Chinese exports rose by seven per cent in the first seven months of 2024.
Chinese exports rose by seven per cent in the first seven months of 2024.
Chinese exports rose by seven per cent in the first seven months of 2024.
Chinese exports rose by seven per cent in the first seven months of 2024.


How data disagrees with western backlash against China exports and impending 'trade war'


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October 09, 2024

In today’s heated geopolitical climate, China rarely gets the benefit of the doubt in western capitals. The country's refusal to follow western-style economic stimulus, like government handouts during the Covid-19 pandemic, has drawn criticism.

This year, 17 nations and the EU have restricted or investigated Chinese imports, concerned that Beijing is dumping products to escape its economic slump. The New York Times warns that trade tensions are “near boiling point”, while The Wall Street Journal suggests China risks causing a new “trade war”. But are these fears really justified?

To counter a property market crash, Beijing has injected money into its struggling manufacturing sector, leading to excess production being exported – a move critics say threatens jobs abroad.

But does trade data back these claims? The picture is nuanced.

According to Trade Data Monitor (TDM), Chinese exports rose 7 per cent in the first seven months of this year compared to 2023, with even faster growth in key markets like the EU (8.4 per cent), the US (8.2 per cent), South-east Asia (12.5 per cent) and Latin America (14 per cent).

Chinese exports of steel surged nearly 22 per cent, with major growth in appliances, vehicles and ships. Most of these exports were sold at discounted prices, making it harder for foreign companies to compete.

However, exports only tell half the story. Chinese imports also increased by 7.2 per cent in the same period, with significant growth in imports from the US (23.7 per cent), South Korea (20.9 per cent) and the UK (19.7 per cent), reported TDM.

This suggests China’s trade practices are more balanced than some critics claim.

While Chinese exports have surged, imports from major economies have also grown, benefitting foreign suppliers. This does not support the idea that China is engaging in mercantilism – exporting more while importing less.

Interestingly, while China’s export growth concerns are louder than ever, they would have made more sense from 2021 to 2023, when Chinese exports rose sharply, and imports stagnated.

Western media’s alarmist tone focuses on China’s growing trade surplus, but this year’s data reveals that many foreign companies have made gains in China. Critics may be cherry-picking facts to fit their narrative.

China’s trade competition with East Asian countries is another key factor.

After China’s export surge during Covid-19, East Asia gained market share, partly due to western efforts to reduce reliance on China. In response, Chinese companies lowered prices to regain market share in 2023. This price competition makes China’s export performance less unique compared to its East Asian rivals.

During the pandemic, Chinese export prices rose 25 per cent, which competitors in East Asia essentially matched. These higher prices made East Asian exporters vulnerable to China’s subsequent price cuts.

Despite recent discounts, Chinese export prices are still 5 per cent higher than pre-pandemic levels – contrary to claims by US President Joe Biden’s administration.

This makes it hard to argue that China is dumping goods at artificially low prices. More “de-risking” from China – shifting supply chains elsewhere – would have happened if East Asian competitors had not raised their prices. China’s lower prices make it harder for Western buyers to move away from Chinese sourcing, despite geopolitical risks.

Even with criticism of China’s exports, western governments have relied on familiar protectionist measures. Between 2015 and 2017, during a brief surge in Chinese exports, 11.2 per cent of Chinese goods faced import restrictions. Since 2022, 11.2 per cent of Chinese exports have again been targeted, with that figure likely rising by the end of 2024, according to Switzerland-based research institute, Global Trade Alert.

So, over 88 per cent of Chinese exports have not faced new trade restrictions in the past three years. This suggests that the criticism of Chinese trade practices may be louder than the actual impact. While future disruptions are possible, widespread curbs have not materialised.

Executives, investors and analysts would be wise to look beyond the critical rhetoric on China’s crisis response. Chinese companies have responded to calls for reduced sourcing by offering lower export prices, which may outweigh the trade war risks for foreign buyers.

This has made sourcing patterns more resistant to change than Western governments would prefer, with fewer companies likely to significantly cut or abandon sourcing from China.

The limited protectionist response to China's export growth may lead executives to downplay the risk of a trade war, though the US election could change that. If the risk stays low, incentives to shift production from China will also decrease.

Additionally, China’s import growth this year is benefitting some foreign suppliers, including western companies.

The bottom line: executives and investors should look beyond alarmist headlines.

Simon J. Evenett is the professor of Geopolitics and Strategy at IMD Business School and co-chairman of the World Economic Forum Trade & Investment Council

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Group A: Palmeiras, Porto, Al Ahly, Inter Miami.

Group B: Paris Saint-Germain, Atletico Madrid, Botafogo, Seattle.

Group C: Bayern Munich, Auckland City, Boca Juniors, Benfica.

Group D: Flamengo, ES Tunis, Chelsea, Leon.

Group E: River Plate, Urawa, Monterrey, Inter Milan.

Group F: Fluminense, Borussia Dortmund, Ulsan, Mamelodi Sundowns.

Group G: Manchester City, Wydad, Al Ain, Juventus.

Group H: Real Madrid, Al Hilal, Pachuca, Salzburg.

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Ten tax points to be aware of in 2026

1. Domestic VAT refund amendments: request your refund within five years

If a business does not apply for the refund on time, they lose their credit.

2. E-invoicing in the UAE

Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption. 

3. More tax audits

Tax authorities are increasingly using data already available across multiple filings to identify audit risks. 

4. More beneficial VAT and excise tax penalty regime

Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.

5. Greater emphasis on statutory audit

There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.

6. Further transfer pricing enforcement

Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes. 

7. Limited time periods for audits

Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion. 

8. Pillar 2 implementation 

Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.

9. Reduced compliance obligations for imported goods and services

Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations. 

10. Substance and CbC reporting focus

Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity. 

Contributed by Thomas Vanhee and Hend Rashwan, Aurifer

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The lowdown

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Rahul Chopra (captain), Aayan Afzal Khan, Ali Naseer, Aryansh Sharma, Basil Hameed, Dhruv Parashar, Junaid Siddique, Muhammad Farooq, Muhammad Jawadullah, Muhammad Waseem, Omid Rahman, Rahul Bhatia, Tanish Suri, Vishnu Sukumaran, Vriitya Aravind

Fixtures

Friday, November 1 – Oman v UAE
Sunday, November 3 – UAE v Netherlands
Thursday, November 7 – UAE v Oman
Saturday, November 9 – Netherlands v UAE

Financial considerations before buying a property

Buyers should try to pay as much in cash as possible for a property, limiting the mortgage value to as little as they can afford. This means they not only pay less in interest but their monthly costs are also reduced. Ideally, the monthly mortgage payment should not exceed 20 per cent of the purchaser’s total household income, says Carol Glynn, founder of Conscious Finance Coaching.

“If it’s a rental property, plan for the property to have periods when it does not have a tenant. Ensure you have enough cash set aside to pay the mortgage and other costs during these periods, ideally at least six months,” she says. 

Also, shop around for the best mortgage interest rate. Understand the terms and conditions, especially what happens after any introductory periods, Ms Glynn adds.

Using a good mortgage broker is worth the investment to obtain the best rate available for a buyer’s needs and circumstances. A good mortgage broker will help the buyer understand the terms and conditions of the mortgage and make the purchasing process efficient and easier. 

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3.14pm: 55kg female: Amal Amjahid (BEL) v Bianca Basilio (BRA)
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Fifa Club World Cup quarter-final

Kashima Antlers 3 (Nagaki 49’, Serginho 69’, Abe 84’)
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Why it pays to compare

A comparison of sending Dh20,000 from the UAE using two different routes at the same time - the first direct from a UAE bank to a bank in Germany, and the second from the same UAE bank via an online platform to Germany - found key differences in cost and speed. The transfers were both initiated on January 30.

Route 1: bank transfer

The UAE bank charged Dh152.25 for the Dh20,000 transfer. On top of that, their exchange rate margin added a difference of around Dh415, compared with the mid-market rate.

Total cost: Dh567.25 - around 2.9 per cent of the total amount

Total received: €4,670.30 

Route 2: online platform

The UAE bank’s charge for sending Dh20,000 to a UK dirham-denominated account was Dh2.10. The exchange rate margin cost was Dh60, plus a Dh12 fee.

Total cost: Dh74.10, around 0.4 per cent of the transaction

Total received: €4,756

The UAE bank transfer was far quicker – around two to three working days, while the online platform took around four to five days, but was considerably cheaper. In the online platform transfer, the funds were also exposed to currency risk during the period it took for them to arrive.

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Price: base / as tested: Dh382,000

Engine: 5.6-litre V8

Gearbox: Seven-speed automatic

Power: 428hp @ 5,800rpm

Torque: 560Nm @ 3,600rpm

Fuel economy, combined: 12.7L / 100km

The National Archives, Abu Dhabi

Founded over 50 years ago, the National Archives collects valuable historical material relating to the UAE, and is the oldest and richest archive relating to the Arabian Gulf.

Much of the material can be viewed on line at the Arabian Gulf Digital Archive - https://www.agda.ae/en

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Director: Jafar Panahi

Stars: Vahid Mobasseri, Mariam Afshari, Ebrahim Azizi, Hadis Pakbaten, Majid Panahi, Mohamad Ali Elyasmehr

Rating: 4/5

THE SPECS

      

 

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Transmission: 6-speed automatic

 

Power: 110 horsepower 

 

Torque: 147Nm 

 

Price: From Dh59,700 

 

On sale: now  

 
Updated: November 13, 2024, 9:05 AM