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BEIJING (Reuters) – Exports of motorcycles, tractors, photocopiers and lighting Christmas trees will become increasingly threatening as the economic situation in China deteriorates.
PHOTO FILE: Visitors attend the China Import and Export Fair, also called Canton Fair, in the southern city of Guangzhou, China, on April 16, 2018. REUTERS / Tyrone Siu / File Photo
Many of these exporters will have something in common: uncertainty about future US orders as a trade war with the United States rages. The turmoil has added to concerns about the health of the Chinese economy, already under pressure from a cooling real estate market, a crackdown on corporate debt and risky lending practices, as well as an anti-pollution campaign at the national level.
During the summer, the United States levied tariffs of up to 25% on $ 250 billion worth of Chinese goods as a punishment for what they claim to be unfair trade practices on the part of the United States. China. The latest tariff rate accounted for half of the $ 500 billion worth 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. During the Guangzhou Canton Fair's spring semester, which is held twice a year, only a quarter of the exporters to whom Reuters spoke have said they expect a real trade war.
As exporters gather for the fall session of the three-week meeting starting Monday, much darker prospects are expected to invade the tens of thousands of exhibition stands present at the show.
US President Donald Trump has repeatedly threatened to impose tariffs on more Chinese imports as part of an increasingly intense trade war that has led many forecasters, including the International Monetary Fund, to reduce their global economic projections for 2018 and 2019.
Beijing urged Chinese exporters to diversify their destinations abroad and to rely less on the United States – China's largest trading partner – or to turn more to their domestic customers.
"Our existing US orders are relatively stable, but our US customers are not increasing their orders," said a manager at a Guangzhou-based battery manufacturer, one of many manufacturers facing US tariffs higher on Chinese batteries.
"We maintain stable prices and swallow the tariffs ourselves," said the manager.
While cities and provinces such as Guangdong, dependent on exports, bear witness to this, policy makers are deploying more and more measures to help businesses cope with the commercial storm.
The central bank has reduced the amount of cash that commercial banks must set aside as reserves four times this year to boost lending to small businesses. The Ministry of Finance has cut taxes and increased tax breaks to reduce corporate overheads. $ 1 billion infrastructure projects have been put on the fast track to stimulate growth.
The authorities, while asserting that they will not resort to the competitive devaluation of the Chinese currency to boost exports, have allowed the CNY = CFXS yuan to fall by about 6% against the dollar this year.
Overall Chinese exports have generally held up well, with data published on Friday indicating a 14.5% increase in shipments in September, far exceeding expectations, which stood at 8.9%.
ECONOMY OF SLOWDOWN
The trade war with the United States complicates an already weakened image of growth in China this year. Beijing has set a GDP growth target of about 6.5% for 2018. The economy grew by 6.9% last year.
Growth is slowing as China eliminates excess production capacity and polluting plants, capital investment plummets this year, and monthly industrial output growth is in a relatively low range (6-7). %).
At the same time, the restrictions and restrictions put in place to counter real estate speculators have led to a slowdown in the housing market, affecting construction and other related sectors.
The impact of a multi-year crackdown on the level of corporate debt and risky credit practices has also become more apparent. Private companies warn against tightening financing because their access to financing for parallel financing, a source of financing that is cheaper than bank loans, is decreasing.
Annual growth in total social finance outstandings, a large credit report that includes off-balance sheet financing, slowed to 10.1% in August, its lowest level ever recorded.
As companies struggle or even deteriorate, domestic consumption, the engine of the economy, has begun to moderate.
Monthly retail sales growth, an indicator of Chinese consumption, fell below 10% in April, where it has remained stable since. The last time retail sales grew less than 10% was more than a decade ago.
Auto sales fell for the third consecutive month in September, down 11.6% from the year before, as concerns about the economy pushed consumers to tighten their cords to give up expensive purchases.
WAITING AND LOOKING
State-controlled media have so far exploited China's ability to cope with internal and external challenges, including the trade war, arguing that there are many political tools to keep growth on one foot. d & # 39; equality.
"The impact of the trade war is not yet clear, as US tariffs have not yet been applied to certain sectors," said Joe Chung, owner of a ceramic tile manufacturer in Guangdong.
"The concern is not just about the United States. With the slowdown in exports to the United States, there will be increased competition for other overseas markets, "said Chung, predicting tough times over the next two years.
Ceramic flooring is listed on the US tariff blacklist.
Chinese exporters of goods that are not yet on a list of US tariff retaliation vary, including products such as toys, sewing machines and wigs.
China's foreign trade growth may slow in the fourth quarter, the country's customs agency said on Friday.
Report by Ryan Woo; Other reports from Stella Qiu at BEIJING and Shanghai Newsroom; Edited by Philip McClellan
