News Center

In the past two days, the United States has launched a "continuous fire model" and introduced a number of measures to undermine Sino-US trade and financial cooperation, including: on the morning of August 2, Beijing time, the United States announced that it would impose a 10% tariff on US $300 billion Chinese exports to the United States from September 1; on the morning of August 6, Beijing time, the United States falsely called China a currency manipulator. As a result, both the U.S. and Chinese stock markets fell sharply.

What should China do in this situation? Can China's economy and stock market withstand these pressures?

First of all, we must realize that the trade war is unpopular after all, and the countercurrent of trade bullying and unilateralism cannot continue.

Under the situation of economic globalization, countries participate in the global industrial chain according to their comparative advantages, share benefits and bear risks at different stages of the value chain, and at the same time, the economies of various countries will also grow with the allocation of global resource flows. This is the big logic. If you encounter conflicts of interest or other issues that need to be resolved, they can be resolved through negotiations under multilateral mechanisms such as the WTO, or through bilateral negotiations.

Since the United States unilaterally provoked a trade war in March 2018, the two sides have conducted repeated communication and consultations, and have also reached some consensus in stages. However, the US side has occasionally shown a hegemonic posture and taken unilateral measures to undermine the atmosphere of bilateral consultations. Several measures introduced recently can be said to have intensified.

The United States has adopted various pressure methods to try to force China to accept its unreasonable demands that go beyond the scope of bilateral trade, which is impossible for any sovereign country to accept. We must see that the series of trade protection measures adopted by the United States violate the rules of the World Trade Organization, damage the multilateral trading system, seriously interfere with the global industrial chain and supply chain, and affect the recovery and growth of the global economy, which is unpopular.

What China needs to do is to clarify the facts, continue to work hard to resolve differences through negotiations, and at the same time persist in the necessary struggle; the second is to firmly do its own thing, maintain stable and positive economic development, and continue to actively expand opening up. China is on the side of justice, and the countercurrent of trade bullying and unilateralism cannot continue.

Second, we must recognize the continued stability of China's economic growth and its resilience to external pressures.

Since the founding of New China, after 70 years of continuous efforts, especially the rapid development of more than 40 years of reform and opening up, it has grown into the world's second largest economy and the largest country in manufacturing, trade in goods, and foreign exchange reserves. China has a population of nearly 1.4 billion, a 0.9 billion labor force, a 0.17 billion of highly educated and skilled human resources, the world's largest middle-income group, and more than 0.1 billion market players. These market resources are precious and have great potential.

China's economy has entered a stage of high-quality development, with growth mainly driven by domestic demand, which contributed 108.6 per cent to economic growth in 2018, of which final consumption contributed 76.2 per cent. China's R & D investment ranks second in the world, accounting for about 2.18 per cent of the economy, and new momentum represented by strategic emerging industries and the sharing economy is growing. China's total economic output crossed the 90 trillion yuan mark in 2018, growing by 6.6 per cent and by 6.3 per cent in the first half of 2019. The contribution rate of China's economy to world economic growth has remained at about 30% for many years.

We also have the advantage of socialism with Chinese characteristics, the national spirit of unified will to overcome difficulties, can concentrate our efforts on major issues, have great development resilience, potential, and room for maneuver, and have rich experience in macro-control and sufficient policy space.

The global status of China's economy has been formed, and even if there is pressure from the United States, it cannot stop China from continuing to develop. Over the past 40 years of reform and opening up, China's economic and trade exchanges with other countries in the world have become closer and more extensive. As a responsible trading power, China has a growing circle of friends. The US pressure is also unsustainable.

Third, it is necessary to fully understand the basic law of the tortuous progress of the international economic order.

In fact, even if this round of trade war does not occur, there has always been discord in the international economic system. The US side's aggressive trade war this time has only greatly raised the tone of dissonance. The establishment of a new international economic order is a long way to go.

The technological blockade imposed by Western developed countries on developing countries is not new and has a long history. In November 1949, under the proposal of the United States, 17 Western countries as member states established the "Paris Coordinating Committee", that is, the "Export Control Coordinating Committee". The purpose of the organization is to restrict the export of strategic goods and high technology to about 30 developing countries.

In the middle and late 1980 s, some major changes took place in the international political and economic situation. Western developed countries urgently needed to open up new markets. Therefore, GATT continued to expand until the WTO was established in 1995. "Batumi" gradually declined and was dissolved in April 1994. However, in July 1996, 33 Western countries signed the Wassenaar Agreement (also known as the Wassenaar Arrangement mechanism), using it to replace "Batumi" and continue to impose a technological blockade on China and other developing countries. The United States is still the leader.

As we all know, after China became a member of the WTO in 2001, the United States repeatedly said that it did not recognize China as a market economy country, and constantly put forward some asking prices. While the WTO promotes the process of multilateral trade, unilateralism and protectionism, which are contrary to the purpose of WTO, have not disappeared, and the game between countries has always existed.

In the face of disharmonious factors in the international economic system, China advocates win-win cooperation, and all countries should discuss matters involving everyone. We will continue to adhere to the principle of equal consultation and win-win cooperation. We will not only strive to resolve differences and contradictions, but also have the confidence to face difficulties, turn crises into opportunities, and open up a broader new world of development.

The development of any country will not be smooth sailing, and there will inevitably be difficulties, obstacles and even stormy waves. Economic globalization is also tortuous, in different periods will encounter different contradictions and difficulties. In the era of globalization, China's economy and China's stock market should absorb both favorable and unfavorable factors from all sides, and insist on doing their own thing first at all times.

Relatively speaking, my country's capital market reform is relatively lagging behind the development of the overall economy. Whether it is a market downturn or an active period, we must adhere to the reform direction of marketization, rule of law, and internationalization, and solidly implement the construction of basic market systems. In the near future, we should make full use of the opportunity of the construction of the science and technology innovation board, consolidate the responsibility of the main body of the market, stimulate the vitality of the main body of the market, create a good market ecology, and make every effort to build a standardized, transparent, open, dynamic and resilient capital market.

As long as we have a firm direction, maintain our determination, and persevere in our work, we will be able to overcome the difficulties at hand and open up a broader new world of development.

(Source: Securities Daily)