Flanders Investment & Trade (FIT) would like to know whether Members of the Flanders-China Chamber of Commerce (FCCC) expect to be hit by Brexit and whether FIT could help by organizing a briefing on:

• The impact of Brexit
• FIT services in the framework of Brexit
• Available subsidies

Send your answers to michele.surinx@fitagency.be

Chinese Finance Minister Liu Kun

China is ready to implement supportive measures, such as export assistance and skills training, to help business affected by the ongoing trade war with the U.S., Finance Minister Liu Kun has said, adding that “some regions and some companies” had already been hit by the trade war but “China has the capabilities to minimize the impact”. The Minister also said China would adopt a “more proactive” fiscal policy to counteract the downward pressure on economic growth, including cutting taxes and fees on a larger scale and speeding up bond issuance to safeguard economic growth. Total tax cuts for 2018 are expected to exceed CNY1.3 trillion, Liu said. China’s macro tax levy was only 27.2% last year, down from 28.2% in 2016, while the global average was 36.8%, according to the Ministry of Finance.

U.S. President Donald Trump has now imposed tariffs on nearly half of all imports from China, and China has retaliated with its own tit-for-tat measures. While China’s headline growth remained on track, there are growing signs of economic deceleration. In September, both the official and unofficial purchasing managers’ indexes for the manufacturing sector fell to their lowest levels since February on the back of a slump in export orders, production and inventory. Standard Chartered Economists Shen Lan and Ding Shuang wrote in a note that the impact of U.S.-China trade tensions “is expected to become more tangible in the quarters ahead”.

The Chinese embassy in Ottawa has publicly condemned a “poison bill” clause in the new North American trade deal that gives Washington an effective veto over any attempt by Canada or Mexico to agree to a free-trade deal with a “non-market economy” – a provision that is widely seen as targeting Beijing. The Chinese Embassy said in a statement that article 32.10 in the U.S.-Mexico-Canada Agreement (USMCA) was “fabricating the concepts of ‘market country’ and ‘non-market country’ outside the World Trade Organization (WTO) framework” and was “the excuse made by some countries to shirk their obligations and refuse to meet their international commitments. We condemn the hegemonic acts by related countries of publicly interfering with the sovereignty of other countries, and we feel sorry for the damaged economic sovereignty of the countries concerned,” Embassy Spokesperson Yang Yundong said. While the special clause does not name China directly, it could greatly impede China’s future trade talks with Canada or Mexico because the U.S. has refused to classify China as a “market economy” under the WTO framework.

The decision to cut import tariffs from the start of next month is expected to reduce China’s overall tariff from 9.8% to 7.5%, which along with other measures will work to reduce tariffs by nearly CNY60 billion. The Chinese government decided to cut tariffs on 1,585 industrial products during an executive meeting presided over by Premier Li Keqiang on September 26. When the new tariffs come into effect, China’s overall tariff rate is estimated to be a little higher than the European Union and lower than many developing countries. Ministry of Commerce (MOFCOM) figures showed that the country imported goods worth CNY7.8 trillion from January to July, an increase of 12.6% compared with the same period last year. In the next 15 years, China is forecast to import goods worth USD24 trillion.

A further escalation of the trade war between the U.S. and China would take a major toll on economic growth in both countries next year, with China the bigger casualty, according to an economic analysis by the International Monetary Fund (IMF). The world economy would also suffer, the IMF said. Based on the trade tariffs already in place, the organization revised down its estimates of world growth this year and next by 0.2 of a percentage point to a still healthy 3.7%. Assuming the US slaps tariffs on all Chinese imports, as US President Donald Trump has threatened to do, the effect on consumer and business confidence combined with the negative financial market reaction would probably cut the GDP of the United States by more than 0.9% in 2019, while Chinese growth would be 1.6% lower than it otherwise would be, the IMF said.

Relations could worsen further with the publication this week of the U.S. government’s Foreign Exchange Report, if it labels China a currency manipulator, as some analysts expect it will. Whether China is formally labelled a currency manipulator by the Treasury will depend on the extent of the standards and criteria used from two laws: the Omnibus Trade and Competitiveness Act of 1988 and the Trade Facilitation and Trade Enforcement Act of 2015. According to the 2015 Act, China meets only one of the three criteria to be considered a currency manipulator, namely that a country runs a significant bilateral trade surplus with the U.S. of at least USD20 billion. But the 1988 Act allows for a more subjective assessment of whether a currency is being manipulated to provide an unfair competitive advantage in trade. International Monetary Fund Director Christine Lagarde has dismissed the idea that China is manipulating its currency to gain a competitive advantage. The last country declared a currency manipulator by the U.S. was China in 1994.

China will not cave in to US demands even if it faces further tariffs on its exports, China’s Commerce Minister Zhong Shan has said, signaling Beijing’s uncompromising stance in dealing with U.S. as President Donald Trump has said that China is not ready for a trade deal and reiterated he was prepared to levy further tariffs against Beijing. “China wants to make a deal, and I say they’re not ready yet,” Trump told reporters at the White House.

People’s Bank of China Governor Yi Gang has met with U.S. Treasury Secretary Steven Mnuchin and Federal Reserve Chairman Jerome Powell on the sidelines of the World Bank annual conference in Bali, Indonesia, and exchanged views on “relevant economic and financial issues”, but their talks were not focused on the trade dispute.

China’s monthly trade surplus with the United States rose to a record high of USD34.1 billion in September, a 10% increase from the USD31.05 billion surplus booked for August, suggesting Washington’s tariffs on imports of Chinese products have yet to have the desired effect of narrowing the trade gap between the two countries.

Chinese smartphone maker Transsion has never sold a handset in China, but dominates markets across Africa, beating global companies like Apple and Samsung to become market leader. In cities like Lagos, Nairobi and Addis Ababa, busy streets are awash with the bright blue shopfronts of Transsion’s flagship brand, Tecno. The company is based in Shenzhen but is largely unknown in China. It took a different path to success from other top Chinese smartphone makers such as Huawei and Xiaomi, which started out in China before eventually expanding overseas.

Tecno cameras have been optimized for African complexions, explains Arif Chowdhury, Vice President of Transsion. “Our cameras adjust more light for darker skin, so the photograph is more beautiful,” he says. “That’s one of the reasons we’ve become successful.” Transsion founder George Zhu has spent nearly a decade traveling through Africa as head of sales for another mobile phone company when he realized that selling Africans handsets made for developed markets was the wrong approach. In 2006, Zhu launched Tecno in Nigeria, targeting Africa’s most populous nation first. From the start, the company’s motto was “think global, act local,” which meant making phones that met African users’ specific needs.

“When we started doing business in Africa, we noticed people had multiple SIM cards in their wallet,” Chowdhury says. They would awkwardly swap the cards throughout the day to avoid the steep charges operators would levy for calling different networks, says Nabila Popal, who tracks the use of devices in Africa for research firm IDC. “They can’t afford two phones,” says Chowdhury, “so we brought a solution to them.” Zhu made all Tecno handsets dual SIM. More innovations followed. Transsion opened research and development centers in China, Nigeria and Kenya to work out how to better appeal to African users. Local languages such as Amharic, Hausa and Swahili were added to keyboards and phones were given a longer battery life.

African countries suffer frequent power breaks and some users might have to walk tens of kilometers to charge their phone at a local market, so an extended battery life was essential to win market share. But perhaps Transsion’s smartest move was its pricing. It has three main brands: Tecno, Infinix and Itel, selling for between USD15 and USD20, the South China Morning Post reports.

In the 2017-2018 Brand Africa 100 report, published by African Business Magazine, Tecno ranked as the 7th most admired brand in Africa. That was up from 14th the previous year, but it still lagged Samsung (2nd) and Apple (5th). Apple’s iPhone is still considered a luxury product that many Africans aspire to own but can’t afford.

China is the world’s second largest pharmaceutical market and owner of the second highest number of biotechnology and pharmaceutical intellectual property rights, but only a few domestically developed inventive new drugs have won government approval to be marketed. In the first 10 months of last year, out of 35 new drugs that received Chinese regulatory approval, just one was developed by a domestic firm, according to a report by business consultancy McKinsey. Three of the 11 drugs given the marketing green light in 2015 and 2016 were developed by local firms. In the United States, of the 46 new drugs given consent for marketing by regulators last year, 28 were developed by U.S. firms and none were Chinese. “Drug innovation is still nascent in China but, following sweeping regulatory reform, it has been moving rapidly in that direction in the past couple of years,” said Marietta Wu, Managing Director of private equity firm Quan Capital and a co-founder of Shanghai-based drugs developer Zai Lab. “Compared to the U.S., the innovation gap is still significant,” but the Chinese government is determined to change that.

The “Made in China 2025” strategy unveiled in 2015 laid out specific five and 10-year targets for domestic firms on drugs innovation, export market development and import substitution. Being able to produce better drugs domestically is key to China’s ability to lower costs and improve accessibility of medicines, especially for life-threatening cancers. Recently, Premier Li Keqiang renewed his call on officials to speed up price cuts for cancer treatment. The elimination of tariffs and drastic cuts to value-added tax (VAT) on imported cancer drugs in May and June this year reduced drug costs in the short term, but greater self-sufficiency and intellectual property ownership are the longer term answers.

Some domestic firms have already achieved partial breakthroughs on innovative drugs development for cancers. Nanjing-based Genscript Biotech announced in December that Johnson & Johnson’s offshoot Janssen Biotech had agreed to pay Genscript USD350 million upfront to co-develop a blood cancer treatment. China is a latecomer in drug innovation. Two of only a handful of drugs to make it past the industry watchdog in decades were Shenzhen ChipScreen Biosciences’ treatment for relapsed T-cell lymphoma in 2014, and Jiangsu Hengrui Medicine’s new breast cancer treatment in August this year. Last month another approval was announced, by Hong Kong tycoon Li Ka-shing’s Hutchison China MediTech, which has invested USD590 million since 2000 into its mainland drug research projects. China MediTech Chief Executive Christian Hogg said the sheer size of China’s patient pool – with a third of the world’s cases of colorectal cancer, half for gastric cancer and 40% for lung cancer – is key to its potential as a future power in biopharmaceutical industry development.

As part of “Made in China 2025”, the Chinese pharmaceutical industry is expected to develop 10 to 20 innovative drugs by 2020 and commercialize 20 to 30 by 2025. The government also wants to see at least 100 pharmaceutical firms gaining U.S., EU, Japanese and World Health Organization (WHO) certification. By 2020, Beijing wants registration completed for five new biological drugs so they can be marketed in developed nations, rising to 10 by 2025. Other objectives include breakthroughs in 10 to 15 “major core technologies” by 2020, and the ability to produce generic versions of 90% of blockbuster drugs after their international patents expire, the South China Morning Post reports.

China’s pharmaceutical firms have spent a combined USD7.2 billion on research and development in 2016, according to the Brookings Institution. While modest compared to the USD156 billion spent globally by pharmaceutical firms and the USD93.6 billion outlay of the world’s top 20 drug developers – mostly based in Western nations – China’s spending has jumped 44-fold from USD163 million in 2000.

A dispute has broken out between the China Council for the Promotion of International Trade (CCPIT) and Business 20, an international business group affiliated with the Group of 20, over the role of state-owned enterprises (SOEs). Business 20 issued a communique calling for an end to state-related competitive distortions, but the wording met with strong objections from CCPIT, which insisted that the B20 proposal should not be submitted to G20 leaders at their next summit and demanded revisions to the sections covering SOEs. The Chinese trade promotion body claimed that the proposal had ignored concerns expressed by Chinese business delegates at a B20 meeting in Argentina, adding that it one-sidedly highlighted market distortions, excess capacity and corruption in the SOE sector. G20 leaders will discuss the communique when they meet in Buenos Aires on November 30 and December 1, but the quarrel exposes the deep divisions between Beijing and other countries over the management of the state-owned sector.

B20 wants G20 leaders to reach an agreement about government-driven competitive distortions. “The agreement would require significant lessening, limitation, and/or complete elimination of policies that accord preferential treatment to SOEs,” a B20 paper said. It could target the subsidies, debt relief and favorable loans given to state-owned companies. If the B20’s advice on SOE reform does appear in the final G20 communique later this year, it may force China to ditch the multilateral approach Chinese President Xi Jinping has long espoused, Zhao Xijun, Professor of Finance at Renmin University in Beijing, said.

Chinese business executives who joined the B20’s 156-member trade and investment task force this year included Guo Ningning, Executive Director of the Agricultural Bank of China (ABC) and Sun Yongcai, Deputy Party Secretary at the state-owned train manufacturer CRRC.

As of August 31, China’s state-owned industrial enterprises had assets valued at CNY174 trillion, up 7.6%, according to China’s Ministry of Finance. The State-owned Asset Supervision and Administration Commission (SASAC) now directly controls 98 large industrial firms with total assets of more than CNY50 trillion. Forty-eight of these state-run firms have made Fortune magazine’s list of the world’s top 500 companies by revenue.