Original: Tianya mending knife source: wechat official account: Tianya current affairs has been authorized to reprint
Two days ago, we analyzed in the article “Europe and the United States began to impose crazy sanctions on Xinjiang…” that Europe and the United States began to impose sanctions on Xinjiang with unwarranted “forced labor” and wanted to kick Xinjiang’s industry out of the international industrial chain.
Many people have two questions:
First, why don’t we counter sanctions?
Second, why should we care about the sanctions imposed by Europe and the United States?
Let’s first give you a simple answer: why don’t we counter sanctions?
Let me ask a question: we export a large number of middle and low-end manufactured goods to Saudi Arabia, and Saudi Arabia exports oil to us. If Saudi Arabia imposes sanctions on our goods, do we want to counter sanctions?
Of course, there is no need for anti sanctions!
Because we import a large amount of oil from Saudi Arabia, and oil is a necessity, isn’t it our own who will be hurt by your sanctions on Saudi oil – even if we increase the tariff by 100 times, we still have to import from Saudi Arabia, and we can’t find a substitute.
The same principle: European and American countries mainly export some high-end manufacturing to us, many of which cannot be replaced in the short term, so we don’t need “equal” sanctions, which is hard for us – for some high-tech products that can develop in the short term, we will certainly impose sanctions on European and American enterprises.
Due to asymmetric trade, it is more often that Europe and the United States impose more sanctions on us, and we impose less sanctions on Europe and the United States – the quantity and amount of goods we sell to Europe and the United States far exceed the exports of Europe and the United States to us. Our goods are more replaceable, and the substitutability of European and American goods is poor.
Therefore, Europe and the United States impose sanctions on us. We do not impose anti sanctions or less sanctions. It is not our advice, but from the trade structure and China’s own interests.
Let’s make this clear.
Next, let’s focus on the second point: how can we avoid the sanctions imposed by Europe and the United States?
Many people don’t understand and ask: why should we care about the sanctions imposed by Europe and the United States? Can’t you ignore them?
Let’s give a few examples and you will understand.
For example, our photovoltaic industry in Xinjiang is very developed. We have produced a large number of polysilicon, silicon chips, battery chips, modules, inverters, etc. these products are not only for our own use, but also exported in large quantities. We export these goods to other countries. Other countries must give us money. However, since RMB is not an international currency yet, those countries have no reserve RMB, so they can’t give us RMB. But those countries have dollars, because the dollar is the international currency. So if they want to buy our goods, they can only pay US dollars. When other countries buy our goods and pay US dollars, they must transfer money through the bank, right? The US dollar is an international currency, so in order to facilitate the trade of countries around the world, it has established a US dollar cross-border settlement system, which is controlled by Europe and the United States.
If the United States and Europe impose sanctions on Xinjiang, then the United States and Europe will shut down these systems, so that other countries have no way to pay US dollars to Chinese enterprises, and business will be difficult to do.
However, as we all know, our photovoltaic industry is relatively cheap. In order to obtain cheap Chinese goods, other countries must find ways to bypass the sanctions imposed by Europe and the United States.
What are some ways to get around it?
There are many such methods. Let’s simply say two:
First, adopt RMB settlement;
Now China’s economic strength is stronger and stronger, and its currency is more stable. It will not easily appreciate or depreciate. Therefore, many countries are willing to reserve RMB – other countries sell their goods to China, and then they don’t want us dollars, and they want RMB. With the people’s currency, they can buy goods from China.
Let’s take a look at the depreciation of the US dollar?
In June, US inflation reached a new high, reaching 8.6%.
Do you know what this concept is?
The annual profits of many enterprises are around 5%, which can not keep up with inflation?
For example, the real estate industry has been relatively miserable in recent years, with an average net interest rate of -5.7%. Vanke has performed well, but its net interest rate has not exceeded 5%.
If a country’s currency depreciates by more than 3% every year, many countries will not reserve the country’s currency.
Over the past decade, our inflation has been well controlled, basically within 3.0%.
Therefore, just from the perspective of controlling the depreciation rate and range, many countries have the incentive to reserve RMB.
For example, Serbia has a lot of iron ore. they can sell iron ore to China, get RMB from China, and then take RMB to buy Chinese photovoltaic modules. The RMB payment system is controlled by China, so the sanctions imposed by Europe and the United States on us are useless.
Second, adopt local currency settlement.
In addition to adopting RMB payment to avoid European and American sanctions, there is another way to avoid European and American sanctions: local currency settlement.
What is local currency settlement?
For China, RMB is our currency, so RMB is called “local currency”, and the currencies of other countries are called “foreign currency” — in China, RMB is the legal currency, and any domestic transactions must use local currency. You can’t buy things in stores with us dollars. If an enterprise secretly uses US dollars for settlement, it is against the law and will be sentenced to prison.
China and Serbia conduct local currency settlement, which means that Chinese enterprises can directly purchase Serbian goods in RMB, and Serbia can directly pay Chinese enterprises dinars (Serbian currency) for Chinese goods.
However, we also know that Serbia is only a small country with few types of goods. If our enterprises sell a large number of goods to Serbia, they give us a large number of dinars, and the dinars are not international currencies. You can’t take the dinars to other countries to buy goods, so why do we reserve so many dinars?
We don’t want dinars, so if Serbia wants to buy Chinese goods, it can only pay us RMB or US dollars.
As we have said above, if Europe and the United States impose sanctions on Xinjiang’s goods, Serbia will not be able to buy our goods through US dollars. However, since Serbia can export fewer goods to us, even if it can obtain a certain amount of RMB from China, it is not enough to buy Chinese goods.
At this time, another way came out: currency swap.
We have given Serbia 10billion yuan and Serbia has given us 50billion dinars, which are valid for three years. This is called “currency swap”.
Does currency swap mean that we exchange 10billion yuan for 50billion dinars in Serbia?
Of course not!
The currency swap has a valid period. When three years are up, we will return 50billion dinars to Serbia, and Serbia must return the 10billion yuan we exchanged to it.
Serbia doesn’t have enough RMB to buy Chinese goods, so we give it 10billion RMB in exchange. Does it have RMB to buy Chinese goods?
At this time, another question arises: if Serbia spends all the 10billion yuan exchanged from us, and the three-year agreement expires, we will return 50billion dinars to Serbia, but Serbia does not return RMB to China?
We don’t care. Anyway, the agreement has expired. You must return 10billion yuan to us.
At this time, Serbia must find a way to earn RMB.
How to make it?
There are many such methods.
For example, Serbia continuously supports us internationally, and the relationship between the two sides is very good, so Chinese people may travel to Serbia and earn RMB; For example, Serbia sells goods to us at a low price to earn RMB
Now you see, through RMB internationalization or local currency settlement, you can completely avoid the sanctions of Europe and the United States.
So, does it mean that RMB settlement or local currency settlement can avoid the sanctions of Europe and the United States?
It’s not that simple.
Once Europe and the United States impose sanctions on Xinjiang products, in addition to payment problems, enterprises also have great problems.
What does that mean?
Let’s continue with the example.
For example, I am a photovoltaic manufacturing enterprise. I have production bases not only in Xinjiang, but also in Inner Mongolia. My photovoltaic products are sold not only to domestic enterprises, but also to Serbia, the European Union and the United States.
If Europe and the United States impose sanctions on Xinjiang products, the photovoltaic products I produce in Xinjiang will not be sold to Europe, the United States and the United States – because my products are mainly exported to Europe and the United States, I have no other way but to close the production base in Xinjiang at this time.
Therefore, once Europe and the United States impose sanctions on Xinjiang products, many enterprises mainly exporting to Europe and the United States will have to withdraw from Xinjiang, which is undoubtedly a major blow to Xinjiang.
Is there a solution?
Of course there is a way!
There are more ways than difficulties!
For example, I used to have production bases in Xinjiang and in Inner Mongolia. Now Europe and the United States have imposed sanctions on Xinjiang products. At this time, I will label the goods produced in Xinjiang as those produced in Inner Mongolia, so I can avoid the sanctions of the United States?
Some time ago, Europe and the United States exempted the tariffs on photovoltaic modules of four Southeast Asian countries for two years, leading to a sharp rise in the share prices of Chinese photovoltaic enterprises.
According to the normal principle, the United States exempts Southeast Asian countries from photovoltaic module tariffs, and the share of photovoltaic module exports from Southeast Asian countries to the United States is bound to increase, which is a major negative for Chinese photovoltaic enterprises. Shouldn’t the share price of Chinese photovoltaic enterprises fall?
What’s the problem?
Are photovoltaic enterprises in Southeast Asian countries competitive? The photovoltaic industry in Europe and the United States cannot compete with China, let alone Southeast Asian countries? There is no PV industry in Southeast Asian countries at all. All its PV products are owned by Chinese enterprises, but they are not labeled with Chinese brands when they are produced in China. After they are sold to Southeast Asian countries, they are labeled with brands manufactured by Southeast Asian countries – this is how Chinese enterprises avoid the sanctions of Europe and the United States.
Since trump took office, he has imposed huge tariffs on many Chinese goods, so many enterprises have transferred their goods to Southeast Asian countries, and then pasted the brand made in Southeast Asian countries to avoid sanctions.
In recent years, many people have been talking about Vietnam’s economy.
Since the United States launched a trade war against China in 2016, Vietnam’s exports have been increasing
In fact, many people don’t know that a large part of Vietnam’s exports are not Vietnamese goods at all, but Chinese goods – Chinese enterprises export goods to Vietnam, affix Vietnamese brands, and then export them to the United States.
Therefore, there is a lot of water in Vietnam’s export data – we don’t know the specific share.
It is a way to OEM in other countries and then export to the United States, but it is also problematic. There are three main problems:
First, let the brand effect of Chinese products weaken;
In fact, the commodities of many enterprises are not superior to similar products, but they can sell at high prices. Why?
Because people have brand value, everyone trusts this brand, so its selling price can be higher.
A large number of cheap and beautiful goods in China can not be labeled with their own brands, which hurts the profits of enterprises and benefits enterprises in Southeast Asian countries – if I get the brand of Maotai and put Erguotou into the bottle of Maotai, I can also sell at a high price.
Second, weaken the competitiveness of commodities;
When Chinese goods are exported to Vietnam and labeled with Vietnamese brand, you need to pay freight and customs duties. Vietnamese enterprises also need to pay wages to their employees… These are added to the price of goods.
Re export and OEM will inevitably increase the price of commodities; As prices rise, sales will inevitably decline and competitiveness will inevitably weaken.
Third, it is easy to be traced to the “source”.
Chinese enterprises export their goods to Vietnam for OEM. As long as the Americans want to check, they can certainly trace the source, because there are too many intermediate links involved in this process – Chinese enterprises know this, the Chinese government and the Chinese customs know this, Vietnamese enterprises know this, and the Vietnamese government and customs know this
Whether it is a Chinese enterprise, government or customs, or a Vietnamese enterprise, government or customs, as long as an insider “informs” the United States, the United States can know that Vietnam’s PV is actually made in China.
Many goods from Southeast Asian countries are OEM products from China. In fact, the United States knows it well.
Since the United States knows that Chinese enterprises evade U.S. sanctions through “OEM”, why did the United States not attack Southeast Asian countries?
The answer is the first two points we mentioned above: weakening the brand value and competitiveness of Chinese goods.
What should we do if we want to make it difficult for the United States to find the source?
Chinese enterprises have production bases in Xinjiang and also in Inner Mongolia. In order to avoid the sanctions of Europe and the United States, enterprises must change all the commodities produced in Xinjiang to be produced in Inner Mongolia. In this process, strict confidentiality is required!
The Chinese government needs to set up a special department. The people in this department must be very reliable. These people are specially responsible for these enterprises that “change their production places”; Enterprises must also do a good job of confidentiality, and transport, labeling and other work should be handled in a closed manner
Therefore, there are ways to crack the European and American sanctions.
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