China-US trade plan to have mixed effects

By Wang Cong Source:Global Times Published: 2017/5/14 23:33:39

Good news for consumers, less so for firms: experts

A chicken farm in Yuncheng, North China's Shanxi Province Photo: CFP


A recently agreed trade action plan between China and the US that would further open up the Chinese market for US agricultural products and financial services could mean more options for Chinese consumers, but increased competition for domestic companies, experts said on Sunday.

Chinese and US officials announced last week that they had reached an initial consensus on several trade issues, as part of the 100-day action plan for bilateral trade negotiations.

These included allowing US beef exports to enter China by mid-July and granting market access for US financial institutions to provide credit rating services and electronic payment services in China.

This could benefit Chinese consumers as it will allow for cheaper, better quality goods and services, particularly agricultural products, according to Ma Wenfeng, a senior analyst at Beijing Orient Agribusiness Consultant.

"If we resume the imports of US beef, we will have more sources for beef," Ma told the Global Times on Sunday, adding that US beef is generally better than the meat imported from Brazil. "The US has better safety regulations for beef than Brazil, which ensures better quality," Ma said.

China banned beef imports from the US in 2003 due to a case of mad cow disease reported in the state of Washington, and has been relying on imports from countries such as Australia and Brazil. China also temporarily barred meat imports from Brazil in March this year following a scandal in which Brazilian officials were found to be taking bribes to allow the sale of rotten meat.

Under the new trade plan, Chinese officials will take measures to allow wholly foreign-owned financial firms  in China to provide credit rating services and guidelines will be issued for wholly US-owned electronic payment service providers to begin the licensing process in China by mid-July. In addition, China will issue both bond underwriting and settlement licenses to two qualified US financial institutions.

This will expand the financial services and product offerings in the Chinese market, which has been dominated by domestic companies thus far, according to experts. "As the Chinese capital market is going through reforms and opening up, it's in the interest of the investors to have a diverse, open market," Li Daxiao, chief economist at Shenzhen-based Yingda Securities, told the Global Times on Sunday.

Liu Xuezhi, a senior analyst at Bank of Communications, added that "it's a crucial step to involve US firms, which tend to be more mature, in the opening up and internationalization of the domestic capital market."

Increased competition

But there will also be increased competition for domestic businesses, experts noted.

Ma said that if China starts to import more US agricultural goods it will be a huge problem for domestic farmers. "The US agricultural sector has a strong competitive edge over the Chinese one, which is facing a lot of problems," Ma said.

"We have enough people, we have enough land, but we still rely on imports for food, so there is something wrong," he said, adding that China needs to reform the current system to produce one that protects farmers' interests and has better production capacity.

The financial sector will also see more intense competition, as domestic firms will be facing some powerful new rivals, experts said.

For example, electronic payment services in China are currently dominated by Union Pay, largely because of the absence of competition, according to Liu. US credit card operators Visa Inc and MasterCard Inc are currently not independently licensed to clear transactions in China, but based on last week's agreement, that will soon change. 

"That will bring some challenges to Union Pay and could threaten its dominant position in the market," Liu said.

But in the long term, the opening up of the domestic market both in agriculture and finance will benefit from the participation of US companies, the experts said.

"Openness and competition is good for any sector, so that's not the problem. The problem is how we should help domestic industries and companies to improve their competitiveness through structural reforms," Ma said.

Chinese poultry farmers will also see some benefits, as the agreement is set to open the US market to cooked chicken from China.

In addition, the US will also encourage Chinese companies to invest in the US and will treat Chinese banks according to the same regulations as banks from other countries.

Posted in: ECONOMY

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