Guangdong governor trusts economy to resist trade war impact, analysts disagree

Guangdong province governor, Ma Xingrui

The governor of Guangdong province, Ma Xingrui, has announced that he is prepared to enforce plans to further open the economy of the province in order to counter the negative effects caused by the China-U.S. trade war.
Ma was speaking in Beijing during a press conference organized by the State Council on Monday, noting that Guangdong province has some contingency plans for the negative effects of the trade war that will certainly affect the southern province, a key manufacturing and hi-tech hub, Hong Kong’s South China Morning Post reported.

Although the governor acknowledged the likely losses from the continuation of the trade war process, he insisted that such losses would be manageable, pledging to further open up the province to cope with the challenges.
“Foreign trade makes up a significant part of Guangdong’s economy. Guangdong contributes about one-fifth of China- U.S. trade,” Ma said, adding, “It is inevitable that [the province] will be affected.”

However, he said Guangdong, which has learned its lessons from the 2008 global financial crisis, has the tenacity to overcome the current difficulties.

“Having gone through the 2008 financial crisis, businesses in Guangdong have accumulated experience, and developed tenacity and risk control ability,” Ma remarked.

“We are confident that the overall situation will be controllable and [that] our economy will not fluctuate significantly,” Ma said. He refuted the accusations of his U.S. counterparts, namely regarding Huawei, saying, “The U.S. has, without reason, raised a lot of criticism […] and barred [U.S. suppliers] from supplying Huawei.”

“I have told our American friends […] that we value the protection of intellectual property more than you do,” he added, noting that intellectual property rights were crucial in Guangdong’s efforts to develop its hi-tech sector and become an international hub for innovation.

Nevertheless, and despite the optimism expressed by Ma, analysts are far more cautious and have warned that there are limits as to how far the freewheeling province can go.

Analyst at The Economist Intelligence Unit in Hong Kong, Nick Marro, said on the topic, “the governor needed to do more to convince foreign companies that Guangdong could take the lead in opening up the economy. We’ve seen numerous commitments from both central and local officials to continue opening up the market, with few actual concrete measures released in practice.”

Marro added, “[some] measures that have been realized such as financial services or auto market openings are either phased in over several years, incomplete, or hobbled by other regulatory obstacles, such as restrictions on data flows, which are a big headache for financial service firms.” He noted that officials tend to always point to measures as evidence of opening up but because those measures are few and presented randomly, they have little to no impact on improving market sentiment, or even in addressing some of the U.S. market access concerns that underpin the trade war.

Tommy Wu, analyst from Oxford Economics in Hong Kong, said the Guangdong government was likely to make progress in fields such as intellectual property protection but said there were limits as to how far China would be willing to go. “China’s protectionism and state assistance to create global champions like Huawei is a problem that foreign businesses want China to address, so I am not sure how helpful opening up will be given the current backdrop,” Wu remarked. He said that the hi-tech sector will continue to be an area of constant clashing between China and the U.S., as well as Europe.

Guangdong province has been China’s leading exporter for over three decades, accounting for about a quarter of China’s overall exports last year.  RM