China’s export-dependent cities and provinces are scrambling to provide relief to exporters, stabilise employment and avert the possibility of social unrest as an intensifying trade dispute with the United States threatens to further erode business.
Guangdong, China’s biggest province by gross domestic product, this week offered to cut corporate taxes, slash electricity prices and reduce transport and land costs as additional US tariffs since July exposed Chinese manufacturers to the prospect of empty order books.
The tariffs have come at a particularly bad time for the southern province, which is in the midst of an economic restructuring as it tries to move away from low-end, labour-intensive manufacturing.
The shift has already led to job losses.
Fujian, another big-exporting province on the coast, unveiled a similar package of measures in August to soften the blows of the trade war.
The plight of the provinces is just a taste of what could come if the United States carries out its threat to impose additional tariffs on all of its Chinese imports.
All-out US retaliation would scuttle China’s plan to pivot away from basic industries to higher-value manufacturing, and could result in job losses in the hundreds of thousands, according to one private estimate.
“To some, this is a microcosm of what could happen to other export-dependent provinces should Trump roll out the full tariffs,” said Jonas Short, head of Beijing office at brokerage Everbright Sun Hung Kai.
“It’s also structural — cost rises due to land usage, as well as social security and funding pressures. But also the shock of these tariffs acted as a double whammy.”
Guangdong’s exports fell 2 per cent in the first seven months from a year earlier, with shipments of machinery — accounting for more than half of its exports — up only 2.2 per cent.
Three Guangdong cities — Zhongshan, Foshan and Shenzhen — are racing to meet criteria for a program under which exporters, both domestic and foreign-owned, are exempted from a value-added tax of 16 per cent.
Small firms with no export licences can also bundle their products with trading firms that have permits.
Zhongshan, which shares the Pearl River Delta with Guangzhou and Shenzhen, is especially vulnerable, being one of the Chinese cities most dependent on US customers.
Directly in the line of fire is Zhongshan’s Guzhen district, the largest production base of lighting fittings in China.
US tariffs have already hit makers of light-emitting diodes (LEDs). The Trump administration is readying more duties on $200 billion worth of Chinese imports that will include most lighting products. — Reuters
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