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China unveiled a series of changes under the growing pressure of US President Donald Trump on technology.
Beijing has promised to cut tariffs, open up its auto industry and buy US exports. But that was not what Mr Trump wanted: the end of development policies, according to Washington, is based on theft of know-how and could erode US industrial leadership.
Exporters rushed to replace lost orders after Trump triggered the first wave of tariff increases on Chinese imports by $ 50 billion in July. Waves of job losses are weighing on industrial cities. Until now, however, Chinese leaders have expressed confidence in their economy of $ 12 trillion a year and refuse to give in to the tactics that they see as a path to prosperity and influence. World.
According to economists, political analysts and business groups, the communist leadership does not seem to have to back down after Trump intensified his dispute on Monday by approving sanctions on an additional $ 200 billion worth of Chinese goods.
"Contrary to the opinions expressed in Washington, China can – and will – prove itself," said the president of the American Chamber of Commerce in China, William Zarit, in a statement. "We are not optimistic about the prospect of a short-term resolution."
Mr. Trump, on the other hand, expressed trust this week, tweeting, "tariffs have put the United States in a very strong bargaining position, with billions of dollars and jobs in our country." The president also said that China has paid billions of dollars in tariffs to the United States, even though it is buyers who pay duties, such as US importers and consumers, and not the country of origin. exports.
Chinese economic boom
Mr. Trump's complaints are at the heart of the Communist Party's vision as a leader in economic development – a venture capital investor at the national level, boldly creating new industries.
This role has gained importance since President Xi Jinping took power in 2012, despite the party's 2013 commitment to give market forces a "decisive role" in the fight against corruption. economy dominated by the state.
Proponents of the reform complain that the dominant SOEs in the banking sector, energy and other sectors are growing. They claim to ignore the lessons of three decades of market-style shifts that have propelled China's economic boom.
Beijing is still understanding what Washington wants, said Li-Gang Liu, Citigroup's economist.
"The balance sheet from the US side is not clear," Liu said in an email. "Without clarity about what President Trump wants the Chinese exactly, it's hard to see progress."
The ruling party sees initiatives like "Made in China 2025", calling for the state's creation of global champions of robotics, electric cars and other areas, essential to boosting the revenue of the country. China's poor majority a technological and cultural leader.
Washington, Europe and other trading partners complain that the explicitly nationalistic goals of creating Chinese global brands and promising subsidies to local competitors violate Beijing's promises to treat businesses on a competitive footing. 39; equality. US officials also say that Beijing steals or lobbies foreign companies to sell their technology.
Changes in China
While pushing off US pressure, Beijing unveiled other changes long sought by its trading partners.
The government announced in April that it would allow full ownership of electric car manufacturers as early as this year and lift all property ceilings by 2020. Beijing has agreed to join the European Union to propose reforms of the World Trade Organization. unable to cope with the challenges of Chinese style.
Chinese leaders seem to be wondering how to present their projects in a way that causes less foreign opposition, said Paul Haenle, director of the Carnegie-Tsinghua Center for Global Politics. He said there was "a considerable debate" on how to run Washington at the annual summer leadership retreat in the resort town of Beidaihe.
"I think there's an internal debate about, have we managed that properly, is there any way to recognize in the US and others that we recognize that there is have changes to make? " Haenle said. But doing so without having the impression that the Chinese leaders "give in to the United States will be a difficult undertaking to achieve".
Chinese leaders may have hoped that cooperation with North Korea would win Trump. But he continued with tariff increases, even after Beijing joined the "maximum pressure" campaign on North Korean leader Kim Jong Un to abandon nuclear weapons and Xi skipped the regime's 70th anniversary festivities this month. -this.
"I do not think they're very hopeful that Trump will be easier," Haenle said.
Beijing's belief that it must accelerate the development of technology has been bolstered by the impending death of ZTE Corp., one of China's largest technology companies, said Liu of Citigroup.
ZTE announced it could close after Washington imposed a seven-year ban on US component and technology sales to the state-owned telecommunications equipment maker, citing its exports to North Korea and Iran. To regain access, ZTE has agreed to pay a $ 1 billion fine, replace its management team and incorporate a US compliance team into the company.
Chinese leaders realized "that they do not have basic technology," Liu said. "Made in China 2025" has "become more important than before and will be accelerated".
Some supporters of the Chinese reform see a possible way out: Restructuring "Made in China 2025" and other initiatives to make them more market-oriented and eliminate subsidies that irritate Washington and other governments. They say it would bring China back by encouraging creativity and efficiency through competition.
"It would be nothing more than to promise further openness and reform.The government's interference in business would be corrected," said economist Hu Xingdou in Beijing. "All this is good for the Chinese people."
Beijing may hope Mr. Trump "will move to a more conciliatory stance," especially if his Republican party suffered setbacks in the November elections, Haenle said. But he said he doubted they knew enough about US policy to try to influence the outcome by offering concessions.
Impact on China
The impact on China has been less than what some US leaders hoped for.
The latest rise in Monday's tariffs could reduce China's economic growth by 0.3 to 0.5 percentage points over the next year, said Lillian Li of Moody's rating agency in a report. Government stimulus spending and easier credit are expected to offset this, leaving China's growth forecast unchanged at 6.6 percent this year and 6.4 percent in 2019, she added.
Citigroup estimates that the first US tariff on $ 50 billion of Chinese products will eliminate about 881,000 industrial jobs. That could reach 3.5 million additional jobs lost over three to five years if import tariffs of $ 200 billion increase to 25 percent, he added.
The conflict has positive repercussions for some Chinese companies, with some local governments acting on long-standing complaints by reducing taxes and fees and simplifying bureaucracy.
Guangdong Province, an adjacent export center in Hong Kong, announced changes on Sept. 10 that it said would reduce business costs by 200 billion yuan ($ 31 billion) by 2018-20. .
"We think Chinese industries will come out of the trade war stronger than ever before," said Liu, Citigroup's director.
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