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Trade Wars: Positive Results Achieved In The Negotiations, Chinese Enterprises Should Still Take A Look At The Current Progress.

2019/10/14 11:24:00 0

Sino US Trade WarPositive Results

On October 11th, President Trump met with members of the Political Bureau of the CPC Central Committee, vice premier of the State Council, and Liu He, the leader of the Sino US comprehensive economic dialogue at the Oval Office of the White House. The information disclosed by the two sides for the first time shows that there has been some progress in the consultations. The two sides agreed to continue to work together to work towards a final agreement.


China and the US reached the first stage trade agreement, but the friction was only "postponed".

Trump answered questions from Chinese and foreign reporters at the Oval Office on the afternoon of the US China trade consultation. In response to Xinhua's questions, he said, "I think we are very close (to end the trade war). I think this is a very important stage. " In addition, Trump also said that the leaders of the two countries could sign the agreement as soon as possible next month.

According to the outcome of the talks, China and the United States will reach a partial agreement. The two sides have made substantial progress in the fields of agriculture, intellectual property protection, exchange rate, financial services, expanding trade cooperation, technology transfer and dispute settlement. The two sides discussed the follow-up consultations and agreed to work together towards the final agreement. The news made the financial markets more excited and optimistic that the US stock market and most commodity futures strengthened. In particular, cotton futures are approaching price limits.

According to galaxy securities analysis, if the agreement reached between China and the United States in the year, it will be the second best way to stop the powerful deleveraging after the beginning of 2019. It is beneficial to improve the external environment of China's economy and play a positive role in solving the related risks such as economic downturn.

In fact, the overall trend of Sino US Trade Frictions Since 2018 is to stop and stop, upgrade the overall situation and expand the field gradually, and continue to upgrade from trade friction to science and technology war, financial war, geopolitical warfare and public opinion war.

According to the official website of the White House, the main contents of the first stage agreement include:

1) on the tariff side, Trump suspended the original tariff increase on China's $250 billion product in October 15th and maintained 25% tariffs. In December 15th, a tariff of 15% was added to some commodities in the 300 billion US dollars (about 160 billion US dollars and the rest came into effect in September 1st).

2) in terms of agriculture, China will purchase agricultural products (000061, shares) worth about 400-500 billion US dollars, especially to increase the purchase of pork and soybeans.

3) in terms of financial services and monetary aspects, China has expanded its financial services institutions, including banks, to open to the outside world, and has reached an agreement on transparency and market freedom in the foreign exchange market.

4) in terms of intellectual property rights, China has strengthened the protection of intellectual property rights from the United States.

5) progress has been made in the dispute settlement mechanism, but no specific contents have been announced.

In addition, Trump welcomed Chinese students studying in the United States to support Chinese investment in the US.

However, the agreement did not solve the problems of many sanctions enterprises and government agencies such as HUAWEI. The tariffs of 25% and 15% have not been completely abolished. The "currency manipulation state" still needs to be formally assessed and confirmed by the US Treasury Department in mid and late 10 months. It only involves part of the technology transfer, and the technology transfer still needs late negotiations. Therefore, the Sino US trade consultation is still very long.

The textile industry is still unable to "relax vigilance" in the progress of Sino US trade negotiations.

In September 1st this year, the US imposed tariffs on US $110 billion, and the levy rate was 15%; the remaining time was about 160 billion US dollars, and the tax increase time was December 15th. In September 12th, Trump said on the social platform that the United States would postpone tariffs on Chinese products valued at US $250 billion (including 34 billion, 16 billion, 200 billion). The implementation time was changed from October 1st to October 15th, and the levy duty rate was raised from the original 25% to 30%. Although the recent thirteenth round of Sino US economic and trade consultations reached a consensus on some trade issues, they could not relax their vigilance.

The negative effects of trade friction between China and the United States on financial markets and the drag on global economic growth have become increasingly apparent. Georgi Ieva, the new president of the International Monetary Fund, said that according to IMF calculations, the trade war is having a serious impact on the world economy and will drag the world economy by 0.8 percentage points by 2020.

It is understood that the 34 billion and 16 billion list of tariffs added by the United States hardly involves textiles and clothing. 200 billion the list covers most textiles, and the 300 billion list covers all garments and a small number of textiles. The two lists of 200 billion and 300 billion cover almost all the textiles and clothing exported to China by us in a complementary form, amounting to about 45 billion US dollars.


China's textile and clothing exports, 18% of exports to the United States. In 2018, China's textile and clothing exports totaled US $276 billion 700 million, an increase of 3.7% over the same period last year. Among them, textiles amounted to US $119 billion 100 million, an increase of 8.1% over the same period last year. Clothing $157 billion 600 million, an increase of 0.3% over the same period. In 2019 1-8, the total export volume of textiles and clothing was US $177 billion 400 million, a decrease of 2.2% over the same period last year. China is the largest exporter of textiles and clothing in the world. At the same time, textile and clothing are also important components of China's trade export. In 2018, China's textile and garment exports accounted for 11.2% of China's total exports, accounting for about 36% of the total volume of global textile and clothing trade. China's textile and apparel exports reached a high level in 2014, and then began to slide. The decline is due to the rapid development of the textile and garment industry in Southeast Asia and other low cost countries, which has seized the share of China's exports. The escalation of Sino US trade friction led to the transfer of some orders to Vietnam and other Southeast Asian countries.

In 2018, China's total exports of textiles and clothing to the United States totaled US $48 billion 960 million, an increase of 7.9% over the same period last year. In the first half of 2019, China's total exports of textiles and clothing to the United States totaled 21 billion 230 million US dollars, down 1.6% from the same period last year. About 73% of garments and 27% of textiles and clothing exported to the United States.

According to statistics of China's textile and clothing import and export market in 1-12 2018, China's top five export markets are the United States (18%), Japan (8%), Vietnam (6%), Hongkong (4%), and Russia (3%). In 2018, China's exports of textiles and clothing to the United States increased by 7.9% over the same period last year. At the same time, China's exports to Vietnam amounted to US $15 billion 920 million, an increase of 21% over the same period last year.
Since 2018, the total export volume of textiles and garments has changed little. Seasonally, the monthly export volume of textiles and clothing has not been affected so far.

The impact of trade friction on PTA and ethylene glycol is mainly affected by its downstream textile and clothing. In terms of PX, PTA, ethylene glycol and polyester, the volume of trade between China and the United States is very small and can be ignored.

On the whole, the Sino US trade situation is not optimistic, and the tax increase list covers almost all our textile and apparel exports to the United States. In the first half of this year, the total volume of textiles and clothing exported to the United States decreased by 1.6% compared with the same period last year. After September, the export volume of garments exported to the United States is expected to shrink further as clothing starts to impose tariffs.


Summary

Ending trade wars means abolition of all added tariffs, which is a hard indicator. at present Sino US trade friction is only a gradual easing rather than an end. Even signing some agreements does not mean solving the Sino US trade frictions once and for all. In the future, there is still uncertainty. Chinese enterprises should still take a look at the current progress.

Part of the source: Xinhua. Galaxy Securities, China financial research, and news network, integrated by the global textile network.



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