Trade conflict escalation serves no one’s interests: CBIRC Chairman
Published: May 25, 2019 05:59 PM

An escalation of the trade conflict by the US can't solve any problem, and will only hurt itself and serve no one's interests, according to the script of a speech prepared by Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission (CBIRC), for a high-level forum in Beijing on Saturday. 

The trade war harms the whole world, Xiao Yuanqi, chief risk officer and spokesperson of the CBIRC, said while reading Guo's speech.

Guo was on an inspection tour outside Beijing, according to Xiao, explaining Guo's absence from the annual Tsinghua PBCSF Global Finance Forum.

The US can hike tariffs to extreme levels, but it will have a very limited impact on the Chinese economy, according to the speech prepared by Guo. Among the reasons cited by him are a rapidly expanding domestic market amid China's consumption upgrade which will absorb a substantial part of Chinese exports to the US, and the growing popularity of Chinese products in markets other than the US as the Belt and Road Initiative is coming to fruition.

The US, for its part, is also set to take a hit, almost to an equal extent, as its Chinese exports will wither, hurting the interests of US businesses. As a consequence, certain US high-tech firms will see a revenue decline, while US consumers and importers will have to bear the brunt of higher costs. Medium to low income people, especially farmers and blue-collar workers, will suffer greater losses, Guo said, noting the US has huge overseas assets and liabilities, and is more reliant than any other country, on the US dollar-dominated international financial system. The trade war will certainly result in turbulence and sluggishness in the international market.

In a sign of a trade war escalation, the US hiked tariffs on $200 billion worth of Chinese goods on May 10. It has also launched an embargo on Huawei Technologies, and is placing more Chinese companies on its blacklist. 

Intense trade tensions have battered stock markets across the Pacific since May, most evident in the technology sector. As of market close on Friday, the tech-heavy NASDAQ had shed 5.66 percent this month, while the ChiNext index tracking emerging high-tech companies listed in Shenzhen had fallen 11.09 percent.

Guo's remarks, one of the most prominent on the trade war, addressed many sensitive questions and made logical explanations, Xing Wei, president of the Insurance Association of China, said at the forum. 

The US has actually benefited hugely from its trade deficits with China, according to Guo. His speech went further to say that US importers and transnational corporations have raked in the majority of profits in trade deficits, US consumers have gained enormous "consumption surplus," the US have obtained cheap capital inflows, as the capital China has accumulated through the trade surplus underpined US consumption and investment through US bond purchases, among other reasons. 

Arguing against accusations about China's theft of US technologies was also a highlight of Guo's comments. Accusations of the US against China are entirely groundless, a reflection of its trade protectionism push in the name of intellectual property protection, according to Guo. China is a steadfast supporter and active constructor of international intellectual property rules. 

US insistence on trade protectionism "might end up isolating itself," Ju Jiandong, Unigroup Chair Professor of Tsinghua PBCSF, told the Global Times on the sidelines of the forum. 

"The Chinese market is strong enough to support Huawei's efforts to develop its own products," Ju said, on China's confidence in fighting the trade war to the end.

Guo, also deputy governor of the People's Bank of China, the country's central bank, called for attention to potential risks. "The contagion and complexity of risks will increase along with financial opening, and special caution is required against massive overseas capital flows in and out of the country and hot money speculation," he stated.

Concerns over the Chinese currency were downplayed. Fluctuations in the yuan's exchange rate in the short term are normal, and  the fundamentals of China's economy show that the yuan won't continue to depreciate, according to Guo, warning those betting on the yuan's fall will surely suffer huge losses.