ZHANG TING/FOR CHINA DAILY
China stands as a stalwart defender of global trade stability, diligently countering forces that threaten this equilibrium. Its approach merges robust support for international mechanisms with innovative domestic policies.
The state of affairs, with initiatives like nearshoring and friendshoring—largely championed by the United States—poses a heightened threat to global trade. This is further compounded by trade protectionist measures, often manifesting as tariffs and unilateral sanctions outside conventional global accords.
Recently, Vice-President Han Zheng, addressing the second China International Supply Chain Expo in Beijing, emphasised China’s readiness to collaborate with other nations. The aim is to forge an open global economic system, ensuring stable and uninterrupted industrial and supply chains worldwide.
Politicising trade connections coupled with rising trade uncertainties has accelerated in past weeks. This underscores the urgency for stabilising global trade processes and ensuring unhampered trade settlements. Tariffs clearly don’t align with these aspirations. Only through global cooperation and the expansion of international platforms can we truly enable and enhance worldwide trade.
At an operational spectrum, these challenges are tangible and necessitate practical solutions. Much of this hinges on productivity advancements and cost reductions arising from enhanced digitalisation of logistics chains. China remains committed to surmounting these hurdles, particularly through advanced technological applications both domestically and in the global trade landscape.
On the domestic front, China’s logistical costs still have considerable scope for reduction. Key policy initiatives include targeting reforms and innovations, dismantling bottlenecks, and systematic planning. China aims to decrease its logistics cost by 6.3 percent over the next three years by refining logistics efficiencies, thereby boosting its offshore competitiveness despite heightened protectionist trade measures elsewhere.
In the sphere of transport and customs, enhancing efficiency in port storage facilities remains critical, especially for exports such as electric vehicles, lithium batteries, and solar panels. Reforms are also anticipated in rail and road freight sectors, aiming to establish an open logistics data-sharing mechanism. Achieving these goals necessitates leveraging technologies like big data, 5G, and the Beidou Satellite Navigation System.
Internationally, the quest starts with bolstering the stability of global supply chains. Worldwide businesses grapple with rising costs, geopolitical tensions, and increasing protectionism.
China is poised to tackle international logistics chokepoints and bolster supply chain logistics security. These hurdles often arise from inefficient supply chain scheduling paired with outdated customs processes. The adoption of distributed ledger technologies is pivotal for process efficiency, achieved through successful digitalisation of supply chains.
The stability of global trade hinges on seamless settlement of international trading commitments. Weaponising systems like SWIFT for political gains undermines such stability. Historically, the US dollar’s dominance as a trade settlement currency has facilitated manipulation of cross-border systems for political endeavours.
In reaction to such risks, a growing number of nations are exploring alternative currency settlements, especially with the break in the petrodollar link. Global trade stability is bolstered when countries can settle in their preferred currencies.
Efficiency gains in trade settlement processes, buoyed by new fintech innovations, mitigate counterparty and adverse currency risks by reducing the settlement period from days to mere minutes.
The anticipated 100 percent tariffs threatened by US President-elect Donald Trump on BRICS nations—China and Russia included—that avoid using the dollar as the reserve currency cast an audacious shadow over global trade stability. This move could ironically destabilise the US economy.
As a riposte, several nations may choose to halt US treasury debt purchases, which currently fund the US’s lavish lifestyle predicated on perpetual debt. This could spark hyperinflation, further destabilising global trade.
Faced with this backdrop, maintaining global supply chain stability is increasingly vital for worldwide enterprises. This stability stands on three pivotal pillars.
The first involves implementing domestic market efficiencies. The second covers adopting digital efficiencies in global supply chains for heightened stability and security. The third pillar is endorsing smooth, rapid trade settlement through enhanced non-dollar solutions, diverging from sole reliance on the US dollar.
China leads with its central bank digital currencies, poised to revolutionise global payments. These developments would slash transaction costs and provide alternatives to the US dollar’s hegemony in international trade.
By all measures, China remains a staunch proponent of a global economy that champions free trade while denouncing protectionist practices.
The author is skilled in international financial technical analysis and formerly served on the national board of the Australia China Business Council. This piece is brought to you by China Watch, a think tank powered by China Daily.
The perspectives within do not necessarily mirror those of China Daily.
For enquiries, reach the editor at editor@chinawatch.cn.
