China
US–China trade war : will there be a winner ?
The U.S. and China are hours away from a new round of tariffs on each other’s goods, with no improvement in relations between the two rivals in sight. Will there be a winner, or only two big losers ?
The U.S. and China are hours away from a new round of tariffs on each other’s goods, with no improvement in relations between the two rivals in sight.
In a significant escalation, $200 billion of Chinese products will be subject to increased tariffs from 12:00 p.m. Beijing time on Monday, on top of the $50 billion in goods already charged higher duties earlier in the year. The combined $250 billion in products facing levies is almost half the value of imports from China last year.
Meanwhile, $60 billion of goods from the U.S. will become subject to Chinese higher tariffs around the same time, adding to the $50 billion already levied. That’ll mean about 70 percent of the value of goods China bought from America in 2017 face tariffs.
There are three major explanations for why the United States began its recent trade war with China
United States wants to reduce its trade deficit
The first is that the United States wants to reduce its trade deficits. US President Donald Trump tweeted on 4 April 2018 that ‘[the United States has] a Trade Deficit of $500 Billion a year, with Intellectual Property Theft of another $300 Billion. We cannot let this continue!’. Many US commentators think that the gargantuan imbalance translates into an incremental increase in US indebtedness to China, which they consider to be a huge vulnerability for the United States.
The United States wants to slow China’s progress toward being a high-tech superpower
The second is that the United States wants to slow China’s progress toward being a high-tech superpower. The main sectors in China getting hit are machinery, electronics and IT technology. This is tantamount to the United States’ directly targeting Made in China 2025.
The final explanation is that ‘Trump favours highly transactional exchanges’ and wants an increased stock of bargaining chips. Trump may well have begun a trade war with China now so that he can relinquish it later in exchange for cooperation over perplexing political and security issues.
Whatever the cause, China has been bashed by the trade war. Over the last five months, the Shanghai Composite Index — a barometer of the Chinese stock market — has plummeted by approximately 18 per cent and the Chinese renminbi has depreciated nearly 8 per cent. Because China is still export dependent, the trade war will make Chinese export firms lose approximately US$22 billion and will cause unemployment, especially in China’s east coast.
China faces daunting domestic challenges
Even without the trade war, China faces daunting domestic challenges.
After years of work, China’s economic structural change is slowly progressing. China’s private consumption as percentage of GDP has been increasing since 2010, but it has not yet breached 40 per cent (compared to a US average of 68 per cent). China’s gross savings rate is more than 46 per cent of GNP against the United States’ 17.3 per cent.
Continued high national savings for a long time fully financed Chinese investment and sustained it at a very high level. Even today, China’s investment accounts for 44.4 per cent of GDP. This prolonged investment on a massive scale has created significant overcapacity in a range of sectors and has engendered much debt — part of which has become non-performing loans.
The trade war will only drive the renminbi to further depreciate
Amid China’s internal issues, the trade war will only drive the renminbi to further depreciate. In recent months, Beijing has taken a series of monetary and fiscal initiatives to boost lending and restructure debt.
These initiatives may ameliorate the situation in the short term, but solving the problems completely and successfully will take much longer than expected. If the trade war lingers on until the end of 2018 or even till 2019, market sell-off pressure on the renminbi will likely increase. In addition, US economic indicators look sublime and the almost-inevitable interest rate raise will facilitate further renminbi depreciation.
The worst case scenario would be a persistent trade war coupled with US interest rate increases. This would elicit very negative sentiment and might cause large-scale capital flight from China.
But can the United States achieve the objectives it seeks from the trade war?
The United States cannot drive down or stop trade deficits for the foreseeable future. Anyone who understands balance of payments accounting knows that the sum of the current account and the capital account must equal zero. The United States has very flexible and liquid capital markets with highly credible governance, which lures countries with trade surpluses to export a large part of their excess savings to the United States.
In 2017, US net financial inflows stood at more than US$375 billion, and the capital account surplus exceeded US$400 billion. Further, in today’s trade regime, the capital account drives the savings account. Unless the United States can flip around its capital account surplus, overall trade deficits will remain huge.
Similarly, the United States will struggle to blight China’s Made in China 2025 initiative.
Technology innovation and investment are being promoted by the Chinese government.
There are now 1775 Chinese venture capital firms. China is determined to narrow the income gap between itself and the advanced countries. So a trade war aiming to refrain China from technological enhancement will ‘only strengthen Chinese leaders’ resolve to boost innovation and achieve technological supremacy, as they realise that they can’t rely on others’, as Joseph Stiglitz notes.
Finally, if Trump plans on using a trade war as a bargaining chip, he should know that China will not likely compromise, at least in the short term. Popular anger and national sentiment may well surge about the trade war, which would leave the Chinese government with little choice but to stand firm. China could use ‘strong sales of US brands’ as its own bargaining chip, but if the trade war lasts for more months and China’s economy continues to worsen, the US bargaining chips might increase in potency. Yet still, China could hardly give in to any conditions that violate its national interests.
The trade war will accomplish neither country’s objectives.
China and the United States need to install an effective communications channel, dispatch high-echelon officials who deeply understand each other, come to negotiations, and as Harvard economist Dani Rodrik suggests, ‘do not impose on other countries constraints that you would not accept if faced with their circumstances’.
Yuhan Zhang is an economist and independent researcher.
Who will be the winner of the US–China trade war? | East Asia Forum
Business
China’s Sany Heavy Contemplates Selling Stake in Indian Operations – MSN
China’s Sany Heavy is contemplating selling a stake in its Indian operations, signaling a potential strategic shift in its business approach within the country.
Sany Heavy’s Strategic Move
China’s Sany Heavy Industries is contemplating a stake sale in its Indian operations. This decision aligns with the company’s strategy to streamline its business and enhance operational efficiency in the competitive Indian market.
Implications for India’s Construction Sector
The potential stake sale could significantly impact India’s construction machinery landscape, as Sany is a prominent player in this sector. Investors are closely monitoring the situation, which could lead to increased capital infusion into the market.
Future Prospects
If the stake sale proceeds, it may open up opportunities for new partnerships and investments in the Indian construction industry. Sany’s decision reflects broader trends of foreign companies reassessing their positions in India’s evolving market.
Source : China’s Sany Heavy is considering stake sale in India business – MSN
China
2025 Guide to Accounting and Auditing in China – New Release from China Briefing
China’s new year demands foreign companies navigate complex compliance and financial reporting processes. The updated “Guide to Accounting and Audit in China 2025” aids executives by detailing recent accounting changes, personal information protection audits, tax health checks, and HR audits to ensure compliance.
The start of a new year is a hectic time for foreign companies in China. To meet the various compliance deadlines throughout the year, they need to begin the long and complicated financial reporting process, months in advance. Failure to comply will risk them being hit with deteriorating credit, additional fines, and penalties, and such companies might not be able to remit their profits overseas.
China Briefing’s Guide to Accounting and Audit in China 2025 (3rd Edition), produced in collaboration with the audit experts at Dezan Shira & Associates, aims to walk foreign businesses through the annual audit and compliance process from start to finish, in addition to introducing China’s accounting framework in a comparative context. We hope this guide helps your business add value to its annual statutory audit and compliance reporting in China.
The guide covers the following:
This practical and easy-to-understand guidebook will be of invaluable use to all executives involved in handling company finances concerning China, including:
In this year’s updated version of Guide to Accounting and Audit in China, there are notable changes that require your attention:
New changes to China’s accounting system: In 2024, China made several significant changes to its accounting system, including the amended Accounting Law, the Interim Provisions on Accounting Treatment of Enterprise Data Resources, Interpretation No. 17 on the Accounting Standards for Business Enterprises, and updates to the International Financial Reporting Standards and the Accounting System for Non-governmental Non-profit Organizations. We have updated the section “New Changes to China’s Accounting System” to reflect these changes and provide practical advice to help businesses prepare.
Legislative developments in personal information protection audits: Following the release of the Draft Measures for the Management of Personal Information Protection Compliance Audits in 2023, the National Information Security Standardization Technical Committee issued the national standard Data Security Technology – Personal Information Protection Compliance Audit Requirements (Draft for Comments) in July 2024. The Network Data Security Management Regulations, published on September 24, 2024, and effective from January 1, 2025, reaffirm the legal obligation for enterprises to conduct personal information protection compliance audits. However, as of this guide production, the draft measures and standards have not been formally adopted, and most enterprises are still in a wait-and-see mode. We have reflected these developments in the “Other Types of Special Purpose Reviews” section.
Tax health check: With tax compliance becoming more prominent in China, tax health checks, conducted either independently or by engaging professional institutions, have become a popular way for businesses to identify and correct non-compliance issues in their tax handling. This reduces the risk of tax penalties and avoids potential financial and reputational losses. We have included a general overview of the tax health check in the “Other Types of Special Purpose Reviews” section.
Human resources and payroll audit: An HR audit can uncover hidden HR-related problems and errors, as well as potential compliance issues, especially given China’s ever-evolving regulations. This enables organizations to establish best practices, thereby mitigating operational and legal risks. We have added a brief introduction to this type of special-purpose audit, including the suggested frequency and methods.
| This article was first published by China Briefing , which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in in China, Hong Kong, Vietnam, Singapore, and India . Readers may write to info@dezshira.com for more support. |
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China
Trump wants China’s help in making peace in Ukraine – he’s unlikely to get it
Trump invited Xi Jinping to his inauguration, aiming to involve China in Ukraine ceasefire talks. However, China’s support for Russia complicates its willingness to assist in negotiations, benefiting from ongoing conflict.
US president-elect Donald Trump has invited China’s president Xi Jinping to his inauguration on January 20 in a surprise move which appears to be part of a plan to involve Beijing in ceasefire negotiations in Ukraine.
Just after his recent meeting with Ukrainian president Volodymyr Zelensky in Paris, Trump posted, “There should be an immediate ceasefire and negotiations should begin,” and “China can help.” That latter remark has suddenly gained more significance after Trump extended the unusual invitation for the foreign leader to attend the January 20 ceremony.
Leaving aside whether Xi will accept Trump’s invitation to Washington DC (he probably won’t), the more important question is whether he would indeed help Trump end the Russian war against Ukraine.
China has had a strong economic and trading relationship with Russia throughout the war, and has refrained from criticising Putin. While it has denied providing Moscow with military assistance, reports suggest that China has allowed some goods that have battlefield use to be sent to Russia.
On the surface, Trump’s initiative and what China has most recently put on the table with Brazil look like two reasonably well-alligned peace proposals.
Both call for a ceasefire along the current frontlines, followed by negotiations on a permanent settlement. Both seem to accept Russia’s demand to freeze the territorial status quo, which would mean Ukraine would lose the near-20% of its territory that Moscow’s forces have illegally occupied since 2014.
Kyiv and Beijing
Ukraine and most of its western partners continue to reject this as unacceptable. Before Trump’s election victory, this was a sustainable position because the west was able to prevent Ukraine from being militarily defeated on the battlefield.
Trump has invited Xi Jingping to his inauguration.
This position may be slowly changing, but it is not clear that it would suddenly make China a welcome partner for the west in any peace negotiations – least of all for Ukraine.
Kyiv has always been wary of China and its international policies, from the economic and trade Belt and Road Initiative to the recent peace proposal. Zelensky called the China-Brazil peace initiative “destructive”. He also accused China and Brazil of being “pro-Russian”.
Zelensky is personally deeply invested in his own peace plan, particularly as Ukrainians have made enormous sacrifices in the war so far. This does not rule out compromises, but it makes concessions to China, widely seen by Ukrainians as one of Russia’s main supporters in the war, very unlikely.
Even if there was a sudden change of heart in Kyiv, it is highly doubtful that a Trump-brokered deal would serve Beijing’s interests. For Xi it is always about strengthening China’s role and influence as a global power. China will be concerned if the war is over, the US may become even more focused on its trade war with Beijing.
Read more:
Why China is worried about a second Trump presidency – and how Beijing might react
So far, the war in Ukraine has allowed China to benefit from the strain that it has put on the west.
US suggestions that it will pull back on its alliance commitments in Europe have raised doubts over the dependability of the US as an ally for Ukraine. This is becoming more acute as Trump prepares to move into the White House.
The longer the war in Ukraine continues in this way, the longer China will reap the benefits from the reduction of the relative weight of the United States as its main geopolitical and geo-economic rival.
A carefully managed continuation of the war against Ukraine, by contrast, benefits China in asserting its global leadership.
China’s approach to managing the “Ukraine crisis” was reiterarated by Xi at the recent Brics summit in Kazan, Russia, and in a meeting with former Russian president Dmitry Medvedev in Beijing on December 12 2024. It is focused on upholding “three key principles: no expansion of the battlefields, no escalation of hostilities, and no fanning flames, and [striving] for swift deescalation of the situation”.
What’s in it for China?
This is a far cry from an end to the war as envisaged by Trump. A Trump-brokered deal would likely lift sanctions and provide a possibility of renewed, more cooperative relations between the west and Russia.
It would significantly strengthen Putin’s position, contribute to Russia’s international rehabilitation, reduce his country’s dependence on China, and potentially rekindle historical Russia-China rivalries. Trump’s claim that he wants to “un-unite” Russia and China will not have gone unnoticed in Beijing.
And even if Trump did not manage to drive a wedge between Russia and China, a stronger Kremlin would mean a shift of the power dynamic in the partnership between Moscow and Beijing, potentially elevating Putin from a junior partner to Xi’s peer.
From a Chinese perspective, helping Trump to broker a deal between Russia and Ukraine offers few incentives, except potentially toning down the US trade and tariffs war against it. Draining the west’s resources in defending Ukraine keeps it away from the Indo-Pacific region in which most of the competition between China and the US will play out.
Xi has no interest in seeing Putin being strategically defeated in Ukraine, but keeping Russia bogged down in its war against Ukraine will ensure that the partnership between Beijing and Moscow will stay on current terms with the balance of power tilted towards China.
Keeping the war in Ukraine going, rather than helping Trump to end it, therefore is the most likely choice that Beijing will make.
This article is republished from The Conversation under a Creative Commons license. Read the original article.
- China’s Sany Heavy Contemplates Selling Stake in Indian Operations – MSN
- 2025 Guide to Accounting and Auditing in China – New Release from China Briefing
- Trump wants China’s help in making peace in Ukraine – he’s unlikely to get it
- Trump Proposes 10% Tariff on China and Contemplates EU Tariff Measures
- Middle-Ground Trade Policies with China: Essential for Global Growth
- China Reports Agreement on Ceasefire between Myanmar’s Factions
