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Trade war helps push China’s private manufacturers to the brink, as investment hits all-time low
- China manufacturing investment, mainly funded by private businesses, is expanding at the lowest rate since records began
- Trade war has helped drive down private investment, but domestic factors such as Beijing’s crackdown on shadow banking have heightened concerns
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A week before Christmas, Shanghai-based factory owner and one of China’s largest bicycle exporters, Ge Lei, received a rare but timely gift from the Trump administration.
The Office of the US Trade Representative moved to exclude one type of bicycle – those on which both wheels have a diameter of between 50cm and 55cm – from an additional 25 per cent trade war tariff.
It was small relief in an otherwise tough year for Ge, whose family business, Shanghai General Sports, makes bicycles for exporting mainly to the United States and who has been badly hit by other US tariffs.
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The prolonged US-China trade war forced him to cut 20 per cent of production capacity this year, to match a similarly-sized drop in American orders.
Ge is planning to open a factory in Cambodia that will see him not only capitalise on cheap labour and avoid US tariffs on Chinese products, but also offer him the chance of entering the European market. Currently, bicycles made in China are subject to punitive anti-dumping duties of 48.5 per cent when exported to the European Union.
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Stories of struggling manufacturers like Shanghai General Sports are one of the factors underpinning Beijing’s decision to pursue a “phase one” deal with the US. At the core of Beijing’s demands from the deal is that Washington scales back tariffs on Chinese products.
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