Import Substitutes, the Way to Kill in Trade War


Sun Tsu says, “Fighting and winning each and every battle is not the best of the best; subduing the enemy without fighting is the best of the best.”

What about that teaching in a trade war. Imposing tariffs on lots of imports is not the best of best, producing import substitutes is the best way to kill.

For example, China’s retaliation at US tariff increases by imposing high tariff on its import of US soybean. It certainly is not a good way, let alone the best of the best ways.

American experts are not worried as China cannot find alternative source for soybean to satisfy its huge demand for it. As a result, Chinese consumers either have to pay higher prices or suffer soybean shortage.

If China has no import substitute for American soybean, in terms of soybean it is defeated by the US.

However, if it can find alternative sources of supply and put an end to US export of soybean to China, there is no need for tariff increase. China will completely win without fighting.

Chinese leaders are wise to see that inability to supply enough food to satisfy China’s hugh population’s needs is dangerous, especially in wartime. As a result, China has been improving its agricultural technology and greatly increased its food output, but there is a limit to that. There are lots of mountains and deserts but limited arable land in China.

What shall China do? Utilization of other countries’ redundant land is a way out. China is now conduct agricultural win-win cooperation with Ukraine. It can either grow soybean there or transfer its wheat or other food production there and use the land freed for soybean production. Xinhua’s report on the cooperation will be reblogged at the end of this article.

China can also rent Russian land near its northeast border for soybean production. In fact Northwest China was a major exporter of soybean in the past. The import substitute strategy will enable China to subdue the US without fighting.

China’s “made in China 2015” will enable China to produce import substitutes for lots of high-tech products, especially airliners. China has already been conducting test flights of its 130-seat airliner C919 and is developing jumbo airliners in cooperation with Russia. When China and Russia use its own airliners and other high-tech products and even export them in competition with the US. The US will be in real trouble.

We can foresee the grievous defeat the US will suffer in its trade war with China.

The following is the full text of Xinhua’s report about China’s win-win agricultural cooperation with Ukraine:

Chinese investors breathe new life to Ukraine’s rural

Xinhua | Updated: 2017-04-19 14:30

KIEV — Newly sown fields, well-kept houses and modern farms — the rural area surrounding Koryukovka settlement shines like a pearl among the string of abandoned villages in a remote corner of Ukraine’s northern Chernigov region.

After experiencing labour force outflow for decades, Koryukovka gained new life in 2013, when it attracted the interest of investors from central China’s Henan province.

The Chinese State-owned Huangfanqu Farm entered into a joint venture called Fanda with a Ukrainian partner and has already invested more than $10 million in the development of farming in Koryukovka district, changing the lives of locals.

Reanimation of livestock farm

“Since the Chinese company started to finance us, we have significantly increased the number of livestock and boosted the productivity of our cattle,” Olga Ruchko, a technician at the Koryukovka livestock farm, told Xinhua.

Standing proudly in front of the modern farm, Ruchko was not trying to hide her pleasure with the Chinese investors.

In 2013, the farm in Koryukovka faced a threat of closure because the previous owners failed to provide enough funds even for buying protein-rich feeds for cows to help the animals produce enough milk and gain weight.

“Previously, we could not afford good feeds and our livestock has not got enough nutrition. But now, with Chinese financing, we buy everything we need — oil cakes and concentrated feeding stuff for cows and mixed cattle feed for calves,” Ruchko said.

Due to better feeding and improved animal welfare after the renovation of the farm, the daily milk output per cow has increased from 10 to 22 liters.

Chinese investment has helped double the livestock at the farm to 2,000 cows and calves and provided jobs to about 100 residents of Koryukovka.

The farmers sell about 9 metric tons of fresh milk to local cheese producing plants per day. They also provide free milk to a local kindergarten.

“Currently, we supply milk as a raw material, but the company plans to build its own processing plant to produce finished products,” Viktor Yushchenko, chairman of Gorky enterprise, which runs the Koryukovka farm, told Xinhua.

Decent life for villagers

The farm at Koryukovka, nearly 300 kilometers north of the Ukrainian capital, is one of the two agricultural enterprises managed by Fanda. The other is located in Naumovka, a suburb of Koryukovka, just 15 minutes’ drive away.

Once a flourishing village during the Soviet times, Naumovka lost most of its younger generation, who left in search of better life in the city.

Now, young people stopped moving out from Naumovka as the village offers them new employment opportunities. Chinese investment revived about 3,000 hectares of arable farmland in Naumovka, providing jobs to more than 130 villagers.

In 2013, Volodymyr Metla, a 40-year-old resident of Naumovka, was considering moving to Kiev to take a job as a construction worker so that he could support his family.

Metla’s life has changed since Chinese investors came to his village and gave him a job as a tractor driver, while employing his wife as a junior accountant.

“I have been working for the Chinese company for about four years and I like my job. Chinese managers pay the wages timely, they have good agriculture equipment and they are good people. We made friends with some of them,” Metla told Xinhua.

Farmers from nearby villages also came to work in Naumovka.

“I am from Kholmy, it is 30 km away from here. I used to work for a local enterprise, but it had collapsed. Here I work as a driver of a combine harvester, a sowing machine and a truck,” Sergey Onopchenko told Xinhua.

Win-win cooperation

Apart from managing livestock farm in Koryukovka and fields of corn, oats and lupine in Naumovka, Fanda rents a forest of 2,700 hectares, where it plans to raise wild animals, such as deer and hunting birds.

Zhang Zhenhua, the director of Fanda, said that the agricultural cooperation between Chinese and Ukrainian enterprises is a win-win for both sides due to the complementary advantages of the two economies.

China has experience and knowledge of modern farming technologies, its investors have financial resources, while Ukraine has fertile land and good farming infrastructure.

“Before coming to Ukraine, we have visited many countries in Africa and Southeast Asia. Then we found out that agriculture is very well developed in Ukraine and decided to invest in this country,” Zhang told Xinhua.

The intention of the Ukrainian authorities to join the Chinese Belt and Road Initiative has reassured the Chinese farmers of prospects in Ukraine.

Speaking of his dream, Zhang said it is simple: to further develop his enterprise to bring benefits for his employees and local people.

To bring his dream to life, Zhang is seeking fresh investment for reconstructing a pig breeding complex, building a greenhouse for vegetables and fruits, and constructing a milk processing plant.

“Throughout the world, agriculture works on the same principles: the cultivation of land and breeding of cattle does not make a big profit. To get more income, you need to process the products,” Zhang said.

Fanda is expected to invest more than $50 million in total. The projected capital injection will allow the company to create up to 1,500 new jobs in the Koryukovka district.

Article by Chan Kai Yee

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China Will Inevitably Lead World Trend in World Market


Bloomberg says in its report “Is Xi a Threat to Foreign Businesses in China?”, “Multinationals say they feel less welcome in the world’s second-biggest economy”. However, according to the report, “Xi’s policies tread a well-worn path laid down by his predecessors.”

Since China began its reform and opening-up, it has restricted foreign joint venture partner’s equity holding to less than 50% and required joint ventures to provide advanced technology, export products or produce import substitutes for imported goods. Wholly foreign owned enterprises have to prove that their technology is advanced before they are allowed to set up in order that China may learn from the technology. For more than 3 decades, multinationals must have got used to that.

To make money in China, they have to give China something. It is clear to them that Chinese policy makers would never allow China’s reform and opening-up to enable foreign domination of Chinese economy. They were happy about that in the past but unhappy now. Why?

Unexpectedly, China has grown rich and strong very fast. Now China will use the technology learnt from foreigners and developed by its own to take market shares from them whether at home and abroad.

The report says China’s Made in China 2025 program will make China competitive in 10 years in 10 industries including aircraft, new energy vehicles, robot, electronics and biotechnology.

China has been providing and will provide preferential treatments to those industries such as government subsidies, low-interest loans, tax waivers and rent-free land and even pressures domestic entities to buy only from Chinese suppliers.

China has developed C919 narrow-body airliners and will soon supply it to the market and has been developing CR929 wide-body airliner jointly with Russia to compete with Boeing and Airbus.

The report says China plans to raise domestic robot market share from 31% last year to 50% by 2020. China has earmarked $150 billion in spending over 10 years to boost its electronic industry in order to reduce import and increase export of chips.

The report quotes Gao Zhikai, an investment banker with Morgan Stanley and its joint venture China International Capital Corp, as saying, “China is one of the world’s largest countries looking at population size, Internet users, mobile phone users, and other aspects. It is now the time for China to lead global trends.”

Comment by Chan Kai Yee on Bloomberg’s report, full text of which can be viewed at https://www.bloomberg.com/news/articles/2017-10-12/is-xi-a-threat-to-foreign-businesses-in-china?utm_source=SupChina&utm_campaign=fc193ae567-20171013-398+ChinaSaysEUUnderstandWTORules&utm_medium=email&utm_term=0_caef3ab334-fc193ae567-164862477


After 13 years, China’s home-grown Comac ARJ21 passenger jet enters commercial service


The Comac jet arrives in Chengdu yesterday. Photo: SCMP Pictures

The Comac jet arrives in Chengdu yesterday. Photo: SCMP Pictures

The first of 30 Comac ARJ21 planes delivered to Chengdu Airlines amid nationalistic fervour

China’s ambition of an indigenous plane took wings on Sunday as its first home-grown passenger jet, the Comac ARJ21, entered commercial service after 13 years in the making.

Configured with 90 economy-class seats, the jet was delivered to its launch customer, Chengdu Airlines, from Comac’s Shanghai factory and flown to Chengdu by the airline’s general manager Sui Mingguang and deputy manager Zhang Fang in an emotionally charged event bursting with nationalistic rhetoric.

“I am very proud to fly the first Chinese-made jet…It is not in any way inferior to the A320,” said Zhang, the captain, upon landing, as reporters unleashed a volley of questions on comparisons with the bigger Airbus product.

Chengdu Airlines, a budget carrier in which Comac has a 48 per cent stake, now faces the task of establishing its maker’s claims and proving to the world that China has arrived as a plane maker. ARJ’s commercial performance will serve as a test case for the bigger C919, China’s answer to Boeing and Airbus in the 150-seat category, that rolled off the assembly line this month.

The ARJ has yet to gain US endorsement, limiting its market to non-Western skies. But Comac has already received more than 300 orders, including from customers in the Republic of Congo, Thailand, Myanmar and Germany.

The plane was certified by the Chinese aviation authority last December after nearly seven years of tests.

Chengdu Airlines, which has a fleet of 20 A320s, said it planned to use the ARJ in less than three months upon completing post-delivery tests. It is likely to be used on prominent routes between Beijing, Shanghai, Guangzhou and Shenzhen first, before being deployed in southwest China.

Chengdu Airlines will receive four more ARJs from Comac next year – the first batch of the 30 planes it ordered. But the airline will also need to find pilots. Since pilot licences are model-specific, there are just 10 pilots licensed to fly ARJ in the country at present. They include four at Chengdu Airlines, all of whom were in the cockpit yesterday.

Converting to an ARJ licence will be a major career gamble for pilots whose pay depends on their flying hours and who are not allowed to operate multiple models at the same time.

Despite that, the response of the airline’s nearly 400 A320 pilots had been “more enthusiastic” than expected, said Captain Ti Wei, deputy manager of the airline’s flight department.

That is in part because the company is tripling the hourly pay to make up for the shorter flying hours that ARJ will entail.

Ti is one of the first batch of 16 experienced pilots at the airline on course for the training, which takes 50-70 days. “I am looking forward to being able to fly China’s own plane,” said Ti, who has flown in an ARJ simulator and found it to be “very smooth”.

Olga Razzhivina, a director at aircraft appraiser Oriel, said: “As the ARJ enters service, Comac’s support ability will be the main test. Being a newcomer to aircraft manufacturing is not easy. Not only the aircraft itself has to be safe, the manufacturer has to convince potential customers of its ability to resolve any technical issues quickly and efficiently.”

The ARJ is entering a crowded market currently dominated by Brazil’s Embrarer and Canada’s Bombardier.

Source: SCMP “After 13 years, China’s home-grown Comac ARJ21 passenger jet enters commercial service”


China Xi Jinping Stresses a Strong Country’s Ability to Make Its Own Large Aircraft


Xi Jinping on a C919 prototype

Xi Jinping on a C919 prototype

Soon after entering a contract with Russia on development of large airliner during Russian President Vladimir Putin’s Shanghai visit on May 20-21, Chinese President Xi Jinping visited the Design, Research and Development Center of the Commercial Aircraft Corporation of China Ltd on May 22, 2014.

He held a conference with the foreign experts in Shanghai and said at the conference, in the current world of economic globalization and socialization of information no one can block the flows of commodities, information, technology and talents.

For a country, opening up to the outside world means first of all opening up to foreign talents; therefore, there may not be real opening-up if our thoughts are shackled and our minds remain narrow. In opening up to the outside world, our focus shall be placed on people and our efforts shall be related to talented people so as to urge people to open up with respect to their vision, thoughts, knowledge and technology. By so doing, we will keep on attaining new highs in opening up to the outside world.

Xi stressed the importance of drawing in talents because according to the contract between Russia and China on development of large airliner, the development and production will be conducted in Shanghai. Xi expected that quite a few Russian experts would come to Shanghai and wanted the experts already in Shanghai to respect, learn from and cooperate satisfactorily with Russian experts.

When Xi was in the workshop to inspect a new airliner, lots of workers and staff came to meet him. Xi told them that as a strong country, China must have its own equipment manufacture industry and be able to produce large aircrafts on its own despite all the difficulties China has to overcome in doing so.

Note: The enterprise Xi visited produces commercial aircrafts, but the technology for civil aircrafts can also be used in producing large military transports and strategic stealth bombers. We shall not restrict Xi’s concept of large aircrafts to commercial airliners.

Source: huanqiu.com “Xi Jinping places great hope on the team that developing C919: A strong county must have its own large aircrafts” (summary by Chan Kai Yee based on the report in Chinese)

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