Logo of Phnom Penh Post newspaper Phnom Penh Post - Beijing shrugs off trade war ‘obstacles’, vows to retaliate

Beijing shrugs off trade war ‘obstacles’, vows to retaliate

Content image - Phnom Penh Post
China’s President Xi Jinping (left) and Premier Li Keqiang talk as they wait for voting to finish at the sixth plenary session of the National People’s Congress at the Great Hall of the People in Beijing on March 18. AFP

Beijing shrugs off trade war ‘obstacles’, vows to retaliate

Chinese officials are shrugging off warnings that the trade spat with the United States could slash the country’s economic growth, with state-run media saying Beijing can “outlast” the tariffs war.

Donald Trump this week announced another $200 billion worth of goods on which to foist levies for his latest volley in the stand-off between the world’s top two economies, and threatened there could be more in the pipeline if China doesn’t play ball.

But while Chinese Premier Li Keqiang acknowledged on Wednesday that the country is facing “greater difficulties” in maintaining steady growth in the face of the US onslaught, he quickly voiced confidence in its ability to “overcome obstacles”.

The new measures add to the $50 billion worth of goods already targeted. That amounts to about half China’s exports to the US, which generate roughly 1.3 per cent of its gross domestic product, said Mark Williams, chief China economist at Capital Economics.

According to the rating agency Moody’s, this new escalation could cut as much as 0.5 percentage points from Chinese economic growth next year.

The row comes at a tough time for Beijing, which has seen the world’s number two economy run out of steam of late, hit by the government’s efforts to tackle a mountain of debt, which led to a tightening of credit and a sharp decline in infrastructure investment.

The International Monetary Fund predicted in April that growth would slow to 6.4 per cent in 2019, against 6.9 per cent in 2017.

But if Trump executes his threat to tax all imports from China, Beijing could see that figure fall to 5.8 per cent next year, warned Louis Kuijs, chief Asia economist at Oxford Economics. That would be the slowest rate since 1990, the year after the Tiananmen Square protests.

While there are hopes the two sides will be able to resolve their difference, Kuijs warned the prospects for a deal remain low in the short term, with the White House appearing certain it can win the war.

‘Few alternatives’

However, Beijing has so far weathered the tariffs storm partly thanks to a sharp depreciation of the yuan, which has lost almost a tenth of its value against the dollar since April, offsetting the impact of tariffs, Capital Economics’ Williams said in a note.

Secondly, he added that US companies will stay dependent on Chinese suppliers, because “for many of the affected goods, there are few alternative suppliers”.

For the types of items taxed by Washington, China is on average the source of half the goods, he said.

Authorities are also expected to take more measures to boost domestic demand, such as lowering income taxes, increasing export-tax rebates, finan-cing more infrastructure, and encouraging banks to expand lending,
according to Oxford Economics.

Even so, Li told the World Economic Forum on Wednesday Beijing will not embark on a huge stimulus drive similar that used to fend off the global financial crisis 10 years ago.

While Trump insists that China is in a weakened state – it is straining under a colossal debt mountain exceeding 250 per cent of GDP – and will cave in during trade negotiations, there is a stoic confidence in Beijing.

Even if Washington taxed all imported Chinese goods, “China has ample fiscal and monetary policies to cushion that impact”, said Fang Xinghai, vice chairman of the China Securities Regulatory Commission (CSRC).

“We prepare for the worst, and we think the economy will still be fine,” he said this week.

The state-run China Daily declared in an editorial that the country would “outlast” the tariff war and will instead “emerge stronger”.

MOST VIEWED

  • NY sisters inspired by Khmer heritage

    Growing up in Brooklyn, New York, Cambodian-American sisters Edo and Eyen Chorm have always felt a deep affinity for their Cambodian heritage and roots. When the pair launched their own EdoEyen namesake jewellery brand in June, 2020, they leaned heavily into designs inspired by ancient Khmer

  • Omicron patients can stay home: PM

    Prime Minister Hun Sen has given the green light for anyone who contracts the SARS-CoV-2 Omicron mutation or any other variant to convalesce or receive treatment at home or in any other reasonable non-healthcare setting. The new decision supersedes a restriction on home care for

  • The effects of the USD interest rate hike on Cambodian economy

    Experts weigh in on the effect of a potential interest rate expansion by the US Federal Reserve on a highly dollarised Cambodia Anticipation of the US Federal Reserve’s interest rate hike in March is putting developing economies on edge, a recent blog post by

  • Cambodia’s first ever anime festival kicks off Jan 22 at capital’s F3 centre

    Phnom Penh's first ever Anime Festival will bring together fans, artists, shops and other local businesses with ties to the Japanese animation style for cosplay competitions, online games, pop-up shops and more on January 22, with Friends Futures Factory (F3) hosting. F3 is a project that

  • PM eyes Myanmar peace troika

    Prime Minister Hun Sen has suggested that ASEAN member states establish a tripartite committee or diplomatic troika consisting of representatives from Cambodia, Brunei and Indonesia that would be tasked with mediating a ceasefire in Myanmar. The premier also requested that Nippon Foundation chairman Yohei Sasakawa

  • Demining rat ‘hero’ Magawa dead at 8

    A landmine-hunting rat that was awarded a gold medal for heroism for clearing ordnance from the Cambodian countryside has died, his charity said on January 11. Magawa, a giant African pouched rat originally from Tanzania, helped clear mines from about 225,000sqm of land – the equivalent of 42