Global Times:

What influences will the additional tariffs imposed by the United States on Chinese goods have on the global industrial chain? If foreign investment withdraws from China because of the tariffs, what influence will it have on China's industries and the global industrial division of labor? Thank you.

Luo Wen:

The additional U.S. tariffs on Chinese goods will cause great harm to and exert negative influences on global industrial chain, which can be shown in three aspects.

First, the tariffs will break the connection between the industries of different countries, risking fragmenting the global industrial chain. As we all know, under the conditions of economic globalization, the economies of all countries are deeply integrated into the global industrial chain. The trade between countries is no longer just simple commodity trade, but relies on global production networks to jointly complete product R&D and design, processing and manufacturing, logistics and transportation, and marketing services between countries. All countries are dependent on each other with their economies closely intertwined. We prosper and suffer together. The imposition of tariffs by the United States can be said to disrupt the normal international division of labor system, making some industries disconnected from upstream and downstream industries, meaning that the global industrial chain is facing the risk of fragmentation.

Second, the tariffs will break international economic and trade rules, leaving the global industrial chain in a state of disorder. The existing international economic and trade rules represented by the WTO regulations are the important cornerstone of global economic growth. The unilateralism and protectionism currently adopted by the United States have forced some countries to take countermeasures. By July this year, in addition to China, the other major trading partners of the United States, including the European Union, Canada and Mexico, successively launched countermeasures. . Therefore, the risk of a worldwide trade war is growing. In this situation, the international economic and trade rules may be damaged or collapse completely. Once the global industrial chain loses the fundamental support of these rules, the risk of disorder will become even greater.

Third, the tariffs will reduce the efficiency of global economic operations, leaving the global industrial chain exposed to greater risks of low efficiency. The additional tariffs of the United States have dealt a blow to normal commodity trading and resource allocation worldwide, reducing the efficiency of international economic operation. In April this year, the International Monetary Fund (IMF) released the World Economic Outlook, stressing that an increase in tariffs and nontariff trade barriers could disrupt global supply chains, and slow the spread of new technologies, reducing global productivity and investment. This will lower the overall efficiency of the global industrial chain.

This is the answer to your first question.

As to the impact of relocation of foreign companies, we believe that cross-border investment and relocation are voluntary business practices of companies to allocate resources efficiently across the globe. For any country, there are companies moving in and out every day. It is a normal and natural result of economic globalization. Up to now, the escalating trade friction provoked by the United States has had some impact on foreign companies in China. Some have decided to move to other countries in order to diversify their risks and lower costs. We should take a rational view of this issue.

First, instead of sidestepping it, we will take various measures to help companies overcome any difficulties. We will consistently deepen reform to streamline administration, delegate powers, improve regulation and strengthen services. We will cut taxes and reduce tax burden on companies and consistently improve the business environment.

Second, instead of exaggerating the issue, we should have every confidence in the potential of the Chinese market and the advantages of our industrial supporting capacity. China offers enormous market potential, a complete industrial supporting system and ample room for business development. Therefore, most of the foreign companies decide to stay for common development with the Chinese economy. There are also companies further exploring the Chinese market. For example, American electric vehicle manufacturer Tesla in July announced plans to build a super factory in Shanghai, its first outside the United States.

Third, we will open China wider to the outside world at our own pace. We will stay committed to market-oriented reform, continue opening-up, and implement all of the announced initiatives to achieve this. We are convinced that more and more foreign companies will come to invest in China, and most of the companies operating here will stay for further development. Thank you.

Related

Go to Forum >>0 Comment(s)