Analysis of China’s Foreign Trade Development Environment in 2018

Analysis of China's Foreign Trade Development Environment in 2018

In 2018, driven by factors such as the continued recovery of the world economy, the steady improvement of the domestic economy, and the enhancement of the endogenous power of foreign trade development, the overall situation of China’s foreign trade is improving, but uncertainties have increased. From an international perspective, the dynamics of world economic growth have increased, but the economic and political situation has become more complicated. The “reverse globalization” and trade protectionism have risen, the macroeconomic policy adjustment spillover effects of major economies have become prominent, geopolitical risks have arisen one after another, and the world economy has recovered. The foundation is not stable. From the domestic perspective, China’s economy is expected to maintain sustained and steady growth, but the problem of insufficient development imbalance is still outstanding, and it takes hard work to complete the annual target. China’s foreign trade has both new development opportunities and difficulties and challenges.

World economic growth is accelerating but the risks are also rising

The world economy and trade continue to grow. After nearly 10 years of adjustment after the international financial crisis, the world economic recovery has been better than expected since 2017. Economic growth has gradually shaken off the low-speed operation, industrial production, international trade and other fields have continued to recover, and economic growth momentum has increased.

The major economies have generally strengthened infrastructure construction and promoted the development of the real economy such as manufacturing, and the economic growth rate has generally rebounded. The US economy has maintained steady growth, the labor market has improved, private consumption has expanded, and manufacturing has risen steadily. The economic growth in the euro zone is improving, the economic sentiment index is rising, the deflationary momentum is being contained, and the confidence of consumers and investors is increasing. Japan’s economy grew moderately, external demand grew strongly, and the employment situation was good. Demand in developed markets has picked up, trade has become more active, and the economy of emerging economies has resumed growth.

Major international institutions such as the International Monetary Fund (IMF) and the World Trade Organization (WTO) have raised their forecasts for world economic and trade growth in 2018. In the April 2018 World Economic Outlook, the International Monetary Fund raised the estimate of global economic growth in 2018 to 3.9%. On April 12, 2018, the World Trade Organization released the “Global Trade Data and Outlook” report, which raised the global trade growth forecast for 2018 from the previous 3.2% to 4.4%, significantly higher than the annual average of 3% after the international financial crisis. The rate of growth. Among them, the growth rate of exports and imports of developed economies will reach 3.8% and 4.1% respectively; the growth of import and export of developing economies will be stronger, and exports and imports will increase by 5.4% and 4.8% respectively.

Trade protectionism increases the uncertainty of the global economy. Despite the current improvement in the global economic situation, the tendency of trade protectionism in some countries has risen, bringing significant uncertainty to the growth of the world economy and trade.

The US government pursues “US priority”, unilaterally emphasizes US interests, neglects international cooperation, and frequently adopts unilateralism, threatening global trade recovery and affecting the process of economic globalization. In January 2018, the United States announced a four-year and three-year global safeguards (201 survey) for imported photovoltaic products and large washing machines. In March, the United States imposed a comprehensive tax on imported steel and aluminum products on the grounds that imported steel and aluminum products threatened US national security. The tax rates were 25% and 10%, respectively (232 surveys), but were temporarily excluded from Canada, Mexico, etc. The economy imports products. On March 22, US President Trump signed a memorandum, based on the 301 investigation report released by the US Trade Representative Office, instructing relevant departments to impose large-scale tariffs on imported goods from China, suing China against the World Trade Organization on intellectual property issues, and limiting Chinese companies invest in mergers and acquisitions of US companies. On April 3, the US Trade Representative announced the taxation proposal for the China 301 investigation. The list of taxation product recommendations involves China’s approximately US$50 billion product export. The proposed tax rate is 25%, covering approximately 1,300 tax number products.

The relevant practices of the US government have worsened the international trade development environment and brought significant uncertainties to the development of global trade and investment. The World Trade Organization warned that escalating trade conflicts may affect business confidence and investment decisions, which will significantly reduce global trade growth. The breakdown of trade relations between major economies will derail the global economy from the recovery track of the past few years and threaten economic growth. And the employment situation.

The macroeconomic policy adjustment spillover effect of major economies is highlighted. As the world economy recovers, the monetary and fiscal policies of major economies have adjusted. The US economy took the lead in getting out of the trough and the normal pace of monetary policy accelerated. The Fed’s interest rate hike and reduction of its balance sheet have had an impact on international financial markets and national monetary policies. Economies such as the Eurozone and Japan have also shown signs of reducing the size of quantitative easing, and global currency liquidity is tightening. On March 21, 2018, the Fed raised the federal funds rate by 25 basis points to 1.5% to 1.75%, and said that the economic outlook is optimistic, the rate hike may accelerate, and interest rates will be raised at least twice during the year. On April 10th, ECB officials said that the European Central Bank may raise the deposit rate to -0.2% and end the 2.55 trillion euro bond purchase project at the end of the year.

In terms of fiscal policy, as the financial situation of developed economies improves, tax cuts have once again become a trend. On December 22, 2017, US President Trump signed the largest tax reduction bill in the United States since 1986, changing the progressive federal corporate income tax rate with a maximum tax rate of 35% to a 21% single tax system, giving companies overseas profit remittances. Most of the personal income tax has also declined, and the bill has been implemented since January 2018. The United States and the Senate and the House of Representatives Tax Joint Commission initially predicted that in the next 10 years, the bill will increase the US federal fiscal deficit by 1.46 trillion US dollars, and promote economic growth by 0.8 percentage points.

The United Kingdom, France, Japan and other countries have also introduced tax cuts. The normalization of monetary policy in developed economies and tax cuts will increase their domestic investment yields and attract global financial and industrial capital to return. While emerging economies and developing countries are facing capital outflow risks, financial market turmoil may occur, affecting economic recovery.

International commodity prices remained high and fluctuated widely. In 2017, the world economy and international trade rebounded significantly, and the commodity market continued its upward trend since the second half of 2016, especially the rise in energy prices. According to the World Bank’s primary product price index, in December 2017, the energy and non-energy commodity price indices rose by 13.8% and 2.0% respectively over the same period of the previous year. In the first quarter of 2018, crude oil prices continued to rise, driving the commodity price index to rise further. The CRB index rose 1.2% in the first quarter, while the S&P Goldman Sachs Commodity Index rose 2.1% in the first quarter. In March, the World Bank’s energy and non-energy commodity price indices rose by 4.0% and 4.3% respectively from the end of 2017.

Looking forward to 2018, from the perspective of supply and demand, world economic growth is expected to be optimistic, demand in the commodity market is more robust, supply and demand balance is further improved, and prices are expected to remain at current high levels. However, the tightening of monetary policy in developed economies will inhibit the rise in commodity prices, risk factors such as rising trade protectionism and tensions in hotspots will also have an impact on commodity prices, and commodity prices may fluctuate widely.

In addition, the geopolitical situation in hotspots deserves close attention. The confrontation between Russia and the West has intensified, and the instability of the Middle East has exploded. Both have increased the uncertainty of world economic development.

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