Qatar National Bank (QNB) expected the Chinese economy to remain steadfast in front of global trade shocks, noting that the prospects for this year are still relatively strong despite the continued trade tensions.
In its weekly report, the bank attributed the structural decrease in relying on exports to the United States, the lack of effective customs definitions in the global supply chain environment, and the competitive advantage that results from the twice the rhythnbi exchange rate, which are combined factors that reduce the large external shocks of the Chinese economy.
The report pointed out that the Chinese economy began the year in a positive impact, against the background of improving the morale of the private sector as a result of a mixture of supportive economic policies, optimism towards the country’s capabilities in the field of artificial intelligence, the stability of manufacturing activity, as this came after years of declining investors ’demand and the fluctuation of growth rates, due to real estate crises, organizational restrictions, limited government motivation, and the shock resulting from the procedures During the Korona pandemic.
These positive expectations and transformations have contributed to enhancing economic activity and increasing the expectations of continuous growth since September 2024, but the global economy prospects have suddenly changed in February, after the US administration led by US President Donald Trump announced a significant increase in customs tariffs on imports, especially targeting China with customs duties of 140 percent with a significant reduction of exemptions, and after the launch of bilateral negotiations,, the bilateral negotiations, These definitions have been reduced to 40 percent, but they are still relatively high.
Despite this great shock, the report referred to three main factors that support the optimistic view of China’s ability to confront American policies, foremost of which is that the total impact of American definitions on the growth of the Chinese economy is very limited, mainly due to the decline in the importance of the United States as a major export destination, in addition to the strategic shift of China on its trade flow destinations.
The report considered, when analyzing the second worker, that customs definitions have become ineffective tools in a world witnessing a fragmentation in global supply chains, as the weakened role of China in the global production networks of the effectiveness of these definitions significantly, unlike bilateral trade flows in the past, modern goods cross multiple borders during assembly, which makes it difficult to isolate the national added value.
The report indicated that multinational companies are adapting to these changes, as they transfer the final assembly stages to other countries while maintaining Chinese inputs through recharge operations.
These alternative solutions are more effective than applying customs tariffs, which reduces the impact of protectionist policies, and a large part of China’s exports, such as the basic components of electronics, machinery and medicines, are difficult to replace and remain necessary for American companies and the stability of supplies.
The report considered that as a result, it is unlikely that customs tariffs will stimulate the re -manufacturing inward, and it is expected that China will maintain its role as an indispensable link in the global manufacturing sector.
The report expected in the third factor to compensate for the decrease in the value of the Chinese rhymenebi, especially in terms of the real actual value, the impact of American customs duties, as this decrease enhances the competitiveness of Chinese exports prices at the global level, indicating that since the escalating of the “trade war” last February, the value of the runenbi against the US dollar has decreased, but it has decreased more against a broader basket of currencies, which led to a significant decline in the actual exchange rate Real for the Chinese currency.
The report pointed out that this matter resulted in reducing the relative cost of Chinese exports in the markets that do not deal with US dollars, which enabled Chinese companies to strengthen their market share globally despite the high American customs tariffs, as the amendment of the real actual exchange rate works as an automatic stability mechanism for the Chinese economy. Moreover, the adjustment of the rhynemby exchange rate contributes to maintaining the external demand or even increasing it, which ensures the continuation of the surplus Exports, and more confirm the limited impact of mono -side commercial barriers.