Chinese State Council Meeting - About industrial chain recovery and support policies for foreign trade work after the epidemic of COVID-19

On March 10^th, the executive meeting of the state council confirmed new measures to deal with the impact of the epidemic and stabilize foreign trade and foreign investment. We will further facilitate the capital flow of the industrial chain and promote the coordinated recovery of work and production at all links. At the same time, we shall support the epidemic prevention and control, and provide help for the enterprises in trouble.

In the meeting, there are three economic and financial prospects that deserve our attention.

Latest news of China Import and Export Fair

According to previous plans, the spring 2020 China Import and Export Fair, the 127th session, will commence in mid April.

At present, the COVID-19 situation in China has been controlled, which has laid a foundation for the fair to be held as scheduled. The Canton fair has a long history since 1957 and has never been interrupted. COVID-19 epidemic exerts an impact, but it will not be enough to shut down the fair. Zhao ping, director of the international trade research department of the China council for the promotion of international trade, said that the regular session of the Chinese people's congress clearly expressed the demand to prepare for the spring Canton fair, which has stabilized the confidence of a large number of foreign trade enterprises.

As a barometer of China's foreign trade, the Canton fair is an important platform for China to promote the development of foreign trade. The current problem is that when the Canton fair is held in mid April, it is still unknown whether the global epidemic could be controlled. The holding of Canton fair should focus on the prevention and control of the epidemic, especially the imported cases from abroad, and it shall also focus on the preparation of the exhibition to help foreign trade enterprises maintain orders as much as possible.

Both Chinese and foreign companies are keen to participate in the fair. Chinese companies desperate to resume some foreign trade orders while European and US markets are eager to buy Chinese goods after a period of work shutdown. The Canton fair will be held with innovation in the participation way, and more brands and buyers from more countries will participate in the online Canton fair for transaction.

Enterprises in whole industrial chain are back to work

The meeting pointed out that all regions and departments should promote the recovery of work and production of the whole industrial chain in an orderly manner, set up cross-departmental working groups, uplift the blockages in the industrial and the supply chain, encourage leading enterprises to give support to other enterprises, enhance the collaboration and maintain the smooth flow of the international supply chain. The meeting also called for the timely measures of deposit-reserve ratio and additional efforts to reduce deposit-reserve ratio for stock-holding bank.  , It encourages commercial banks to increase loan support for small and micro enterprises and individual business, to help resume production and to reduce financing costs.

Experts pointed out that currently we should be highly alert to the relocation of leading enterprises outside to China, which shall result in the relocation of its supporting industrial chain upstream and downstream. We should promote the recovery of leading enterprises as soon as possible.

In the short term, the epidemic prevention and control have led factories and workers idle and logistics blocked, raw material prices rise, and difficulties of getting workers in production, etc.. All these factors bring greater pressure on the global industrial chain. For example, there is nearly 12,000 enterprises manufacturing automobiles components in Hubei province, which have been affected by COVID-19.  The supply disruptions have influenced directly to the global auto giant enterprises, Renault and Hyundai for example, to reduce and even shut down their production.

Will China lose its position in the global supply chain due to the previous shutdown?  Experts believe that the global supply chain has been in the process of dynamic adjustment, and China's position in the global supply chain depends on China's core competitiveness.

First of all, China has the most abundant and high-quality labor resources, with high production efficiency and a large number of skilled workers. Secondly, China is the only country with the most complete industrial system in the world. 41 groups, 191 categories and 525 subcategories of industrial sectors in the UN industrial classification could all be found with supply enterprises in China.

Supply chains for most major industrial products can be found with both suppliers and customers in China. A brief shutdown will not damage these core competencies or cause China’s position to loosen up in the global supply chain.

Ensure steady foreign trade and steady foreign investment

The meeting pointed out that to promote epidemic prevention and control and economic and social development, we must take multiple measures to stabilize foreign trade and foreign investment.

Many exporting enterprises have been affected in these three months.  The meeting once again stressed that export tax refund should be withdrawn as much as possible except for energy-intensive, highly polluting and resource-based products which are not encouraged by the state. It also introduced a series of rescue measures on foreign trade credit and export credit insurance to help exporting enterprises. The deputy director of the international market research institute of the ministry of commerce stated that the meeting called for financial institutions to be guided to increase foreign trade credit, implement the policy of delaying the repayment of principal and interest on loans, and negotiate a further extension for small, medium and micro foreign trade enterprises that are affected by the epidemic and have good prospects. At the same time, the state shall support commercial insurance companies to carry out short-term export credit insurance business and reduce rates.

The meeting also called for the urgent reduction of the negative list for foreign investment access, and the expansion of the industrial catalogue for encouraging foreign investment, so that foreign investment in more areas could enjoy tax and other preferential policies. In addition, we need to ensure that both domestic and foreign enterprises enjoy the same benefits from recently introduced tax and fee reduction policies.