Home Economy Amid trade war, China’s private sector posts stronger output

Amid trade war, China’s private sector posts stronger output

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Although the long-lasting China-US trade war has weighed on Chinese exporters over the past year, it turns out the country’s export-oriented private sector has grown even stronger as tax breaks from the central government and a shift in overseas markets gradually take effect.

Exporters in Yiwu, East China’s Zhejiang Province, also known as the shop front of the world’s factory, told the Global Times on Wednesday that the trade war is no longer a headache for their businesses and they have even seen steady growth in overseas sales and profits recently.

Yang Zhiwei, general manager of Yibing Import and Export Co, which focuses on decorations and accessories, said his businesses saw limited impact from trade war this year, and his company’s Christmas orders have even increased compared with 2018. 

“Orders for Valentine’s Day have been coming in since October,” Yang said.

Yang expected the company’s sales in 2019 could reach 10 million yuan ($1.42 million), up 400 percent from last year.  

However, Yang mentioned the adjustments he made due to the trade war. Now, half of his customers are in Europe, which has overtaken North America as his company’s largest market. 

Yang’s turn to Europe also applies to his counterparts in South China’s Guangdong Province. From January to October this year, trade between Guangdong and the US dropped 6 percent year-on-year, while trade with the EU was up 10.9 percent.

“The China-US trade war has led some companies to increase efforts to develop markets in European countries and those that are involved in the Belt and Road Initiative,” said Sun Yijiu, CEO of Beijing Wangju Co, which designs websites for e-commerce companies.

“But they were expanding and diversifying long before the trade war. So the impact of the trade war on our customers is very limited,” said Sun.

The company is also getting more customers because of the better-than-expected foreign trade situation. Sun said that he has observed an increasing number of companies that want to turn to overseas business over the past two years.

Cross-border e-commerce trade reached 61.28 billion yuan, up 17.4 percent on a yearly basis, during the first 10 months this year in Yiwu, government data showed.

Latest figures also showed that China’s small private-sector companies have become an economic stabilizer of the country. From January to October this year, private companies’ profits grew 5.3 percent year-on-year, and small companies’ profits grew 8.8 percent.

Key government support

Yiwu exporters said the central government’s policy of waiving business taxes on micro-sized and small businesses is one of the major reasons that such enterprises could grow and prosper, posting steady profit growth amid external uncertainties. 

The growing competitiveness of made-in-China products also makes it tough for foreign customers to leave, they said.

“The Chinese government gives small e-commerce businesses like us a zero-tax policy. Our company spent all of the money that would have gone to taxes on research and development (R&D) last year,” said Jin Hongbin, the general manager of Yiwu Heyang Plastics Co. 

Jin told the Global Times on Wednesday that the company could be able to invest about 16 percent of its sales revenue on R&D to improve its innovation and competitiveness.

China has cut taxes for small and micro-sized businesses since the beginning of the year, with the goal of saving them a total of 200 billion yuan annually for three years.

Another Yiwu merchant who has benefited from the tax policy, Mao Xiaochun, product purchasing manager of Yiwu Juding Costume, said that due to the tax cut, sales are expected to reach 250 million yuan this year, up 25 percent on a yearly basis.

“Margins are down a little bit, but there’s less tax to be paid and overall sales are up. Thus, our profits increase continuously,” Mao said.

The problem is that talents in Yiwu now could not support our growth, as they prefer large cities like Beijing and Shanghai, Jin said.

Global Times

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