“The United States has taken the lead in challenging the international order and international rules, and launched attacks on countries and regions whose interests are not in line with the US. As a result, the world order, rules, and the world economy have experienced significant changes. Furthermore, the World Bank, UNCTAD and IMF have all lowered their forecast on the 2019 world economic growth to 2.9%, 3%, 3.6%. respectively,” said Chen Wenling, chief economist of China Center for International Economic Exchanges at the Conference on International and Domestic Economic analysis and 2019 Economic Outlook.
“Generally speaking, China’s economy is relatively stable despite some worrying problems because the direction of China’s policies is correct and it still has huge economic potential. The implementation of the “Belt and Road Initiative” has a positive effect on stabilizing China’s economic development and enlarging trade development,” said Chen Wenling in an interview with China Trade News.
She also said that the global trade pattern is likely to experience three major changes but China has the strength and confidence to face the complicated and ever-changing world economic situation and stabilize its economic and foreign trade development. China has always been the defender of the multilateral free trade system.
Firstly, there will be major adjustments and changes in multilateral trade rules. The WTO advocates economic globalization, trade liberalization, fair trade, and trade facilitation. Due to the increased number of new economies and changes in the manufacturing structure, the United States has proposed the so-called fair trade and reciprocal trade. For example, the United States believes that all countries should have the same import tariffs on automobiles. China is a practitioner of the WTO multilateral trading system. When China joined the WTO, the import tariff on automobiles was 15.6% but it was reduced to 9.8% during the five-year transition period. Now China has further reduced it to 7.5% voluntarily. China’s comprehensive tax rate is actually close to the developed countries such as the United States, Europe, and Japan, and the comprehensive tax rate of agriculture is even lower than that of Japan. The WTO believes that China has fulfilled its commitments better than any other countries. In response to the challenges facing the multilateral trade rules, China chooses to actively promote WTO reforms by fulfilling its commitments, obeying rules, and maintaining the multilateral trading system.
Secondly, the transfer of industries has adjusted the flow, direction, structure, and regional distribution of trade. On the one hand, labor-intensive industries are moving quickly to Southeast Asia, Africa, and Latin America. The new industrial pattern means that China will not only promote exports, but also import more goods, and change from producing labor-intensive products to satisfying people’s needs for a better living. In the future, China will become an international trade center that buying goods from the rest of the world and selling to the rest of the world. On the other hand, the trade of intermediate goods has become a major trade. According to the data obtained by the WTO Research Center, the trade of intermediate goods accounts for two-thirds of global trade, connecting the global industrial chain, service chain and supply chain together. The products in the industrial chain need to be repeatedly imported and exported, and hence the trade relations between countries have become increasingly closer. Trump’s trade sanctions against China will eventually cause damage to American manufacturers and consumers, and it will ultimately realize the importance of cooperation and win-win.
The third change is the change in the way of trade. Originally, international trade includes general trade, processing trade, and small border trade. However, the next-generation trade mode is based on the first-mover advantage of cross-border e-commerce. China is taking the lead in the next generation of trade as more than 30 cities in China are experimenting with cross-border e-commerce. On the contrary, the US is going backward because the domestic laws it used to start the trade war are from the 20th century.
Chen Wenling said that international trade is facing a change which can determine the destiny of the world economy. If the rules are formulated according to the concept of supremacy proposed by the United States, the world economy will fall back. However, China’s propositions and practices are future-oriented and in line with the trend of the times.
In the face of the uncertain world economy and the trade friction initiated by the US, Chen Wenling suggested that we must adhere to the following three points. First, we must not fear the intimidation of the United States and must believe that we are in the right direction. Second, our determination comes from the analysis of trade: the trade friction initiated by the United States will cause pain to its own enterprises, and it will eventually realize the importance of cooperating with China. China just needs to wait for that moment to come. Last but not least, China must continue its reform and face the future, create new theories, rules, and frameworks that are suitable for future development.