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Meeting New Challenges
Raft of policies issued to ensure foreign trade growth amid fresh disruptions
By Wang Jun  ·  2020-04-03  ·   Source: NO.15 APRIL 9, 2020
Workers make garments at the Qingdao Jifa Group's factory in Shandong Province in east China on March 28. The company is using online methods to obtain orders from foreign countries after the COVID-19 outbreak (XINHUA)

While the economy in China is returning on track, new challenges are coming up from other areas. With the novel coronavirus disease (COVID-19) becoming a pandemic, exporters are losing orders as disruptions hit their clients abroad.

For instance, Goodwill Watch Case, a watch manufacturer in Dongguan, Guangdong Province in south China, announced on March 21 that its factory will close for three months. Its largest client, American fashion designer and manufacturer Fossil Group, has canceled its future and present orders. Fossil, which also makes accessories for Armani and DKNY, has closed all its North American stores and most stores in Europe due to the pandemic. "Our operation is in crisis," Goodwill said in a statement.

The China Import and Export Fair, also known as the Canton Fair, the nation's oldest and largest trade fair held twice a year in spring and autumn in Guangzhou, the capital city of Guangdong, has been postponed. This key platform for foreign trade and China's opening up would have reached its 127th edition with its spring session scheduled on April 15. Last year, it drew over 195,000 buyers from more than 200 countries and regions.

Ma Hua, Deputy Director of Guangdong's Department of Commerce, said at a press conference that the exhibition would be postponed, given the high risk of imported COVID-19 cases, Nanfang Daily reported on March 23.

On March 24, Chinese Premier Li Keqiang chaired a State Council executive meeting to discuss the epidemic's impact on the global economy and the challenges it poses for the Chinese economy. It was the second time in a fortnight that the premier had chaired this key meeting to discuss foreign trade.

It was decided at the meeting that calibrated steps will be taken to maintain stability in six key areas: employment, finance, foreign trade, foreign investment, domestic investment and market expectation. International transportation, an essential link in foreign trade, has been hit by the global spread of COVID-19. China's air freight capacity will be increased to guarantee the international supply chain and improve the international competitiveness of its logistics industry.

Airlines will be encouraged to increase the number of cargo aircraft and cargo-only flights. Equal support will be given to state-owned as well as private cargo airlines, and the network of air cargo hubs in the country will be improved.

Bai Ming, a senior research fellow at the Chinese Academy of International Trade and Economic Cooperation in Beijing, told 21st Century Business Herald that Li's addressing foreign trade challenges twice in a fortnight indicated China's determination to stabilize its imports and exports. "Special circumstances have emerged," Bai said. "In February, [global] production was affected by the epidemic in China, but now, the problem is that orders have been reduced due to the worldwide spread of the epidemic."

At an online press conference on March 19, Jiang Fan, an inspector at the Department of Foreign Trade of the Ministry of Commerce (MOFCOM), said foreign trade companies will be troubled by weak external demand and reduced orders for some time in the future. With over 201 countries and regions reporting confirmed cases of infection by March 27, COVID-19 has hit production and consumption. Trade activities are on the decline and the global economy is under growing downward pressure.

Figures from the General Administration of Customs of China show that in the first two months this year, exports dropped by 15.9 percent to 2.04 trillion yuan ($289.77 billion), while imports went down by 2.4 percent to 2.08 trillion yuan ($295.45 billion). The volume of trade in goods totaled 4.12 trillion yuan ($585.23 billion), a decline of 9.6 percent year on year.

Foreign trade firms' survival

To minimize the impact on foreign trade companies, MOFCOM, other relevant departments and local governments have together announced a series of policies to stabilize foreign trade. "Our priority is to provide fiscal, tax, financial support and export credit insurance in accordance with World Trade Organization rules to help foreign trade companies secure markets and orders while preventing risks," Jiang said.

Small and medium-sized trade firms will face a period of difficulties due to their weak risk-resistance capability. So the government must take measures to ease their difficulties and provide them assistance and support, Liu Rui, a professor with the School of Applied Economics of Renmin University of China, told China Industrial Economy News.

These firms themselves should also seek new opportunities. The general severe trend in foreign trade doesn't mean there won't be any opportunities in specific markets or industries, Liu added, pointing out that the demand for masks in other countries, for example, is huge now. Firms that supply the product have an opportunity.

"COVID-19, while it caught us all by surprise, also provides these trade firms an opportunity of repositioning themselves and a breathing space, especially as some of them failed to consider long-term development as they grew fast in the past," Liu said. "The outbreak will drive them to reposition themselves and look for new opportunities in the market instead of waiting to die. The opportunity for market upgrading must be grasped, or it will never come back."

On March 10, Li chaired the fortnight's first State Council executive meeting focusing on stabilizing foreign trade. It outlined three major measures.

All export tax rebates must be made in full and in a timely manner except for high energy-consuming, heavily polluting or resource-intensive goods.

Credit will be expanded to support exports. The government will guide financial institutions to increase loans to the foreign trade sector and allow loan payments to be deferred. Loan payments due from epidemic-affected medium-sized, small and micro trade firms with good business prospects can be deferred again.

Export credit insurance should be utilized. The government will facilitate financial institutions' role in counter-cyclical management while commercial insurers should launch short-term export credit insurance and lower premium rates to better protect trade firms from risks.

Border trade support

MOFCOM and the Export-Import Bank of China (China Exim Bank) issued a guideline on March 23, announcing innovative border trade will be supported in border economic cooperation zones.

The guideline provides 10 measures, including strengthening credit support to key sectors and establishing cooperation and policy guarantee mechanisms to strengthen financial support to border economic cooperation zones.

China Exim Bank branches have been asked to intensify and innovate financial support and better allocate and optimize credit resources to support border economic cooperation zones and enterprises to deal with the epidemic and resume production.

Border areas will be supported to receive industrial transfers from the eastern regions, especially in the manufacturing industry. These areas have been asked to improve the industrial chain for border trade. Construction of infrastructure as well as logistics and warehousing facilities will be facilitated while enterprises engaged in small-scale border trade and export processing will be provided loans for replenishing working capital, building workshops and purchasing equipment. New business forms such as cross-border e-commerce will be developed. High-level opening-up platforms will be set up in border economic cooperation zones, integrating border trade, manufacturing, production services, logistics and procurement.

The government will encourage businesses in border and cross-border economic cooperation zones to diversify their goods trade categories, especially with markets participating in the Belt and Road Initiative. More foreign companies will be encouraged to establish facilities in these zones to diversify them.

"Our field studies show the biggest difficulty for enterprises engaged in both foreign trade and domestic trade lies in their capital chains," Pan Helin, acting Dean of the Digital Economy Institute at the Zhongnan University of Economics and Law in central China, told Economic Information Daily. "MOFCOM and China Exim Bank's measures focus on targeted financial support, which is critical to ensure the stable growth of foreign investment and foreign trade."

Copyedited by Sudeshna Sarkar

Comments to wangjun@bjreview.com

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