China Trade Balance: Not Trade War, Dollar Shortage

Solve for the dollar, not trade war. It's a convenient smokescreen and a fortuitous coincidence that China can claim falling imports is related to trade war, assuming President Trump has a high time preference (the 2020 election). Otherwise, if enough time passes, it will be obvious to all what the drop in imports really signals.
SCMP: China’s exports and imports both fell in June, as higher US trade war tariffs blitz Chinese economy
In June, exports fell by 1.3 per cent year-on-year to US$212.8 billion, after tariffs on US$200 billion of Chinese goods were raised from 10 per cent to 25 per cent by Washington in May. This was down from 1.1 per cent growth in May.

Imports, meanwhile, continued to slump, falling 7.3 per cent in June to US$161.8 billion, according to data published by General Administration of Customs in China on Friday. This followed a 8.5 per cent decline in May.
Exports performed slightly better than economists polled by Bloomberg, who had forecast a 1.7 per cent drop, while imports were lower, with the poll predicting a 4.6 per cent drop.
Meanwhile People's Daily is crowing about consumption growth that seemingly avoids imports.

iFeng: 人民日报谈当前消费形势:“购物车”有力拉动“基本盘”
Sogou: People's Daily Talks about Current Consumption Situation: "Shopping Cart" Strongly Pulls "Basic Plate"
Consumption growth momentum is abundant, consumption upgrading features are obvious, and urban and rural consumption is more balanced.

"buy buy Buy"! One by one the fiery lens, refracts the consumption strong growth gratifying situation. China's big market is full of vitality, power and potential.

-Consumption growth has plenty of momentum.

Consumption has been the first driving force for China's economic growth for five consecutive years, and it has maintained a good momentum this year. From January to May, retail sales of social consumer goods totaled 161.332 billion yuan, up 8.1% year-on-year. In the first quarter, the growth of final consumer spending contributed 65.1% to economic growth. Under the background of increasing economic downward pressure, this is undoubtedly an exciting bright color.

-Consumption upgrading has obvious characteristics.

Residents' income growth has been outpacing GDP in successive years. Last year, the Engel's coefficient (the proportion of total food expenditure to total personal consumption expenditure) of residents across the country has dropped to 28.4%, and the escalation of consumption follows.

More people pursue new consumption.

"Once upon a time, what you ate and now what you eat is delicious." Feng Li in Nanjing, Jiangsu Province, has become accustomed to buying vegetables and ordering meals with mobile phone APP. "The goods have been delivered before leaving work. Fruit, vegetable and egg milk are very complete and affordable. " At present, there are more than 4,000 domestic fresh e-commerce platforms and "happiness on the tip of the tongue" pervades the streets.

"I rest, it labor. A thousand dollars is worth it! " Geng Miaomiao of Beijing said that the sweeping robot had made her happy. Condensing wall-mounted boilers, sleep-assisting lifting beds, automatic dryers ... Intelligent products are very popular. During this year's "June 18" shopping festival, sales of smart locks on an e-commerce platform increased 454% year-on-year, Bluetooth headsets increased 1516% year-on-year, and car refrigerators increased 78% year-on-year.

More people favor service consumption.

Whenever night falls, from cinemas to gymnasiums, from book bars, Internet cafes to bars, lights are bright and crowded everywhere. On the basis of income growth, people's pursuit of a better life naturally extends to all kinds of service consumption. Last year, service consumption accounted for 49.5% of residents' consumption expenditure.

From traditional consumption to emerging consumption, from commodity consumption to service consumption, consumer demand is upgrading from imitation, following the trend, simplification to differentiation, personalization and diversification.

-more balanced consumption between urban and rural areas.

Zhang Jijia of Nancun Town, Nanjie Village, pingdu city City, Shandong Province, counted the "big pieces" he had bought over the past few years with his fingers: "Smart phones were replaced, custom furniture was installed, and cars were bought."

From January to May, the retail sales of rural consumer goods nationwide reached 233.67 billion yuan, up 8.9% year-on-year, 0.9 percentage point higher than that of urban consumer goods. Li Guoxiang, a researcher at the Institute of Rural Development of the Chinese Academy of Social Sciences, believes that with the acceleration of rural residents' income growth and the continuous improvement of rural infrastructure and public services, the gradual upgrading of rural residents' consumption is becoming an important force to stimulate domestic demand.

Changes in the external environment have not resulted in a shortage of related imported goods and a sharp rise in prices.

Both the statistical data and the e-commerce promotion observation window strongly prove that China's consumption is growing steadily and the pace of consumption upgrading is accelerating. However, as protectionism and unilateralism continue to spread and uncertainty in the international market increases, some people are also worried about whether consumption can maintain a good momentum.

Some people worry that there will be a shortage in the supply of related imported goods. "Such worries are totally unnecessary." Professor Wang Xiaosong from Renmin University of China School of Economics said.

On the one hand, China has a series of import expansion policies to encourage trading partners to supply more high quality and low price commodities. At present, China has lowered tariffs on a variety of imported goods that involve consumers' daily lives. Red wine from Georgia and Chile, durian and pitaya from ASEAN, salmon from Iceland and other products have achieved zero tariffs. The number of "foreign brands" in the service industry has also increased significantly. United Family, Artemont and other high-end hospitals have successively opened in Shanghai, and Rosen Convenience Store has opened more than 2,000 stores in China.

On the other hand, the "the belt and road initiative" initiative has expanded the "circle of friends" and will attract more new international suppliers. According to statistics, during the "June 18 shopping festival", the overall turnover of Tmall international overseas brands increased 197% year on year. According to the breakdown data, Japan, the United States, South Korea, Australia, Germany, France, the United Kingdom, Spain, New Zealand, the Netherlands and other countries ranked among the top ten in turnover. Austria, Russia and Vietnam led the year-on-year growth in transactions.

Others are worried that the prices of related imported goods will rise sharply. "Judging from the classified consumption data in the first May of this year, changes in the external environment have not caused a sharp rise in the prices of related imported commodities or a contraction in transactions." Wang Xiaosong said.

This is because domestic consumers are often "insensitive" to price increases of such commodities. Affected by changes in the international economic and trade situation, most of the imported basic living and consumption upgrading commodities belong to higher-end products. Domestic middle-income and high-income earners often "don't care much about and can afford" their price changes, while middle-income and low-income earners generally buy relatively little, so the overall impact is limited.

The feelings of Gu Xinfeng, a post-80s white collar worker in Suzhou City, Jiangsu Province, and his lover Xiao Xialing confirm this judgment. They have higher incomes and often buy imported food from cross-border e-commerce platforms or offline boutique shopping centers. "My favorite lobster, her favorite blueberries, nuts and chocolates have all increased in price this year, but they have not reached the point where we feel distressed. Should we buy or not?" Gu Xinfeng said.

This is also because related imported goods are often more substitutable. Imports affected by changes in the international economic and trade situation are mainly automobiles, agriculture, forestry, animal husbandry and fishery products, with relatively narrow distribution areas, and most of them can be imported from other trading partners, thus not leading to a general price increase.

"In the first quarter, China's overall import price index rose by only 1.2% on average from last August, far lower than the net profit growth rate of circulation enterprises and the real income growth rate of residents." Gao Lingyun, a researcher at the World Economic and Political Research Institute of the Chinese Academy of Social Sciences, said.

There is great potential and many favorable conditions for maintaining stable consumption growth.

Looking ahead, the huge market with a population of nearly 1.4 billion and the strong purchasing power of more than 400 million middle-income groups are incomparable to any other country. They will become the most reliable guarantee for the sustainable development of China's consumer market and provide the source of growth and vitality for China's economy and even the world economy. "Although China's consumption contributes a relatively high proportion to economic growth, the consumption rate, that is, the proportion of final consumption in GDP, is just over 50%, and compared with the consumption rate of 80%-90% in developed countries such as Europe and the United States, China's consumption growth still has much room for improvement." Zhao Ping, director of the International Trade Research Department of the China Council for the Promotion of International Trade Research Institute, said.

There is great potential to maintain stable growth in consumption, and there are many favorable conditions. Policy dividends are being released continuously.

The "pocketbooks" are getting bigger and bigger and will continuously improve the people's consumption ability.

Income is increasing. The number of new jobs in cities and towns in China has remained above 13 million for six consecutive years. In the first quarter, the per capita disposable income of the whole country increased by 6.8% year on year, while the income of rural residents grew faster than that of urban residents. At present, there are about 140 million three-member families with annual incomes ranging from 100,000 yuan to 500,000 yuan, and the scale continues to expand.

The burden is decreasing. "Individual income tax has been paid more than 80% less!" Zhao Jia, an employee of Shandong Wansheng Communication Industry Co., Ltd., said that his monthly personal income tax had dropped from 1,870 yuan to 350 yuan compared with before October 1 last year. "In the future, my daughter-in-law will have the money to run fitness cards and my parents to travel!" A research report by Peking University shows that the personal tax reform will eventually expand consumer spending by 717.6 billion yuan, which will boost China's economic growth by 0.87 percentage points based on 2017 GDP.

-The safety net for the people's livelihood will be stronger and the worries of the people will be continuously reduced.

Pension standards have been rising for 15 years, basic medical insurance covers more than 1.3 billion people, and the reimbursement rate for serious illness medical insurance has been raised again … "Social security is getting thicker and thicker, which is conducive to improving consumption expectations and stimulating immediate consumption." Hu Yijian, president of the Institute of Public Policy and Governance of Shanghai University of Finance and Economics, said.

-Continued deepening of structural reforms on the supply side will enrich people's consumption choices.

Policy support is strong and effective supply is increased. Recently, ten departments jointly issued a document encouraging the society to run medical services to further meet the diversified and multi-level medical needs of residents. Speed up telecommunication service and reduce charges; Domestic service quality improvement and expansion ... Policy "big gift bags" are coming one after another, and residents "small wallets" are eager to try.

New industries and new formats are booming, giving rise to more consumption hotspots. With the upgrading of "Made in China" to "Made in China with Wisdom", there are more and more "explosions" of domestic products and more "fans". "internet plus" promotes the integration of online and offline consumption, making choices increasingly convenient and consumption everywhere. "The market size of the artificial intelligence industry in 2023 is expected to increase nearly 6 times compared with 2018" and "the new retail market size is expected to reach 1.8 trillion yuan in 2022." Industry research papers have drawn exciting new hot spots and new spaces for consumption growth.

-Improving and purifying the consumption environment will continuously enhance the people's willingness to consume.

On the supply side, we will focus on cracking down on the chaos of health care products, implement full coverage and strict supervision of vaccines, drugs, etc., and fully launch the tourism supervision service platform throughout the country ... China will speed up the establishment and improvement of a high-level, wide coverage and strong restriction quality standard system to ensure consumers' rights protection capability. "Sincerely invite people from all over the world, and honor comes from the letter." More and more enterprises are making great efforts to improve quality and service.

On the demand side, we will speed up the improvement of the credit system, accelerate credit consumption, and expand more consumer loans to cultural, educational and pension services.

Under the effect of the "combination fist" of the consumption policy, China's consumption will still maintain a steady growth this year. A recent report released by the China Business Association and the All-China Business Information Center estimated that the growth rate of the consumer goods market in 2019 will be around 8.5%, basically the same as that of the previous year. Wang Bin, deputy director of the Department of Market Operations of the Ministry of Commerce, said that according to the prediction of relevant research institutions, the total retail sales of social consumer goods will increase by 9% in 2019, and its contribution rate to economic growth will reach 65%, which is expected to continue to be the first engine of economic growth.

To promote the formation of a strong domestic market, to further stimulate the momentum of consumption growth, and to strive to make people eat at ease, dress well and use comfortably. The "shopping cart" of hundreds of millions of Chinese consumers will definitely be able to effectively drive the "basic plate" of China's economy.

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