Jin canrong: China has three ACES to win a trade war

- May 25, 2019-

It is better not to have a trade war, because both sides will lose.But if it does, China will win, something many people might not have thought of, and trump himself might not have thought of.

Trump, and presumably the American elite, agree that basic facts are good for the United States when it comes to trade.

According to them, the us only sold $150 billion worth of goods to China. So they feel that they have lost a lot. They always say that China has gained more than $376 billion from the us.

But that's not the case. They lied to themselves.

In fact, the United States does sell $150 billion of goods directly to China, but through Taiwan, Hong Kong, Australia and other regions, the United States indirectly sells $100 billion of goods to China in the form of entrepot trade, which trump did not include.

When he takes into account the goods that China sells to the United States through Taiwan, Hong Kong, Macao and other regions, he applies a double standard, and the reason is very formal -- "the principle of origin".

However, he took into account all the commodities whose origin is in China, including those sold through Taiwan, Hong Kong and Macao.

And the commodity that country of origin is in the United States, he regards the area such as Taiwan, harbor, Australia as the "intermediary" that earns price difference, resell to whom he no matter.

So this statistic, the United States undercounted itself by 100 billion dollars in the first place.

Last year's trade in goods between China and the United States, China sold $530 billion to the United States, which is true, but what the United States sold to China was actually $250 billion.

And then trade is not just trade in goods, but trade in services.Trade in services between China and the United States totaled $118.2 billion last year.

But in services, the United States has a $54.7 billion surplus.What concept?Through trade in services, the United States made roughly $90 billion last year.

So $250 billion on this side, $90 billion on this side, and in fact, the United States made $340 billion from trade in China last year.

China's services exports to the United States are about $30 billion, and its goods exports are $530 billion, which adds up to $560 billion.

So the real difference is the difference between $560 billion and $340 billion, which is $220 billion, not $376 billion as trump said.

China does not deny the deficit, but there is another problem. Most of China's exports to the United States belong to processing trade.

For example, the iPhone is produced in shenzhen and zhengzhou, and then sold back to the United States after the production is completed, which is considered as China's export. In fact, the manufacturing and processing of iPhone can only make a little money for Chinese enterprises, but all of them are under the name of China.

Therefore, the conclusion is that the trade interests of both sides are the same, this account is to kill the enemy a thousand, since the loss of a thousand, not kill the enemy a thousand, since the loss of eight hundred.

Then trump threatened China with a $50 billion (goods) tax and a $100 billion (goods) tax, and then began to sanction zte.

Sanctions against zte amount to a warning strike on the battlefield, that is, to tell you, you have weaknesses, I want to fully attack you will be finished, I hope you quit.

Cracking down on zte is a warning to China from the United States, which has a whole new realm besides the traditional trade war of taxing China, to use high-end chipsets to stick China in the neck.

But I guess trump figured it out later and didn't dare.

Why is that?The high-end chips in the United States are indeed the best in the world, with South Korea's samsung and Taiwan's mid-range chips, and the high-end chips in the Netherlands and Japan. The high-end chips in the United States account for 90%.

The problem is that this high-end chip costs a lot, so it has to be sold at a high price.

American chip company sells the chip of China, the net profit of starting price is 90%, those who have economic knowledge knows, net profit 90%, gross profit is about to rush 200% go.

Only by selling at a high price can chipmakers maintain the high investment in research and development and form a cycle.It is the Chinese market that is sustaining this cycle.

Qualcomm, for example, last year had 70 per cent of its chip market in China.Chips are not a commodity that can be sold directly to consumers, only to electronics manufacturers.

China accounted for $260 billion of the $440 billion global chip market in 2017.

Of these, 70% are sold in China. Countries in the Middle East do not use that many chips, and it is unrealistic to expect Africa, central Asia, South Asia, the south Pacific and Latin America.

Europe has its own (high-end chip), Japan has its own (high-end chip), so its market is all in east Asia, while in east Asia, South Korea, Taiwan, Vietnam, including Singapore and India, together account for only 30%, 70% of which are in China.

So if trump does not sell high-end chips to China at all, American chip makers will go out of business in droves.

Chip makers put in a lot of money and then 70 percent of the market gives up. Are you going out of business?

And it will happen twice, because the failure of a high-end chipmaker will inevitably bring down Wall Street, and the U.S. stock market is very inflated, which is mainly driven by high-tech stocks, traditional stocks can not blow up.

So if America's high-end chips fail, so will Wall Street.

(lack of high-end chip) is a little influence to China, is industrial upgrading slowly, some special high-tech projects don't for a while - actually can still have some high-end chip through various channels into the home, so the key project is not affected, general project will affect a little, then use the first end (chip) do.And China is taking this opportunity to go upmarket.

Since the zte incident, the internal spirit of Chinese officials has been to solve problems with the spirit of "two bombs and one star" for five years.

Even if it means that the process is a little bit slow in five years, it will definitely be solved in five years, which is a good result.Like the reader of this article, small make up recommend everybody WeChat search attention public number Kowloon military.Read more.

And in the United States, when a bunch of high-tech companies went down, and Wall Street went down, he lost even more, so it wouldn't work in the United States, and then the United States didn't work.

But China still has three CARDS to play: two "xiaowang" and one "king".

What is xiao wang?

The first is a complete ban on rare earth exports to the United States.

All chips need non-ferrous metals, which are made from rare earths, and China has a monopoly on 95% of the world's production.

Moreover, China's rare earth industry is of high quality, and other countries have rare earths, but their mining industry is not as good as China's.

If China were to completely ban rare earth exports (to the United States), the United States would not be able to make a lot of things and would force the United States to mine its own rare earths.

Once the supply of rare earths from the United States is fully restored, China will be able to export its high-end chips.

Treasury bonds are another xiao wang.

China holds $2 trillion in us Treasury bonds, which is a huge opportunity.

For example, during the financial crisis in 2008, the us Treasury bonds could not be sold for three months. The Chinese government bucked the wind and stabilized its confidence.At that time, if China hits the spot, America will suffer.

What is the king card?The "king" brand is the market of American companies in China.

Last year, American companies made more than 380 billion us dollars in the Chinese market, more than the us trade with China. However, Chinese companies made more than 20 billion us dollars in the us market, which is far from enough.

If China says the market is equal, I don't sell that much to you, and you don't sell that much to me.

General motors' buick, for example, had $42 billion in sales in China last year, compared with $39 billion at home.If gm were to be restricted from China, its biggest market, its shares would suffer.

Apple, for example, had $46 billion in sales in China last year, the world's second-largest market after the United States, making it the most valuable company in the world.But China could do with the apple market.

For example, now other countries' mobile phones must be sold in the United States with GPS, then China requires apple mobile phones to be equipped with beidou, do not install do not let you sell, very simple.

These three ACES are no exaggeration.

America is now arrogant, anxious and arrogant.This will require the co-operation of the americans, whose blustery nationalism is now playing to China's advantage.

If an American company loses the Chinese market, it is mainly the Chinese compradors, agents and the like, rather than ordinary workers, who will suffer.

China has 1.4 billion people. If 1.2 billion people become "hot", there will be 200 million people left. Relevant policies will be carried out smoothly.

For example, if procter & gamble were eliminated, traditional Chinese enterprises like bee-flower would take over.

In fact, it is very simple to deal with the fallen American enterprises. It devalues the value of the domestic enterprises. Once the merger and acquisition is completed, the domestic enterprises will continue to produce and retain personnel after the merger and acquisition, so it is not difficult to deal with them.

China may be a little more open in some industries, like insurance, finance, health care, etc. The auto industry will cut a little bit more tariffs, e-commerce will give a little bit more market share, and the movie market will probably be a little more open.

China can do more to respect intellectual property rights. Our leaders have made relevant commitments.

It is only natural that China should try its best to rationalize its actions. Therefore, China should rely on globalization, free trade and multilateral order as much as possible, and put the United States on anti-globalization, protectionism and unilateralism.

So now americans are also paying attention. I remember recently when secretary of state Mike Pempeo was speaking at a think tank and he said It's a joke that China now claims to support free trade.

Of course, the United States also sees this, and both sides need to emphasize the flag, because the United States is now going out everywhere, not only at China, but also at other countries, so China's argument is reasonable, more or less make China's behavior more acceptable.

But you shouldn't expect much of an effect, let's say.

The conflicts between Europe and America are family quarrels, while China is a total outsider.Just like the two sisters and brothers in Europe and America, it is normal to quarrel, but it does not affect their blood relationship.

After all, China is an outsider, so don't count on that.

But China is right to say that we need to align our actions with a more internationally accepted view, which is smart.

Just don't expect too much of the effect, can let others not too good refutation, not with the United States, the effect is very good.