Last Friday, Trump announced plans to levy taxes on at least US $ 60 billion of Chinese imports, and in addition to imposing restrictions on technology transfers and acquisitions in China, a Sino-US Trade war was imminent. In addition, in response to Trump s national security levy of 25% and 10% tariffs on imported steel and aluminum products respectively, the Ministry of Commerce intends to impose tariffs on US $ 3 billion in imports from the United States. Fresh fruits, dried fruits, nuts, red wine, modified ethanol, American ginseng, and seamless steel pipes will be levied a 15% tariff. The second stage will levy 15% tariffs on pork and products and waste aluminum. What areas will the United States target in the Sino-US trade war? What kind of response might China take? Judging from the performance of the bond market, last Friday s 10-year CDB yield fell by up to 15BP from the previous day s closing. Will the Sino-US trade war really have such a large negative impact on the C hinese economy? In this report, we will discuss the trade war between China and the United States and its possible negative impact on the Chinese economy.
21. The rapid development of China, especially the huge progress in science and technology, is the main reason for the United States to launch a trade war.
The growing trade deficit with China and the rapid development of China are the main reasons why the United States launched a trade war with China. From the perspective of Sino-US Trade, the US trade deficit with China increased rapidly from 29.7 billion US dollars in 2000 to 275.8 billion US dollars in 2016. According to US statistics, the trade deficit increased rapidly from 83.8 billion US dollars in 2000. By 2016, it was $ 375.2 billion. Behind the rapid expansion of the trade balance is the rapid development of China s economy. We measure the relative change of the two major economies by the proportion of China s GDP to the US GDP announced by the World Bank. The data shows that the ratio has increased from 6.4% at the beginning of reform and opening up to About 60% in 16 years. From the perspective of development speed, China s GDP growth rate has been much larger than that of the United States. At present, China s and US GDP growth rates are stable at 6.5-1.5% and 1.5-3%, respectively. The remarkable progress of China s economic development and industrial level has pushed up China s trade surplus with the United States, which is also the main reason for the United States to launch a trade war.
Motors, miscellaneous items and textile supplies rank among the top three in the export and trade deficit with the United States. From the perspective of reducing the trade deficit, the United States should focus on reducing products that import more or have more deficits from China, that is, increase taxes on these areas. Customs statistics show that China s exports to the United States in 17 years (according to HS classification) are the 16th category of electromechanical, audiovisual equipment and its parts and accessories, 20th category miscellaneous products and 11th category of textile raw materials and textile products occupy the top three; For the US surplus, that is, the top three major sources of US deficits are Category 16 electromechanical, audiovisual equipment and its parts, accessories, Category 20 miscellaneous products, and Category 11 textile raw materials and textile products. Therefore, in theory, The United States is most likely to impose tariffs on these thre e categories of goods.
On the surface, the United States is reducing its trade deficit, and behind it is curbing China s economic transformation. Although it will take 15 days for the US $ 60 billion tariff increase to be announced, the information provided by the Trade Representative Office (USTR) is mainly for 1,300 categories such as aviation products, modern railways, new energy vehicles and high-tech products. The areas to be levied tariffs are quite different from the three major categories mentioned above. Therefore, this US trade war is not just to reduce the trade deficit, but the greater purpose is to curb China s economic transformation. Judging from the situation in the past few years, whether the macro-high-tech industry s industrial growth rate has greatly exceeded the overall industrial growth rate, or the micro-manufacturing and high-tech enterprises R \\ u0026 D institutions expenditures have increased by double-digit growth, which indicates that the Chinese economy is developing Rely on quality growth. The Central Economic Work Conference at the end of last year proposed that the future development should be changed from focusing on total volume to optimizing and adjusting the structure, and it also established the path of China s economic transformation from the guiding ideology .
2. How does China fight back against the trade war provoked by the United States in the field of trade?
In the face of the US-initiated trade war, China can use various coping methods, including changing the pace of US debt holdings. So what are the measures in the field of trade? Similar to the foregoing, we screen the industries according to two methods. One is that China imports a relatively large amount of industries from the United States. The results show that the 16th category of mechanical and electrical equipment, audiovisual equipment and parts, accessories, and the 17th category of vehicles, aircraft, Ships and transportation equipment and category 2 plant products are ranked in the top three; the second is based on China s relatively high deficit with the United States, and the results show that category 2 plant products, category 17 vehicles, aircraft, ships and transportation equipment, and category Category 5 mineral products are ranked in the top three. Combining the results of the two and subdividing the fields, Chapter 12 Oilseeds; Seed Kernels; Industrial or Medicina l Plants; HS, Chapter 88 Aircraft, Spacecraft and Their Parts, Chapter 27 Fossil Fuels, Mineral Oil and Its Products; asphalt, etc., Chapter 10 Grain and Chapter 26 Ore, Slag and Ash may become the scope of China s counterattack .
23. Does the Sino-US trade war have a significant negative impact on China s economy?
From the reaction of the bond market, some investors believe that the Sino-US Trade war may have a large negative impact on the Chinese economy, and then prompt the central bank to relax its monetary policy. As a result, the bond market has quickly turned bullish. However, we believe that the negative effect of the Sino-US trade war on the Chinese economy cannot be overestimated for the following reasons:
First, there is a high probability that the Sino-US trade war will end with a compromise between the two sides. The complementarity of Sino-US trade structure determines that both countries can benefit a lot from foreign trade activities. Once they continue to fall into the quagmire of trade war, both sides will suffer certain losses, which both sides are reluctant to see. Therefore, there is a high probability that the trade war will end with compromise between the two sides. For example, the United States raised the issue of intellectual property protection. China may introduce measures in this regard in response to the US request. The US may reduce the scope of tariffs imposed on China and Canada, The probability of the event eventually going to extreme deterioration is very low.
Secondly, even if a real trade war breaks out, a strong domestic demand market means that the Chinese economy will not decline rapidly. Some people in the market have compared this trade war with the historical US-Japan trade disputes. However, we do not believe that the two are comparable: first, trade issues are still political issues, Japan is not a political power, and China is essentially different from it; second, when the United States and Japan trade war broke out, net exports of goods and services to Japan The contribution rate of GDP exceeds China s, and China s GDP is mainly driven by investment and domestic demand. Therefore, even if a real trade war breaks out, China s economy will not decline rapidly. Even in the worst -case scenario, when China s exports of goods fell by 60 billion US dollars, the worst effect of net exports of goods and services on China s GDP growth was 0.45 percentage points. However, considering China s countermeasures and domestic demand growth m omentum, the negative impact on GDP growth should be much lower than this.
Finally, a small economic downturn does not mean that the central bank will relax monetary policy. Whether it is a trade war or a weak investment momentum, economic fundamentals may decline slightly in the future, but will this definitely lead to the relaxation of the central bank s monetary policy? We don t think so. First, overseas pressures have always existed. The normalization of global monetary policy means that there is limited room for the central bank to relax. Second, the central government s economic requirements have shifted from maintaining growth to pursuing high-quality development. Therefore, a small short-term decline cannot change the central bank Monetary policy orientation. The current market may be at the point of the most accommodative liquidity throughout the year. In the future, as personnel adjustments are gradually put in place, the market needs to be alert to the risk of tightening monetary policy.