Confidence in Chinese Economy

2019-09-09 16:01:20 Beijing Review 2019年36期

On August 24, the U.S. announced that it would raise tariffs on about $550 billion worth of Chinese exports to the U.S. by an additional 5 percent. The U.S. move harms both countries interests, threatens the security of the global industrial and supply chains, and drags down global trade and world economic growth. China has urged the U.S. not to miscalculate the situation. Against this backdrop, Hisham Abu Bakr Metwally, first economist researcher at the Central Department for Export and Import Policy under the Egyptian Ministry of Foreign Trade and Industry, points out the errors in the U.S. move, whose edited excerpt follows:

Foreign direct investment (FDI), a key yardstick to measure an economys potential, rose in China in the first seven months of the year with improved quality, thanks to Chinas dedication to further opening up.

Despite the fi erce trade war the United States is waging against China, FDI into China expanded 7.3 percent year on year to 533.14 billion yuan ($78.8 billion) in the January-July period, Chinas Ministry of Commerce announced on August 13.

Usually, when the U.S. imposes trade sanctions on a country, there is a fl ight of foreign investment from the country for fear of economic collapse or recession. However, this did not happen in the case of the China-U.S. trade war.

In fact, the opposite is true, which is unprecedented and unique. Foreign investors maintained their investments in China, increasing them and making new investments. This confidence in the Chinese economy is due to many reasons.

Incentive policies

China has always welcomed dialogue and participation in negotiations to resolve the trade dispute with the U.S. However, the U.S. side has always maintained that China must accept all U.S. terms and demands first. Furthermore, the U.S. first raised the tariffs, making the negotiations unequal and full of terms, which China rejected since it violated the sovereignty of the Chinese decision, as well as the interests of the Chinese people.

The Chinese Government did not start to differentiate among foreign companies or between U.S. and Chinese companies, nor did it target any foreign company with retaliatory or punitive measures. Instead, China has provided incentive policies for all companies.

China has taken great and serious steps to open its markets to the import of foreign goods, including the inaugural China International Import Expo in 2018. China also introduced a new foreign investment law to meet the goals of all-around opening up and providing full opportunity to foreign investment on an equal footing with Chinese investors.

It has expanded its support to investors by lowering taxes, providing soft loans and improving the business environment. In its Doing Business 2019 report, the World Bank stated that China progressed from 78th place in 2018 to 46th this year, representing tremendous progress in improving the business environment.

China has also opened new sectors for foreign investment and simplified and facilitated government procedures. Furthermore, it has set up specialized courts on intellectual property cases for quick adjudication.

A losing policy

Trump has not been able to open new markets for U.S. products. In fact, the trade war policy has led to heavy losses for U.S. producers, especially in agricultural products and pork. He paid compensation to farmers, but was unable to fi nd a new real demand, like China was able to.

The U.S. president deliberately fought Chinese companies, especially technology companies, such as Huawei Technologies Co. Ltd., which made other foreign investors in the U.S. fear that the same unfair treatment could hit them one day. In addition, U.S. companies that supported Trump in his trade war also found that they had achieved nothing. On the contrary, giants such as Google and Apple Inc., which fell to third place in the world in terms of smartphone sales volume, suffered losses.

The latest U.S. growth level results indicated that growth rates fell to 2.1 percent in the second quarter of the year from 3.1 percent in the first quarter, with a great threat of the U.S. economy entering a recession or deflation. This would lead to tremendous job losses, with millions of U.S. workers facing unemployment as a result of the trade war.

Trump is using populist slogans such as “America First” and “Make America Great Again,” which are intended to rouse U.S. people and galvanize them to support hostile policies toward other countries. He relies on trying to weaken and exploit other countries, presenting the U.S. as a strong country and everyone else as weak. This is a losing policy for all.

Investment destination

It is curious that at the same time that Trump is fighting Chinese technology companies, most of Chinas forthcoming investment is heavily oriented toward the technology sector by over 60 percent. This gives the impression that foreign companies are confi dent that China will become a global technological powerhouse in the near future.

Investor confidence in the economy does not come from igniting trade wars or winning a deal here or there, but as a result of consistent and well-defined market-based policies. This is linked to good international relations and an equal investment environment that enable these companies to reach markets and achieve their goals easily.

Investors can now see how the Chinaproposed Belt and Road Initiative will connect the world economically and commercially, while the U.S. puts forward a unilateral initiative to disperse the world and destabilize global markets and institutions. Thus, many investors prefer to invest in China.