China vows steps to ease exporters' pain as Trump's tariffs hit
[NEW YORK] Chinese officials vowed to provide more support for exporters affected by US President Donald Trump's tariffs, showing greater urgency to shore up the crucial sector as signs of distress emerge.
Policymakers in Beijing on Monday (Apr 28) laid out policies to aid exporting companies, including plans to ensure troubled firms get the loans they need and boost domestic consumption to absorb the blow of US levies. The briefing amounted to Chinese officials' most detailed attempt since the start of Trump's second term to address growing trade headwinds as cargo shipments to the US plummet.
'Since the beginning of this year, the risks and challenges faced by China's foreign trade development have increased significantly, especially the unilateral tariffs imposed by the US,' said Sheng Qiuping, vice-minister of commerce. 'In order to help foreign trade enterprises actively respond to external risks and challenges, we will adhere to a goal-oriented and problem-oriented approach.'
The measures represent a targeted approach to stabilising the economy as a trade war with the Trump administration continues with no immediate off-ramp in sight.
Beijing is signalling it's in no rush to aggressively expand economic stimulus or jump into negotiations with the US, even as prohibitive levels of tariffs are forecast to halt bilateral trade and hurt a sector that contributed to nearly a third of the economy's expansion last year.
'Both the timing, the size and approach of growth supportive measure will be flexible, pending the next move of the US,' said Raymond Yeung, chief economist for Greater China at Australia & New Zealand Banking Group, adding that Beijing has a track record of offering exporters-specific support during the pandemic and the global financial crisis.
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China's benchmark CSI 300 Index of onshore stocks erased losses as the briefing went on. The yield on 10-year government bonds was little changed, while the yuan weakened a tad along with most regional peers as the US dollar gained.
Officials announced efforts including:
Guidance for lenders to maintain loans to small and medium-sized trade firms
Special credit tool to support the export of large equipment
Assistance to firms to diversify markets
Reducing costs for domestic trade, such as rent and streaming fees
Optimising the exchange rate hedging tool for trade firms
Zhao Chenxin, Vice-Chairman of the National Development and Reform Commission, said authorities are 'fully confident' in reaching the expansion target of around 5 per cent for 2025. He largely repeated vows last week by the decision-making Politburo, led by President Xi Jinping, to prepare for external shocks.
In an early sign of trouble for exporters, cargo shipments have plummeted since the US raised levies on China to 145 per cent early this month, perhaps by as much as 60 per cent, according to one estimate.
There are currently about 40 cargo ships that recently stopped at ports in China and are now bound for the US, down by about 40 per cent from early April, according to ship tracking compiled by Bloomberg.
Zhao highlighted the economy's resilience in the first three months of the year, including the stronger contribution of domestic demand to growth compared to the previous quarter.
Whether consumers can make up for lost exports will be key to Beijing's attempt to achieve this year's growth target. Economists at international banks including UBS Group and Goldman Sachs have lowered their forecasts for China's 2025 growth in recent weeks to around 4 per cent or lower.
Xi previously vowed to make boosting domestic consumption a top economic priority this year, although consumer confidence remains sluggish as a property market slump zapped a main source of wealth for households.
Yu Jiadong, Vice-Minister of Human Resources and Social Security, acknowledged the adverse effects of US tariffs, saying some exporters face business difficulties and some jobs are affected. He said the government will take steps to improve workers' skills and prioritise youth employment.
China will also free up more cash for banks and cut interest rates at an appropriate time, according to Zou Lan, deputy governor of the People's Bank of China. He reiterated the Chinese central bank would keep the yuan stable at a 'reasonable and equilibrium' level, adding that the foreign exchange market's resilience provides strong support for a stable yuan.
Yuyuantantian, a social media account affiliated with state-run China Central Television that regularly signals Beijing's thinking about trade, said in a post after the briefing that the new and previously announced measures will be implemented by the end of June, without specifying the policies.
China appeared to have resisted rushing into any trade negotiations with Trump. Officials last week dismissed claims that there were talks on reaching a trade deal and reiterated a demand for Washington to revoke all unilateral tariffs.
Before talks begin, officials in Beijing want to see Trump show more respect by reining in disparaging remarks by members of his cabinet, Bloomberg previously reported. China also wants the US to name a point person for talks and show a willingness to address China's concerns around American sanctions and Taiwan, the self-ruled island Beijing considers its territory.
Despite the rhetoric, Beijing is quietly considering suspending its 125 per cent retaliatory tariffs on some US imports, a move that will contain the fallout of the trade war on certain sectors.
'The way the Chinese government is making exemptions, clearly they don't want their own economy to be harmed by the tariffs that they lay on,' Michael Hart, president of the American Chamber of Commerce in China told Bloomberg Television, adding that member companies have already seen exemptions in IT, health care and aviation sectors. BLOOMBERG
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