The Chinese government has unveiled a series of new measures to boost external trade after the year-on-year growth of China’s exports slowed due to lockdown measures in April.
The General Office of the State Council on Thursday published a document with 13 measures that are aimed at boosting exports and imports. It said the government would encourage e-commerce companies to increase cross-border trade, provide more loans and credits to traders and promote digital trade shows.
Meanwhile, Qin Gang, Chinese Ambassador to the US, said Thursday that China would not back down if the Biden administration decided to extend the first-batch Section 301 tariff, which was set to expire on July 5. Qin said that although China had recently faced more uncertainties and downward pressure on its economy due to the Covid epidemic, it had enough space and policy tools to address challenges.
The lockdown measures in key Chinese cities, including Shanghai and Beijing, hit the Chinese economy in April as the country’s three major growth engines – consumption, investment and exports – slowed down.
Domestic consumption fell 11.1% in April from a year ago, compared with a year-on-year growth of 3.3% in the first quarter, according to the National Bureau of Statistics. The annual growth rate of fixed-asset investment eased to 1% last month from 9.3% in the first three months of this year.
The year-on-year growth rate of China’s dollar-denominated exports contracted to 3.9% in April from 15.8% in the first quarter, the General Administration of Customs said on May 9.
Before the trade figures for April were announced, Premier Li Keqiang said in a State Council executive meeting on May 5 that the central government would launch measures to boost external trade and support China’s supply chain industry.
In the meeting, Li said the government would support labor-intensive manufacturers; boost the utilization rate of freight capacity; encourage e-commerce firms to improve their product refund, repair and replacement services; provide more loans and credits to cross-border traders; and promote digital trade shows including the China Import and Export Fair, or Canton Fair.
Based on the policy direction, the cabinet’s general office on Thursday unveiled a document with 13 concrete measures.
Tax rebate procedures would be simplified for e-commerce companies that shipped their goods overseas, said the document. These companies would be encouraged to improve their product refund, repair and replacement services, while they would be categorized as high technology firms so they could more easily enjoy tax benefits, it said.
To export more Chinese automobiles, China’s financial institutions would be allowed to provide financing products to overseas automobile buyers, assuming that the risks of these financial products were manageable, it said. The government would encourage the exports of second-hand automobiles, it said.
More high-valued and low-polluting products, including large medical equipment and smart robots, will be added to China’s catalogue of added products available for maintenance and repair in comprehensive bonded zones, according to the document. It means that these sold products can be shipped back from overseas to the tax-free zones in China for maintenance and repair and then sent back to the users without creating any tax payments.
With the help of e-commerce platforms, trade shows including the Canton Fair will be digitalized with innovative technologies such as virtual reality, augmented reality and big data so manufacturers can get more orders.
Besides, China will set up platforms and trial zones to encourage importers to buy more high-quality foreign goods and stimulate consumption. The country will encourage labor-intensive industries to migrate from coastal regions to central, western and northeastern China, given that more and more electronic product makers are moving their production lines from China to Vietnam.
While waiting for all these measures to show effects, Beijing is facing a more urgent task, which is to deal with the US over tariff disputes.
In January 2020, China agreed to increase purchases of US farm products, manufactured goods, energy and services by US$200 billion above 2017 levels during 2020 and 2021. But it met only about 57% of its goal.
Deputy US Trade Representative Sarah Bianchi said on February 1 that China had failed to meet its commitments under a two-year phase 1 trade deal that expired at the end of 2021.
On May 18, the United States’ National Retail Federation (NRF) said the US should reduce or eliminate tariffs on Chinese goods as a way to help ease inflation. Treasury Secretary Janet Yellen also said the Section 301 tariffs imposed harm on consumers and businesses while being not very strategic in the sense of addressing real issues with China.
In fact, the Office of the US Trade Representative on May 3 published a Federal Register notice commencing its quadrennial review of the tariffs imposed on China-origin goods pursuant to Section 301 of the Trade Act of 1974.
Qin Gang, Chinese Ambassador to the US, said Thursday that since the implementation of the Section 301 tariffs the US had lost about 250,000 jobs while the market cap of US companies decreased by US$1.7 trillion.
Qing said US importers and consumers hoped that the first batch of Section 301 tariff would be canceled after July 5. But he added that China would not be afraid if the tariff was extended.
Follow Jeff Pao on Twitter at @jeffpao3