Beijing ready to deal with trade row fallout

Beijing ready to deal with trade row fallout

Thu, 19/04/2018 - 13:51
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Gao Feng

Commerce Ministry spokesperson Gao Feng says China is well-prepared to dig in for a trade war. Photo: Reuters

China is well prepared to handle any negative effects from its trade dispute with the United States, the commerce ministry says, adding that Beijing's tariff hikes on U.S. imports will not have a big impact overall on its domestic industries.

It would be a miscalculation by the United States if its intention is to contain China's rise, ministry spokesman Gao Feng said at a regular media briefing in Beijing.

"If the U.S. attempts to use protectionist trade policies to contain China's development and force China to make concessions even at the costs of companies' interests, it has taken a miscalculated step," Mr Gao said.

In the latest escalations in the widening trade row, the U.S. said this week it had banned American companies from selling parts to Chinese telecom equipment maker ZTE for seven years, while China on Tuesday announced hefty anti-dumping tariffs on imports of U.S. sorghum and measures on synthetic rubber imports from the U.S., EU and Singapore on Thursday.

"We are capable of resolving the challenges created by China-U.S. trade frictions," said Gao.

Responding to a Reuters question, Mr Gao said Beijing hopes Washington will not underestimate China's resolve to fight back.

"We will relentlessly fight back," he said, adding that China will take any necessary measures at any time in response to the U.S. move against ZTE.

Most analysts believe the two sides will eventually reach a compromise and avoid a full-blown trade war. But so far, China and the U.S. have held no formal trade talks, Gao said.

On April 2, China slapped additional import taxes on 128 U.S. products including frozen pork and wine, in response to U.S. duties on imports of aluminium and steel.

Two days later, China warned it was considering increasing duties on an additional 106 U.S. imports, hitting back at the U.S.'s plan to levy duties on $US50 billion of Chinese goods following a months-long intellectual property probe.

A full-scale trade war between the world's two economic superpowers would hurt both Chinese and U.S. exports and have a negative impact on growth in the two countries, as well as probably lead to collateral damage for other countries.

The global economy will expand this year at its fastest pace since 2010, but trade protectionism could quickly slow it down, the latest Reuters polls of over 500 economists worldwide suggest.

China's economy grew at a slightly faster-than-expected pace of 6.8 percent in the first quarter. But a surprise move by China's central bank to cut the amount of cash that lenders must keep in reserves on the same day rattled investors who took it as a sign Beijing is worried about economic growth momentum.

Earlier on Thursday, China's foreign exchange regulator said that any potential impact on the nation's cross-border capital flows stemming from Sino-U.S. trade frictions can be controlled, and vowed to continue with plans to further open up capital markets in the world's second-biggest economy.

Wang Chunying, spokeswoman at the State Administration of Foreign Exchange (SAFE), said China isn't expecting any major shifts in capital flows and is able to manage a normalisation of monetary policies across the world.

"If global economic recovery continues, it's an inevitable choice that monetary policies of major economies will start to normalize," Ms Wang told reporters in a regular briefing on Thursday.

"However, its impact on China still can be controlled."

Ms Wang said the capital-flow impact arising from the trade standoff with the United States isn't likely to be disruptive.

"We have conducted an in-depth analysis on the impact on China's cross-border capital flows, and it shows that currently, the Sino-U.S. trade frictions on China can be controlled."

Ms Wang said the regulator is planning to increase the quotas for two outbound investment schemes - Qualified Domestic Limited Partnership (QDLP) and Qualified Domestic Investment Enterprise (QDIE).

She expected the dollar to face some downside pressure.

"The pace of normalisation of monetary polices of major economies will be different and will continue to exert downward pressure on the U.S. dollar." .

The regulator will continue to steadily push through two-way opening of the capital account and foreign exchange, Ms Wang said, adding that SAFE will also focus on fending off risks in cross-border capital flows and will maintain and increase the value of foreign exchange reserves.

Ms Wang's comment reinforces a pledge made by Chinese President Xi Jinping earlier this month to further open up the economy to foreign investors and competition.

China's forex supply and demand were basically stable in the first quarter, she said.

China's commercial banks sold a net $9.2 billion of foreign exchange in March, compared with a net sale of $8.2 billion in February, the State Administration of Foreign Exchange said on Thursday.

(Reporting by Yawen Chen and Se Young Lee Writing by Ryan Woo; Editing by Kim Coghill & Shri Navaratnam)