China Unveils New Trade-Boosting Measures to Counter Weak Global Demand

The Lede: China’s cabinet issued a plan for policies to shore up its trade and exports amid falling global demand.

What We Know:

• Responding to concerns among Chinese officials after exporters reported a lack of orders and warnings of a steeper trade slump, the State Council (cabinet) has issued measures for the country to hedge against the possible economic effects.
• Chinese banks and their overseas branches will be encouraged to offer financial support to help auto companies expand overseas. China aims to improve brand marketing, sales, and customer service for auto companies and expects them to collaborate with shipping companies on distribution.
• China will expedite visa processing and increase the issuance of visas for overseas businesspeople while increasing international flights and full resumption of in-person trade expos. Chinese embassies and consulates will also be asked to step up support for small trade firms.
• The Chinese government aims to smooth out exports to developed countries while opening up trade with developing regions, emphasizing Southeast Asia.

The Background: China reopened from harsh ‘zero-COVID’ pandemic policies at the end of last year. In international trade, China’s exports increased dramatically with shipments to Russia and Southeast Asian countries leading the gains. Trade tensions have increased between China and the U.S. and Europe, muting exports.

Likely Outcomes:

• The plan likely reflects precautions Chinese policymakers want to put in place for the possible scenario of a global recession. Despite elevated exports compared to previous years, China’s reopening does not put the global economy back on the pre-pandemic track. While China has recently benefitted from warmer trade ties with developing countries, the pressure of geopolitical tensions, protectionism, and inflation raises issues on the future of trade with the developed countries in the U.S. sphere of influence.
• While China seeks to restore commerce with the U.S. and other developed countries to pre-pandemic levels, they may increasingly view those prospects as a shrinking window. U.S. consumer confidence has fallen to a nine-month low along with an outlook of a recession looming. The Federal Reserve forecasts a recession later this year due to the collapse of small banks in March, which may influence interest rate targets and impact the economy. The onset of a recession would likely reduce purchases by U.S. consumers, including imports from China, which may make other markets more attractive to Chinese businesses.

Quotables:

"The commerce ministry together with relevant departments should closely follow the operation of foreign trade, analyse the changes of situation [and] adjust and improve relevant policies [to] help firms stabilise orders and explore markets." – Chinese cabinet statement

Good Reads:

China to Ramp up Car Exports, Business Visas to Boost Trade (Asia Financial)

China rolls out plan to boost trade amid weakening global demand (CNB)

China issues guidelines to promote foreign trade (China State Council)