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Under the Sino-US trade friction, how will the global value chain change in the future?

  • Author:Hank
  • Release Date:2019-09-27
From March 22, 2018, Eastern Time, Trump launched a memorandum of president with a papertrade warSince then, the Sino-US confrontation and the wide-ranging areas of controversy have covered not only almost all industrial sectors and most economic policy fields, but also spread to multilateral platforms such as the WTO.

Judging from the results of many current trade consultations, the economic and trade friction between China and the United States will be a protracted war, and to a considerable extent determine the future global economic and political structure, while with the renewal of emerging technologies, in international trade. In the digital era, the emergence of emerging production and demand is reshaping the global trading system. The global value chain is being reshaped under the dual push of digital tide and cross-border trade model transformation, and the digital value chain is taking shape.

Sino-US trade frictions continue to escalate and change, further accelerating the restructuring of global value chains.

First, Sino-US economic and trade frictions may accelerate trade, investment and industrial transfer. Due to the increase in trade costs between China and the United States, some industries in China may be transferred to Vietnam, Malaysia, South America and other countries in order to avoid trade sanctions and obtain capital benefits (such as textile and clothing, furniture and other labor-intensive industries). As Trump's tax reforms and trade wars deepen, companies investing in China will likely move companies to their home countries or to member states with regional agreements.

Second, Sino-US economic and trade frictions will change the international division of labor in the global value chain, disrupt the global supply chain, and even the extremes of global value chain breaks.

Finally, the intensification of Sino-US economic and trade frictions may, to a certain extent, change the rules of international trade, accelerate the development of regional trade and free trade zones, and promote WTO reform. These will bring uncertainty to the rules of our economy.

The addition of tariffs between China and the United States will have a certain negative impact on the economies of both countries.

According to China Customs data, the total value of China's foreign trade imports and exports in 2018 exceeded 30 trillion yuan, an increase of 9.7% over 2017. In terms of Sino-US trade, China’s trade surplus with the United States increased by 17.2% year-on-year in 2018, reaching US$323.32 billion. Reuters said that this is the highest record since 2006.

In the first quarter of 2019, the total import and export volume of Sino-US trade was 815.864 billion yuan, of which exports were 62.242 billion yuan, a year-on-year decrease of 3.7%, and imports were 193.434 billion yuan, a year-on-year decrease of 28.3%.

Some studies have found that in the medium and long term, from the total change in Sino-US imports, the US-China bilateral trade data for 2017 is used as the benchmark (US exports to China are US$130.37 billion, imports from China are US$505.6 billion, US The trade deficit with China is 375.23 billion US dollars. The increase in tariffs will result in a decrease of US$29.01 billion in imports from the United States, a decrease of 22.25%. US imports from China decreased by US$126.55 billion, a decrease of 25.03%. In this way, China’s trade surplus with the United States has turned into $277.69 billion, a decrease of $97.54 billion. The Trump administration wants to reduce China’s trade surplus with the United States, but from the data point of view, it seems to be counterproductive.

At the same time as the Sino-US trade war escalated, the science and technology war continued to ferment. The Fed cut interest rates twice during the year, and the change in the RMB exchange rate also triggered the speculation that the trade war had evolved into a financial war.

It should not be underestimated that the trade war has escalated into a financial war. Some experts believe that the renminbi does have a derogatory internal appeal, and a moderate depreciation is appropriate, which is conducive to reversing the unfavorable situation of exports.

However, if you look at it from the perspective of trade warfare, you still have to think carefully. Once the dollar and other currencies begin to compete for a depreciation, a global exchange rate financial war will ignite. At that time, even such a large foreign reserve will face tremendous pressure from capital flight, especially to escape to the United States.

So, is Sino-US trade friction likely to turn to financial warfare?