China projects confidence in weaker economy as trade war with US worsens

A top financial regulatory official and a vice-information technology minister said the impact on the economy of rising US tariffs are manageable, while a former deputy commerce minister argued Chinese firms can deal with the sudden escalation of tra
A top financial regulatory official and a vice-information technology minister said the impact on the economy of rising US tariffs are manageable, while a former deputy commerce minister argued Chinese firms can deal with the sudden escalation of trade tensions calmly.PHOTO: REUTERS

BEIJING (BLOOMBERG) - China is strong enough to withstand the effects of the trade war with the United States, according to statements over the weekend from current and former officials, putting forward a confident view of an economy which has been showing signs of weakness in the past few months.

A top financial regulatory official and a vice-information technology minister said the impact on the economy of rising US tariffs are manageable, while a former deputy commerce minister argued that Chinese firms can deal with the sudden escalation of trade tensions calmly.

Since the collapse of talks in early May, the Chinese government has boosted efforts to reassure the nation and prepare it for renewed tensions with the US. President Xi Jinping has called for a new "Long March" while state media has published a steady series of defiant editorials blaming the US and proclaiming Chinese strength.

The fragility of China's economy over the past few months may complicate those efforts, with exports falling and industrial output and retail sales weaker than expected in April, before President Donald Trump announced he was raising tariffs again. The first data for May due this Friday - the official Purchasing Managers' Index - should give a better view of what's happening and how companies reacted to the renewed tensions.

The impact of the US imposing 25 per cent tariffs on US$200 billion (S$274.8 billion) of Chinese exports will be "manageable," according to Mr Wang Zhijun, vice-minister of the Ministry of Industry and Information Technology. That's because the goods affected are only 8 per cent of China's total exports, and many of the firms hit by are American, which ultimately sell products in the US, he said in an interview with Xinhua News Agency last Saturday (May 25).

LIMITED EFFECT

His view was echoed by Mr Guo Shuqing, chairman of the China Banking and Insurance Commission, who said the effect will be very limited even if the tariffs are raised to the highest level.

 
 
 
 

The US benefits hugely from its trade with China, with American importers and multinational firms getting the most profits from the trade gap, its consumers enjoying cheaper products, and Chinese demand propping up prices in key American exports from grains to energy, civilian aircraft to chips, he said in a written speech which was read out at a forum in Beijing last Saturday. Much of China's proceeds from its trade surplus flows back the US as cheap capital invested in Treasuries and other things, he said.

Both Mr Wang and Mr Guo repeated the pledge to continue opening up the Chinese market in spite of the trade tensions, including reducing the areas foreign companies can't invest in within the technology and financial sectors.

Mr Gao Yan, a former deputy commerce minister and director of China Council for the Promotion of International Trade, said that domestic firms in the export-orientated coastal provinces are "calmly" dealing with the renewed trade tensions, and they can redirect their products to other markets.

The new friction will push China to make itself more independent of the US, according to Mr Wang.

"The trade conflicts with the US have made us more soberly aware that our country must work persistently to resolve the bottleneck problem in key technologies," Mr Wang said, adding that policymakers will give more weight to innovation and will increase central government support for fundamental research.