Some economists, both from the Chinese government and commercial lenders believe that Beijing will focus on achieving a trade agreement with the United States, and the adoption of measures aimed at reducing the impact of China’s foreign trade.
Christian rose — Chinese government officials say they have prepared some plans for revenge or to bypass possible trade sanctions of the United States. This applies both to the latest round of heightened tensions in relations between the largest economies in the world, and some experts sound the alarm about a possible escalation of tensions in the zero sum trade confrontation.
However, economic experts say China’s multilateral response to possible trade restrictions, we could end up as a mutually beneficial trade compromise and mutual exchange in the lungs of emergency policy measures, including monetary and fiscal accommodation.
The head of the Central Bank of China — the people’s Bank of China (PBOC) Yi gang introduced the next segment of the so-called required reserves ratio (RRR) is one of the main instruments of its macro regulation of commercial banks of China. This step is equivalent to the ordinary Central Bank cut interest rates and working in China.
This step is also said to increase domestic lending in China, allowing commercial banks to hold less liquidity in their reserves — hence the term. This, in turn, is expected to increase capital inflows to China, and to curb capital flight, which could accelerate if the US will impose its own tariffs.
“Yi gang quickly stepped forward and clutched the wheel of policy,” said Frederic Neumann of the Hong Kong offices of HSBC holdings PLC. “It’s a subtle adjustment policies of the people’s Bank of China, reducing the cost of funding for banks, but only the extension of liquidity on the edge.”
Yi was appointed recently as the NSC’s head, and began his term as chief banker of the country with the right course of policy, experts say.
This step also produced additional cash liquidity in the amount of 1.3 trillion yuan (206.6 billion us dollars) on China’s domestic market, which allows for potentially faster business activity at home, as well as the high level of domestic investment.
It is also commensurate with the President of the United States has proposed a package of infrastructure of Donald trump, the main product of which is the allocation of $ 200 billion from the Federal budget for infrastructure projects.
“This shows that Yi is a very skilled and experienced banker,” Shen Jianguang Mizuho Bank in Hong Kong.
A higher level of domestic investment, as a rule, compensate for potential losses in foreign trade, which makes the easing of fiscal or monetary policy effective substitute for trading revenue in export-dependent countries.
Some economists say China could increase the so-called transshipment of its products in the price of the export tariffs China slaps us from 50-100 billion dollars.
This practice involves China exports its goods to a third country — probably those involved in investment cooperation with Beijing, also known as “yuan diplomacy” — and subsequent re-export of products in the United States.
Meanwhile, the government in Beijing is reported to have submitted its own action plan aimed at combating the trade restrictions of the United States in the case that such measures are used.
Chinese national Commission for development and reform Commission of China (ndrc) said ongoing trade disputes with the United States will have little impact on the economy of the continent. Director of the NDRC Pengcheng Yan told reporters Wednesday that his Agency has different tools to prevent possible disruptions in exports from China.
This occurs a strong dependence in the middle of mainland China from foreign trade as exports of consumer goods and other industrial goods account for the lion’s share of China’s GDP and budget revenues.
In addition to professional plans, emergency response, Chinese officials were weighing yet another round of devaluation of the national currency, which, if undertaken, will be the first time in 2015, aimed at maintaining international competitiveness of its exports.
The weakening of the national currency exports cheaper, which means the weakening of the yuan can help China to open new markets and increase trade volumes with other trading partners if the US and its allies to begin to impose tariffs.
However, not all experts are convinced, it is a reasonable strategy.
“It is in their interest to devalue the yuan? It’s probably unwise,” Kevin Lai of Daiwa for capital markets Hong Kong Ltd. said. “If they use devaluation as a weapon, it can hurt China more than the United States. Currency stability contributed to the creation of macroeconomic stability. If not, it could destabilize the markets, and things again look like 2015.”
In addition, Beijing touted the potential tariffs on other import value of US $ 957 million — this time, targeting sorghum. We offer Chinese imports of sorghum would 178.6 percent.
While Chinese buyers may cancel their contracts sorghum producers, the US, restrictions on the import of agricultural products can cause food inflation in the populous country.
“Market participants can translate the temporary storage of sorghum as the beginning of a new round of trade disputes between China and the United States, causing concerns about soy,” Monica Tu of Shanghai JC intelligence.
Despite the belligerent rhetoric, none of the trade restrictions has not yet been adopted, and Beijing and Washington will continue to consult on the possible conclusion of an agreement to reduce the imbalances in bilateral trade.