China’s Caution in Global Trade

BEIJING — China’s commerce ministry has urged the country to exercise caution in its global trade dealings, highlighting the increasingly complex and uncertain external environment.

Key Points

• The Ministry of Commerce emphasized the need for China to strengthen its ability to respond to changes in the international market, although specific steps were not detailed.
• China is navigating a complex web of international trade agreements, including:
  • A new pact with the European Union.
  • Ongoing negotiations with other countries.
• The country is facing challenges such as:
  • Rising inflation.
  • Slowing economic growth.

Proactive Measures

• Experts predict potential disruptions in global supply chains due to rising tensions between major economies.
• Chinese officials are advising businesses and policymakers to:
  • Diversify export markets.
  • Invest in domestic industries.

This approach is part of a broader effort to promote economic self-sufficiency, reducing reliance on foreign markets amid concerns about global economic fluctuations. By investing domestically, Chinese companies can mitigate risks associated with external factors like exchange rates and protectionist policies.

Economic Perspectives

Economists are divided on the implications of this push for self-reliance:

• Potential Benefits:

  • Increased domestic investment could lead to faster growth rates by injecting capital into key sectors such as technology and manufacturing.

• Potential Risks:

  • There may be inefficiencies if companies prioritize domestic production over exports or fail to adapt quickly to changing market conditions.

An official noted, “We must strengthen our ability,” but did not provide further details on specific steps.

Initiatives and Challenges

China has made strides toward increasing domestic investment capacity through initiatives like:

• Made-in-China 2025: An industrial policy aimed at upgrading manufacturing capabilities.
• Belt-and-Road Initiative (BRI): Promotes infrastructure development across Asia and beyond through investments from state-owned enterprises (SOEs).

Despite these efforts, analysts believe there is still much work to do before achieving true self-sufficiency in key areas like:

• Semiconductors.
• Advanced materials used in high-tech products (e.g., smartphones, laptops).

The U.S., Japan, and South Korea dominate these industries, presenting significant challenges for Chinese firms.

Government Statements and Support

In recent months, the Chinese government has emphasized the need for greater self-reliance amid global economic fluctuations. Key statements include:

• In June, the State Council described China’s economy as facing "unprecedented" challenges due to:

  • COVID-19.
  • Political tensions between major economies.

• The State Council called for stronger support for private enterprises and small- and medium-sized enterprises (SMEs) through:

  • Tax cuts.
  • Fiscal relief.

Additionally, the State Council emphasized the need for better coordination among government agencies and SOEs to promote self-reliance.

Future Directions

On Tuesday, the Ministry of Commerce announced plans to:

• Strengthen guidance on foreign trade development.
• Promote high-quality development of trade in services.
• Enhance economic integration with neighboring countries.
• Provide better services for foreign investors.
• Increase transparency of government policies and timely release of important information.

The ministry also plans to:

• Reform state-led export credit insurance companies.
• Maintain a stable macroeconomic policy environment.
• Facilitate financial support for the development of private enterprises and SMEs.
• Promote the healthy development of cross-border e-commerce.
• Increase imports from developing countries.
• Support Chinese exporters while discouraging overseas investment by SOEs.
• Ensure the stable operation of foreign-funded enterprises and intensify supervision over imported goods and services to ensure food safety and equality.