“From China’s perspective, even if the US imposes the tariffs to the maximum, the effect on China’s economy will still be limited. The impact of trade friction is completely within our control, and we have the capability and confidence to deal with it,” he said.
Domestic consumption has been the main driver for China’s domestic economic growth so most of the goods China has been exporting to the US will be ideal for domestic sales too, Guo argued.
The CBIRC head’s remarks certainly apply to China’s steel market as over 90% of the country’s finished steel output continues to be consumed domestically, with only about 10 million tonnes per year needing to be imported to serve some niche needs, Mysteel Global notes.
Besides, the list of destinations for Chinese products including steel to countries other than the US has been expanding, and Beijing’s “Belt and Road Initiative” has facilitated Chinese products to gain popularity in non-US markets.
“US is unlikely to completely ban imports of Chinese goods either, as there are no substitutes for some products,” Guo said. “For the others, US importers are willing to share the added costs because of the tariffs,” he told the two state-owned news media.
China’s steel market has, in general, been rather indifferent to the escalation of the trade friction, despite that many steel products have long been imposed on 25% import duties under the US Section 232 in March 2018, when the trade relationship between China and the US showed early signs of worsening.
“US has not been our primary (steel) export destination by any means – a couple of million tonnes we can do without – and domestic demand will likely to stay steady, which will absorb most of the output,” a Beijing-based steel analyst commented.
China’s primary steel export destination has been the ASEAN countries for both long and flat steel over the past few years, with China-origin steel accounting for about 50% of ASEAN’s annual steel imports.
Not only would China’s economy prove resilient, Guo was strongly confident that the friction would have only limited impact on China’s financial sector too.
“The financial market is rather sensitive, and it over-reacted last year, resulting in great volatility, but this year, China’s rather steady economic growth has lent efficient support to the financial market and further dulled the impact,” he said.
China’s financial sector will just need to guarantee sufficient cash flow, stay alert to any potential financial risks, and provide abundant financing to privately-owned and small- and micro-sized enterprises at lower costs, Guo advised.
As for the recent RMB depreciation, Guo reassured the market that China’s economic fundamentals are unlikely to see the country’s currency depreciate continuously in the long run, though volatility is a normal occurrence in the short term.
CBIRC, established in 2018, is the regulator of China’s banking and insurance sectors, playing a crucial role in preventing systematic financial risks in the country.
Written by Hongmei Li, firstname.lastname@example.org
Edited by Russ McCulloch, email@example.com