Signs of U.S. – China Trade Détente

/Signs of U.S. – China Trade Détente

Signs of U.S. – China Trade Détente

The Real Deal by Lloyd D. Ward

Business Insights Beyond the News

Vol. 1, Issue 5
Jan. 30, 2019

Since returning from China last week, I have been talking about a resolution to the U.S.-China trade standoff. President Xi’s eight-point economic plan is designed to rebalance his country’s economy from heavy on production and export to giving more balanced weight to consumption and import. This gives President Trump something tangible to work with. [See The Real Deal, Jan. 24, Vol. 1 Issue 2]

That’s great news for all of us doing business in China, and, in fact, Apple CEO Tim Cook put a finer point on it yesterday in a Reuters news story. In the midst of Apple’s up and down news of product and services sales, Mr. Cook’s insight echoes the message from my recent on-the-ground learnings:

“If you were to graph up the trade tension, it’s clearly less in January than it was in December,” Cook told Reuters. “I’m optimistic that the two countries will be able to work things out.”

And just this afternoon Bill Bishop, editor of Sinocism China Newsletter, expressed cautious optimism on CNBC’s “The Exchange,” as he ticked off the points of President Xi’s 2019 economic plan as evidence of reason to be hopeful for improved relations.

Given this insight from U.S. policy insiders, I’ve asked my Chinese business associate Changquan Lu, Chairman of ZANBO Marketing Management Consultant Co., to keep us abreast of what he’s seeing and hearing this week in Beijing. Here’s what he said.

“I have the following views on China’s economy in 2019,” Mr. Lu says:

“The Chinese economy sets for stable development in 2019. The GDP is maintaining a steady growth around 6% per year. It has entered a moderate growth track, transitioning from high speed pursuit in the past.

“The nature of the lower GDP growth rate of 6% is different from the previous years. The previous high-speed growth of 8% was an indication for quantity, but the current growth of 6% is all about quality. The growth comes from structural optimization, higher product quality and improvement on environmental sustainability.

“If the investment opportunities in the past were for China’s quantitative expansions, now is the golden time to invest in its structural changes for quality.

“China is a country of vast land and big population. It its “13th Five-Year-Plan” period, the Chinese government plans to build high-speed rail that will cover 113 cities.

Fifty cities will have new airports. Investment in transport infrastructure will exceed RMB 13 trillion. Investment in infrastructure networks will reach RMB 2 trillion, which is a driving force for China new economy.

“The Chinese government will slash taxes for SMEs (Small and Medium-sized Enterprises) and individuals. In 2019, China’s proactive fiscal policies will see tax cuts to exceed RMB 1.5 trillion, unprecedented in China’s modern history.

“Chinese entrepreneurs, big or small, are more optimistic than in 2018. They are more willing to put effort on innovation. China has entered an economic stage to develop high-quality products.

“Therefore, China’s economic development has entered its second strategic development stage, representing another golden opportunity to invest in high quality growth.”