-sized rocket

China’s first private commercial medium-sized rocket was recently unveiled in Beijing, just five months after U.S. company SpaceX launched its own heavy-lift launch vehicle, Falcon Heavy.

The Chinese rocket ZQ-2, powered by liquid methane and liquid oxygen fueled engines, is the most powerful private rocket in terms of operational payload currently under development in China.

The rocket’s maiden launch is expected to take place in 2020.

The ZQ-2 was developed by LandSpace, a private rocket manufacturer based in Beijing. To some extent, the Chinese company is positioned at the same starting line as the world’s leading rocket companies such as SpaceX and Blue Origin.

Though the ZQ-2’s payload is much lower than those of the SpaceX and Blue Origin rockets, it is still able to send two large SUVs into space.

“Liquid-propellant medium-sized rockets are in short supply on the market, and a green, cost-efficient rocket engine with a high payload determines its competitiveness,” said LandSpace CEO Zhang Changwu.

Statistics indicate an ongoing surge in development of satellite manufacturing and application, but the supply end still needs to be enhanced to meet market demand. Zhang attributed this to the large gap between the general rocket payload and the requirements of satellite launches.

Currently, most of every country’s in-service medium-sized launch vehicles are from previous generations. They face a series of problems such as pollution, high cost, long preparation, recyclability and low production. Private companies that can tackle technical and cost challenges are sure to finally win the game.

Wu Zhijian, chairman of the China Space Foundation, said that commercial rocket companies represented by LandSpace have lowered both access to and cost of launching. They promoted the commercialization of the space industry, he added.

US brands set to lose out to European rivals in China amid heightened trade row

US brands risk losing market share in China due to higher prices and sour consumer sentiment amid heightened trade tension between China and the US, analysts warned on Monday.

Given China’s additional tariffs on some US imports and its lowering of tariffs on imports from other countries, the competitiveness of US goods in the Chinese market will weaken as their prices rise, Chen Fengying, an expert at the China Institutes of Contemporary International Relations, told the Global Times on Monday.

The comment came after French luxury goods firm Hermes announced a price drop for some of its products in China starting from July 1, the same day a tariff reduction scheme rolled out by the Chinese government took effect.

Similar steps were taken by France-based LVMH, which reduced prices by between 300 yuan ($45.3) and 1,500 yuan, and Gucci, which is lowering the prices for its entire portfolio by an average of 5 percent, according to the National Business Daily.

The three companies all said the reason for the price cut is the Chinese government’s tariff policy.

Rise in tension

The move came as trade tension between China and the US entered a new stage on Friday, with both countries slapping heavy tariffs on each other’s goods.

Yang Qingshan, executive president at the China Brand Strategy Association, told the Global Times on Monday that the price cut by European brands will enlarge their consumer base and draw customers away from US luxury brands such as handbag maker Tapestry Inc, formerly known as Coach.

Experts also noted that daily consumer goods from the US are facing rising competition from other countries, especially as many Chinese people naturally prefer Asian goods in various sectors ranging from cars and clothes to food and gadgets.

China has placed a reciprocal tariff of 25 percent on US auto imports, forcing Tesla to raise its price in the Chinese mainland by almost 20 percent, while European brands such as Volvo are lowering the prices of their imported cars.

At one dealership in Beijing, the previously strong sales of Tesla vehicles appeared to have cooled down over the weekend, with a big drop in the number of consumers eyeing the cars.

“It will be an opportunity for companies in other countries – for instance Europe – that have coveted the Chinese market for a long time,” Chen said.

Even before the trade row, US products like Pampers, Colgate toothpaste and Mead Johnson infant formula had seen their market share drop by around 10 percentage points in the past five years, Reuters reported in June, citing data from Bain and Kantar based on a survey of 40,000 urban households.

Now, in addition to price and competitiveness, consumer sentiment is also coming into play.

“If the goods could only be purchased from the US, then I could tolerate the higher price; but if there are substitutes, I would prefer goods made by other countries as I feel angry about the US’ unreasonable stance,” a Beijing-based white-collar worker surnamed Liu told the Global Times.

The State Council, China’s cabinet, issued a circular calling for more balanced trade with measures to stabilize exports and enlarge imports, the Xinhua News Agency reported on Monday.

Source: Global Times

Commentary: Zero-sum mentality is a threat to the world

The zero-sum mentality displayed by the U.S. is against trade rules. It not only hampers China-U.S. economic and trade cooperation, but also brings great uncertainty to the global economy.

“The U.S.’s goal of reducing trade deficits by tariff measures will by and large fail”, “Skirting WTO rules, the U.S.’s tariff measures will harm the rule-based international trading system,” the trade war initiated by Washington has been widely criticized by international media for its negative consequences.

The foundation for economic and trade cooperation is complementariness, not a zero-sum mentality. China-U.S. economic and trade cooperation is a vivid example of the theory that an open product, service and market will drive economic growth and promote the prosperity of a country.

As the world’s largest developing and developed country, China and the U.S. are different in terms of their development, economic structure and resources. These differences formed a highly complementary relationship that became a strong engine for cooperation.

A community of shared interests featuring deep integration and independence has been built by combining the American strengths in creating high-added value, research and development with China’s advantages in low-cost production and assembly.

The reality has proven that cooperation achieves win-win results while confrontation leads to lose-lose situations.

In 2017, China-U.S. trade volume reached $583.7 billion, which was 233 times the figure in 1979 when the two countries established diplomatic relations. A report released by the U.S. Business Council showed that U.S. exports to China have supported at least one million American jobs.

The experience of international trade has proven that unilateral protectionism is a game that neither helps solve structural problems of the initiator nor benefits global consumers.

The tough tariff measures against Chinese goods will only see more U.S. enterprises lose the Chinese market and miss opportunities brought about by a new round of reform and opening up in China.

Economic and trade cooperation propels common prosperity, not unbalanced development. China-U.S. cooperation is an important part of economic globalization. In 2017, the trading volume of commodities and services from China and the U.S. accounted for 10.4 percent and 11.4 percent of the world’s total, respectively.

Presently, stable investment and trade are especially needed for global economic recovery. The trade protectionism of the U.S. is bound to disturb international trade order and hinder economic globalization.

The trend of globalization means that the interests of countries are interrelated; therefore, building a community of shared destiny is necessary in today’s world.

As the largest developed economy in the world, the U.S. is obliged to conform to the times and adopt a win-win attitude. The opposite mentality is outdated, as countries are constantly moving forward and thus only a win-win concept can guarantee the sustainable development of all economies.

All living things can be nourished without injuring one another, while all roads are able to run parallel without interfering with one another. The zero-sum mentality, which puts U.S. interests above all others, is an outdated and backward way of thinking that should be abandoned.

The world is large enough to allow all countries to develop and prosper. Only by casting the zero-sum mind aside can the U.S. build better trade with other countries, bring more welfare to the people and create more development dividends.

It’s not a joke! Chinese tourists are heading to Africa to avoid the summer heat

Africa is fast becoming one of China’s hottest tourist destinations, as the scorching summer heat burns up cities across the country.

Many regions in China have turned into ovens as the summer months ensue, with many cities issuing high-temperature warnings. According to a recent report jointly released by the China Tourism Academy (CTA) and the country’s largest online provider of travel services, Ctrip, escaping the heat is now one of the biggest motivators for Chinese tourists to travel during summer months.

China’s peak outbound tourism is seen between June and September, off season travelling being especially popular during this period.

A man from Changsha in central China’s Hunan province, who has to keep his AC on for almost 24 hours a day, is planning to go to Africa with his child to avoid the heat.

Another Chinese tourist, Yang Fan, recently went to Africa to avoid the summer heat. He explained, “Many people think Africa is very hot at this time, but we were amazed by its coolness when we arrived in Kenya.”

Thanks to the scorching heat, many travel agencies and service providers have launched related package tours to help people escape the high temperatures, said Shang Jing, an employee of a travel agency in Hunan.

Another agency in the province said that the number of Chinese tourists going to Africa has doubled this year alone. China’s outbound tourism will see a 5 percent compound growth over the next five years, said the CTA in a recent report, adding that 157 million Chinese citizens are expected to travel abroad each year by 2020.

Two-way adjustment leads to smoother operation of world economy

The World Trade Organization (WTO) commenced its seventh trade policy review of China on July 9. During the week-long review, WTO members are expected to evaluate China’s performance since its accession to the organization, focusing primarily on the last two years.

Before the review began, China’s State Council Information Office released a white paper titled “China and the World Trade Organization” in late June as a self-assessment.

Over the past 17 years, the WTO’s influence on China has grown with time. Many worried then that the WTO entry would bring an end to China’s domestic automobile and agricultural industries. However, such worries have completely disappeared thanks to China’s rapid development.

It goes without saying that China has already become one of the major beneficiaries of economic globalization. However, different opinions are held by international media on the impact brought by China’s accession to the WTO, with confidence and doubt both existing.

Some western countries believe that China has not fulfilled its promises, claiming that the country adopted twisted market policies and failed to become a market economy.

Some even suggest that the world needs to tailor a new set of rules for China, arguing that current WTO rules are not applicable to such a huge country, which is not an unfounded claim. The advancement of China since it entered the WTO was unexpected by many countries, China included.

China once proposed to lower the severity of a number of WTO rules, only to be told that it was included in an international “basketball game” and the “basket” would not be lowered specifically for one country. However, the “basket” has now asked to be moved exclusively for China. How the situation has changed!

With a growing China, WTO members need to adjust and adapt. They should become familiar with China’s transformation from a “work-seeker” to a cooperator and competitor in the international market, as well as its transformation into an equal negotiator in the development of international rules.

The adjustment of this mentality is thought to be the hardest part in the process. Although many countries are struggling to come to terms with the new giant beside them, if they cast aside their bias, they will be able to see a mild and peaceful China beneath.

China also needs to adapt to how its role and influence has changed in the international arena. I still remember China’s participation in the Doha negotiations, not long after its accession to the WTO. As a developing country and a new member, we raised a series of special and differential requirements: less requests, lower obligations, longer transition periods and later liberalization.

I was the initiator of what were considered reasonable requests at that time, but the world’s expectation as well as China’s capability have gone through dramatic changes over the last 17 years. China is still a developing country that has vast space for improvement in both the size and quality of its economy. However, it’s true that China needs to make greater contributions and add Chinese wisdom to global trade liberalization and investment facilitation, as well as help create an in-time reform of the multilateral trade system.

China refuses to accept the characteristics that have been thrown around to describe it, refuting claims that it runs under a system of state capitalism or commercialism, or indeed that it’s a market twister. Anyone that doubts China’s open economy status should refer to the white paper, as facts speak louder than words.

(The author is Chinese permanent representative and Ambassador to the WTO Zhang Xiangchen) 

Chinese experts arrive at Thai wrecking site with sonar equipment

Chinese experts arrived at a wrecking site in Thailand on July 7, with sonar equipment to acquire measured data of the shipwreck, according to Chinese newspaper Science and Technology Daily.

On July 5, two boats carrying a total of 127 Chinese tourists sank off the coast of Thailand’s Phuket Island. By the afternoon of July 8, the accident had caused 42 deaths with 14 people still missing. The information was confirmed by Chinese Embassy in Thailand.

Two Chinese professional rescue teams were sent to Thailand to assist with the salvage mission.

Senior engineer Gou Zhengkang was sent to the site, telling Science and Technology Daily that the deep water and short working time, as well as the long time of decompression, all placed challenges on the mission.

According to a video clip filmed by Thai rescue personnel, vital signs were spotted at 42 meters below sea level. However, a diver can only stay at that depth for 3 minutes and 27 seconds.

Chinese rescue teams applied sonar equipment and searched within a 500-meter radius of the shipwreck, said engineer Hu Juntao, who was sent to the site by the Second Institute of Oceanography (SIO), affiliated with China’s State Oceanic Administration (CSOA).

“The sonar device is able to detect targets 1,500 meters below the water surface and send back the signals,” said Zhang Yifei, president of SIO’s engineering investigation institute. The primary task of the Chinese rescue teams is to detect the position of the ship and possible targets under the water, Zhang noted.

Zhang told Science and Technology Daily that compared with reservoirs, the sea poses a much more difficult rescue location, not to mention that the underwater target might move with water flows and waves, which adds increased difficulty to the mission.

Alibaba exports 100,000 Chinese crayfish to Russia amid World Cup season

Chinese e-commerce giant Alibaba is currently shipping about 100,000 crayfish to Russia, so that those attending the World Cup can enjoy a feast.

The crayfish are exported through a poverty alleviation project via Alibaba, that aims to broaden the overseas market of Chinese agricultural products.

Samples were given away in Moscow on June 30, attracting hundreds of soccer fans from Russia, France and Spain, who all thoroughly enjoyed the tasters.

Crayfish are normally sold at $76 to $80 per kilogram in local restaurants, while they only cost $12 per kilogram to buy via Alibaba’s online platforms. According to a chef at restaurant La Provincia, the restaurant purchased 300 kilograms of crayfish less than a week ago, and they are already the most popular dish on the menu.

A local official said that Russian crayfish can only be found in the wild, but Chinese crayfish are artificially bred, so they are bigger in size and of better quality. He believes Chinese crayfish will become extremely popular in Russia.

Alibaba is exploring new markets for Chinese agricultural products through projects like this, said Huang Aizhu, senior director of Alibaba’s rural business department. She said all agricultural products under Alibaba will have export options to increase farmers’ income.

“Poverty alleviation through e-commerce is not only about selling products, but also about improving supply-chain and quality standards of these products on the supply side through big data and other new technologies,” Huang noted.

Asian countries urged to work together to fight US tariffs

Asian countries should work together to integrate and strengthen their industrial chains, which have been hit by the US government’s tariff moves against China, experts told the Global Times on Sunday.

“China and many other Asian countries are in the same industrial chain, and therefore they have the same need to fight against trade protectionism. They should make full use of their advantages and build up the current industrial chain to make it stronger,” Bai Ming, a research fellow at the Chinese Academy of International Trade and Economic Cooperation, told the Global Times on Sunday.

Upstream companies in countries and regions like Southeast Asia and South Korea provide raw materials and components for export to downstream firms in China, where the components are assembled for export to other countries like the US.

The US’ scheduled tariffs on $34 billion in Chinese products took effect at 12:01 pm (Beijing Time) Friday. In response, China’s additional tariffs on some US imports took effect at 12:01 am (Beijing Time) Friday, the Xinhua News Agency reported.

Global impact

According to Bai, the US government’s move to increase tariffs on Chinese products will cause problems for upstream global suppliers to China.

Asian countries will be particularly affected. A report by Vietnam Briefing in April noted that as Vietnam’s products are part of China’s value chain, the trade tension between the US and China will have a big effect on countries like Vietnam.

Economies like South Korea will be “badly hit” if the US continues to intensify its trade dispute with China, because these countries are big exporters of “intermediate goods” to China, where they are made into finished products that are then shipped to final destinations like the US, a CNBC report noted on Thursday.

Such intermediate goods include semiconductor chips and screens, which are manufactured separately in different Asian locations, according to the CNBC report.

According to Bai, downstream companies in the US or in other overseas markets will also be influenced, as Chinese products are inexpensive and not easily replaceable.

But, on the other hand, it won’t be difficult for Chinese companies to find replacements for US goods, Bai said.

He cited the example of soybeans. China imports about 35 percent of its soybeans from the US, Bai said.

However, amid the increased tariffs, China can find supplies from countries like Russia and Ukraine instead, he noted.

At the same time, commodity prices might surge as countries look for alternative markets.

A CNBC report in March noted Chinese importers are paying record harvest-time premiums for Brazilian soybeans as the importers need to secure alternative supplies amid the trade tension with the US.

Cong Yi, an economics professor at the Tianjin University of Finance and Economics, said that in the longer term, it will be impossible for the US to break off completely from the Chinese market.

“Actually, what the US wants is to force China to offer more concessions and give them more privileges in business. They want to grab more of the domestic market,” Cong told the Global Times on Sunday.

Source: Global Times