Zhi YU (Shanghai University of Finance and Economics International School of Business and Management): Europe will benefit from the trade war between China and the US
Zhi YU, holds a Ph.D. in Economics and, as the professor at Shanghai University of Finance and Economics International School of Business and Management, explores the relationship between Chinese import policy and One Belt One Road policy.
What do you think of China's current push for imports?
Since 1995, China's foreign trade surplus has been running at an average annual rate of about 3% of GDP. America's share of the surplus is 95% a year. This is the direct cause of the Sino-US trade war. Beijing hopes to increase imports through November's import expo, reducing China's large surplus and easing trade friction with the United States. But, because the underlying causes of the trade imbalance between China and the United States have not been resolved, the United States has persisted in imposing high tariffs on Chinese products, while China has responded by imposing tariffs on American products. It is therefore predictable that the biggest beneficiaries of this expo will not be the US, but other countries with close trade ties with China, including Europe (including Luxembourg).
“One belt one road brings more value to Europe.”
Which goods do you think China is should import?
The exhibition stands of import expo are mostly consumer goods: the main purpose is to increase the import of consumer goods. Some scholars have suggested an increase the imports of intermediate products. However, from my point of view, the temporary measures to expand imports are a palliative rather than a remedy for China's large trade surplus. China should pay more attention to and address the strategic and policy causes leading to China's long-term trade surplus.
What opportunities and challenges do you see from “One Belt One Road” policy?
The One Belt One Road policy allows Chinese investors to invest in overseas infrastructure, such as ports, real estate, roads, railways and so on. To make investment easier, the financial sector has expanded overseas (for example, Chinese banks have set up branches in Europe) and to provide supporting services. There are a growing number of Chinese Banks in Luxembourg. The first seven major Chinese Banks doing basic business are now slowly starting to compete with foreign financial institutions, for example in the recent issuance of bonds. At the same time, we should note that China's effect on some national infrastructure investment projects is not very good, and many projects are loss-making. Some overseas projects are fully funded by the Chinese side or shared with the partner countries, which can easily lead to increased liabilities for the relevant countries, such as Sri Lanka and Malaysia. All in all, we should consider not only the benefits of our own investment, but also the adverse impact on other countries.