Trade War: China's Domestic Market Will Absorb Unsaleable Exports
Guo Shuqing, the People’s Bank of China’s party secretary and head of the China Banking and Insurance Regulatory Commission, said last week that the impact of the trade war with the U.S. on the Chinese economy will be very limited.
“The United States escalated trade tensions, but it cannot solve any problem,” said Guo. “Chinese financial markets, although they were excessively affected by trade tensions last year, are unlikely to be hit more dramatically going forward, as financial resilience is strengthening.”
The huge domestic consumer market in China will digest most of the unsalable exports, and many of China’s exports will also shift to other foreign markets, Guo says. The U.S. will continue to purchase China-made goods if there are no substitutes, but U.S. consumers will need to pay more.
China Daily reports that greater access to China’s financial sector will encourage global investors and dispel the gloom clouding the global economy, according to senior officials and economists. Chinese financial regulators are preparing a comprehensive opening-up. Foreign institutions with advanced performance in risk management, credit rating, consumer finance, endowments and health insurance are especially welcome, senior officials said over the weekend.
The opening up is expected to help China to reach its GDP growth target of above six percent this year.
As a result of the trade war with the U.S., China is accelerating restructuring reform and shifting from an export-dominated growth model to a more services-driven model.
Despite this optimism, global impacts are expected. Bloomberg economists predict that if tariffs expand to cover all U.S.-China trade, and markets slump in response, global GDP will drop by $600 billion in 2021, the year of peak impact.
Talks between the two nations have been troubled. Last week, China rebuffed claims by U.S. President Donald Trump that it broke a deal made to end the trade war. Lu Kang, spokesperson of the Foreign Ministry, said on May 20: “I am not sure what the U.S. side was referring to by 'a deal.' Perhaps it has bore in mind all along 'a deal' of its own wildwish, one that China has certainly not agreed on however.”
Presidents Trump and Xi Jinping are set to meet at the G-20 summit next month.