Editorial | Beijing sends message of confidence before US trade war talks
China in no mood to be coerced after introduction of sweeping measures to stabilise economy and boost domestic consumption
China goes into trade war talks in Geneva this week on the back of a strong signal to the United States and the world of confidence in its economy, with or without negotiations on punishing export tariffs imposed by President Donald Trump. This follows Beijing’s announcement of sweeping policy measures aimed at stabilising its economy and boosting domestic consumption.
The measures demonstrate China has the tools to put its economy back on track despite the tariff wall, and the wherewithal to finish the job, whatever it takes. It is clear, therefore, Beijing expects the talks to be on a mutually respectful and equal footing.
The course taken is good news for Hong Kong. Its main points include a welcome for high-quality US-listed Chinese stocks to relist at home, in Hong Kong or the mainland. A total of 286 Chinese companies were listed on the New York Stock Exchange, Nasdaq and NYSE American with a combined market capitalisation of US$1.1 trillion at the end of March, according to listing data.
The message is that China is doubling down on economic liberalisation and easier access to its huge market for global capital, and strengthening the roles of its international financial centres, Hong Kong and Shanghai. This involves high-level opening up of the capital markets to optimise access for qualified foreign institutional investors, including through Stock Connect channels between Hong Kong and the mainland.
The flurry of stimulus measures to emerge from top financial officials includes the cutting of key interest rates and a reduction in the reserve requirement ratio for banks. The latter alone injects about 1 trillion yuan (HK$1.07 trillion) into the mainland economy, at a time when the trade war is starting to weigh on the manufacturing sector, with cancelled export orders, reduced output and job cuts
Other measures announced by the central bank include the removal of a 5 per cent reserve requirement ratio on financial leasing and vehicle leasing companies, freeing up capital for lending, more funding by banks and insurance companies for tech innovation and relocation of foreign-listed firms, and support from banks and insurers for small and medium-sized exporting enterprises. Some analysts may see room for more direct handouts. But that is just one reaction to a broad, comprehensive package of bold moves.