China is ready to meet the costs of the trade war

Note:The following is an edited translation of a commentary on the U.S.-initiated trade dispute from the Chinese-language "Commentaries on International Affairs (国际锐评)".

China and the United States will inevitably both pay a price as they enter the biggest trade war in the history of the global economy. The United States' additional tariff on 34 billion U.S. dollars worth of Chinese imports will have an impact on some Chinese enterprises. It will also impact on the lives of their employees. China's government anticipated this, which is why it didn't want to see a trade war start. But now that it has, China will fight it to the bitter end.

On Monday evening, a spokesperson for China's Ministry of Commerce announced new policies that aim to relieve the impact of China-U.S. trade frictions. The policies include continuously evaluating the impact on te dispute on different kinds of companies; using the income raised by China's countermeasure tariffs to relieve the impact on affected companies and their employees; encourage companies to restructure their imports; and, step up the implementation of the the State Council guidelines on thr effective use of foreign investment. Taken together, these measures demonstrate China's strong capabilities in risk control and underlines its determination when it comes to fighting the trade war.

A crane vehicle unloads soybeans imported from Brazil on the quay of a port in Nantong city, east China's Jiangsu province, 4 April 2018. [File Photo: IC]

Of course, China will face losses. And although the losses may be minor relative to China's economy as a whole, it will likely be a big blow to some individual enterprises. But China's government has said that it will try its best to limit the negative consequences. For example, evaluating the impact of the dispute on different companies, and using tariff income to offer relief to the affected companies and their employees, are direct and effective ways to help enterprises and its employees deal with their losses. Encouraging companies to restructure their imports helps to support their long-term development by diversifying their trade partners and in doing so splitting the risks. And China's Securities Regulatory Commission announced on Sunday that it would allow more foreigners to trade A-shares, in a move to further open capital markets and in doing so further prepare the economy for the trade war against the United States. As the trade war as just started, there are still many uncertainties, and China should be ready to change its countermeasures in a timely manner, so that these countermeasures can continue to effectively minimize loses.

Can China really afford the cost of the trade war? It has the world's broadest domestic economy, and enjoys a huge consumer market with 1.4 billion people. This means that China's economy can absorb blows even in the hardest of times. Meanwhile, 91 percent of China's economic growth derives from domestic demand, and 60 percent of it is driven by consumption. Its innovation-driven development brings resilience to its economy. And its opening up policy is continuing to spur growth: The 2018 Business Climate Survey recently released by the American Chamber of Commerce in China has revealed that 74 percent of its members plan to expand investment in China, the highest level of planned expansion in recent years.

The United States has long been mulling over launching a trade war not only so it can reduce its trade deficit, but also so that it could hamper the development of China's high-tech sector at its roots. In doing so it has even attempted to force structural reform on China's economy to divert the path of the country's development. And so, the trade war with America is a fight for China's destiny. Its people and government are willing to make sacrifices, overcome difficulties, and make a concerted effort to safeguard the country's sustainable economic development. That's why China can be confident as it heads into battle.