The basic orientation of China's economy is good and the trend remains unchanged

Recently, the leaders of the State Development and Reform Commission, the Banking Insurance Regulatory Commission and the Ministry of Industry and Information Technology have made intensive voices in recent years. They believe that the escalation of Sino-US economic and trade frictions has an impact on China's economy, but it is very limited. China's economy has sufficient supporting conditions for stable, healthy and sustainable development. Next, the state will speed up the implementation of a number of new policies and measures around the "Six Stabilities" and will continue to promote and enhance the level of opening up.

Sustainable development has support

Ning Jizhao, deputy director of the National Development and Reform Commission, said in a joint media interview recently that although the escalation of Sino-US economic and trade frictions has an impact on China's economy, the basic orientation of China's economic development remains unchanged. Ningjitao said that China's economy has sufficient supporting conditions for stable, healthy and sustainable development.

Firstly, China's economic development is endogenous. After years of transformation, China's economic growth has been mainly driven by domestic demand. Consumption contributed more than 65% in the first quarter of this year, becoming the first driving force of economic growth. Business environment continues to optimize, and the enthusiasm for innovation and entrepreneurship creation of enterprises continues to improve. In the first four months of this year, the number of newly registered enterprises reached 186,000 in a few days.  

The second is the great market potential. China has a population of nearly 1.4 billion, which exceeds the total population of the developed economies in the world. The trend of consumption upgrading is obvious. As a developing country, there are gaps in regional, urban and rural development, and the gap is the potential.

Thirdly, there is a wide space for transformation and upgrading. China's industrial chain is complete and diversified, with great flexibility and resilience. From the industrial point of view, the pace of improving the quality and efficiency of manufacturing industry has been accelerated, and the proportion of service industry in the total economic volume has steadily increased. From a technical point of view, China continues to increase its investment in science and technology. In 2018, the intensity of the national investment in research and experimental development was 2.18%, which exceeded the average level of OECD countries. From the perspective of enterprises, a number of enterprises with strong international competitiveness are emerging. The data show that in the first four months of this year, the added value of industrial production above the scale increased by 6.2% year on year, which is basically the same as last year, and is higher than the expected growth target for the whole year. In addition to the steady growth rate, in terms of industrial operation structure, the high-tech manufacturing industry grew by 11.2% in April, 5.9 percentage points faster than the total manufacturing industry and 3.5 percentage points faster than the first quarter. From the perspective of expectation, the confidence of enterprise development continues to improve, the purchasing manager index of manufacturing industry has been in the boom expansion range for two consecutive months, and the expected index of production and business activities has been above 56% for three consecutive months.

Wang Zhijun, Vice Minister of Industry and Information Technology, said in a joint interview with the news media that from January to April this year, the actual utilization of foreign capital by manufacturing industry was 94.38 billion yuan, an increase of 11.4% over the same period last year. This fully demonstrates the firm confidence of foreign investors in China's economy.

The impact of tariff increases is limited

Since May 10, the United States has raised tariffs on 200 billion US dollars of Chinese goods imported to the United States from 10% to 25%. The U.S. government says it is studying tariffs on another $300 billion of Chinese goods. Guo Shuqing, chairman of the Banking and Insurance Regulatory Commission, said at the World Financial Forum at Wudaokou, Tsinghua, in 2019 that the United States could not solve any problems by escalating trade frictions. Although the United States can impose tariffs to the limit level, the impact on China's economy is very limited. According to Guo Shuqing's analysis, the vast majority of products exported to the United States are very suitable for domestic sales. China is in the period of consumption upgrading, and the rapidly expanding market will absorb a large part of it. At the same time, China has made great progress in the diversification of international trade, and more Chinese products are welcome in markets outside the United States. In addition, from the perspective of China's economic restructuring and upgrading, China needs a certain proportion of production to be transferred overseas to achieve high-quality development. Some products will still be exported to the United States, either because they cannot find alternatives or because American importers are willing to share the tariff costs. When discussing the impact on China's financial market, Guo Shuqing said that China's financial market had been excessively affected by Sino-US economic and trade frictions last year. At present, its resilience has been significantly enhanced and the scale of further shocks will not be too large.

Wang Zhijun pointed out that industrial products were the main part of the $200 billion tariff-added commodities. Among these 200 billion enterprises that export products, foreign-funded enterprises account for 50% of the total. Many foreign-funded enterprises are American enterprises, and a large part of the market for their products is in the United States.

Ningjizhao and Wang Zhijun both mentioned in the interview that although the import of US$200 billion in tariffs accounted for a relatively high proportion of our exports to the United States, the proportion was very low in terms of the overall scale of China's trade in goods. Therefore, the impact of tariff increases is limited. Guo Shuqing said that the goal of the US tariff increase is to reduce the trade deficit between the United States and China, but because of China's counter-measures, its direct results are uncertain, and other factors are likely to have little or even counterproductive effect. The International Monetary Fund (IMF) recently published "The Impact of Sino-US Trade Tension" also believes that the cost of raising tariffs on imports from China by the United States is almost entirely borne by American importers. Although tariffs have led to a reduction in Sino-US trade, the bilateral trade deficit has remained basically unchanged.

Promote all-round opening-up firmly

The Central Economic Working Conference has made promoting all-round opening-up one of the seven major tasks of this year. In the face of the complex and changeable international environment, the leaders of the three ministries and commissions once again expressed their determination to deepen the opening-up unswervingly. Ningjizhao said that the next step would be to accelerate the implementation of a number of new policies and measures around "six stability". Measures should be taken to stabilize foreign investment