Source: 21st Century Business Herald

Under the pressure of domestic overcapacity, China will accelerate the promotion of international cooperation in production capacity and equipment manufacturing this year.

On February 23, at the first press conference, Lin Shunjie, Minister of the Trade and Investment Promotion Department of the China Council for the Promotion of International Trade, stated that in order to promote my country’s superior production capacity and superior equipment ("two excellent") to the sea, the CCPIT will choose several cooperation conditions and good foundations this year. As a key market, developing countries have achieved an increase from product output to industrial output.

2015 is the first year of international capacity cooperation. Summarizing last year’s work, the National Development and Reform Commission stated that my country’s railway going global has achieved major breakthroughs, nuclear power has taken solid steps, and high-quality production capacities such as steel, nonferrous metals, and building materials have begun to transfer to the outside on a large scale. Overseas investment and project contracting have driven rapid growth in equipment exports. . In addition, with key neighboring countries as the "main axis", key countries in Africa, the Middle East, and Central and Eastern Europe as the "west wing", and Latin America as the "east wing", my country's "one axis and two wings" cooperation layout has accelerated.

As a foreign trade and investment promotion agency, CCPIT will continue to focus on the "two excellences" going overseas this year. The key projects include: four African countries investment seminars, China International Equipment Manufacturing Expo, Czech Brno International Machinery Expo China Pavilion exhibition, etc. . In addition, the CCPIT will organize companies to participate in trade and investment promotion groups to visit Malaysia, Thailand and Cambodia, Kazakhstan, Uzbekistan and Russia, the UAE, Iran and Egypt, Ecuador, Colombia and Costa Rica, and strengthen cooperation with countries along the “Belt and Road”. Connect with industries in Latin American countries.

Last year, China proposed third-party market cooperation with the European Union and developed countries such as France and the United Kingdom, focusing on the African and Latin American markets. Lin Shunjie told a reporter from 21st Century Business Herald that at the China-EU Business Summit to be held later this year, CCPIT will continue to promote cooperation between Chinese and European companies in third-party markets.

"It is true that in Latin America and Africa, many European Union companies have traditional advantages, but Chinese companies also have irreplaceable advantages, such as their uniqueness in production costs and certain technical aspects, especially in integrated engineering projects. This kind of cooperation can avoid vicious competition between Chinese and European companies in emerging markets."

In addition, Lin Shunjie emphasized that Chinese and European companies have different choices in overseas markets: Chinese companies tend to have higher risk tolerance and greater tolerance. "In high-risk areas, the entry of Chinese companies and the addition of capital and technology from EU companies are a better combination model."

Contribute to the industrialization of Africa and Latin America

According to reports, the CCPIT will cooperate with the United Nations Industrial Development Organization (UNIDO) and the International Trade Center (ITC) to address the urgent development of agricultural and manufacturing projects in African countries such as Ethiopia, Kenya, Zambia, and Tanzania. Four investment seminars and two trade and investment forums will be held in China in November and November, focusing on helping enterprises in Hebei, Shanxi, Jiangsu, Shandong, Liaoning and other provinces with production capacity cooperation needs to connect projects.

"This event is not a simple meeting," Lin Shunjie said. "The cause is a cooperation agreement that President Xi Jinping and Prime Minister Cameron jointly witnessed to help African countries achieve industrialization." In October 2015, during Xi Jinping's state visit to the UK, China-Africa Development Fund Co., Ltd. signed the "Memorandum of Cooperation on Promoting Investment and Export in Africa" with the British Department for International Development.

As for the reasons for the first launch of the above four countries, Lin Shunjie explained that these countries have more market prospects and have a relatively high matching degree with China's superior production capacity enterprises. Sino-British cooperation will focus on agricultural processing and manufacturing. At the seminar in February, it is expected that more than 60 companies from Hebei, Shanxi, Jiangsu, Shandong, Liaoning and other provinces will participate in the project.

"The United Nations International Trade Center will formulate technical support and development investment plans for the projects that form the initial docking. The China-Africa Development Fund will give priority to providing financial support for the projects recommended by the Association. The Association will also provide feasibility consulting services and economic and trade friction response and investment. Dispute prevention and other legal services to enhance corporate risk prevention and control capabilities. This activity will be carried out on a regular basis in the future and will further expand the scope of countries in 2017.” Lin Shunjie said.

The Council for the Promotion of International Trade also plans to organize a visit to Egypt in September, focusing on the Suez Economic and Trade Cooperation Zone in Egypt. "We hope to recommend Chinese companies that intend to invest in the economic and trade cooperation zone to settle down, and introduce Chinese technology, capital and surplus production capacity to Africa." Lin Shunjie said.

In addition to the "West Wing" of Africa, the "East Wing" of Latin America is also the focus. From October 14th to 15th, the CCPIT will co-host the 10th China-Latin America Business Summit in Tangshan, Hebei Province with the People's Government of Hebei Province, the People's Bank of China (to be confirmed) and the Inter-American Development Bank. This summit will set up seminars on trade and investment exchanges, production capacity cooperation, financial services, and park cooperation. Through exchanges and dialogues, business negotiations and exhibitions, we will enhance the confidence of enterprises of both sides in cooperation and promote pragmatic economic and trade cooperation between China and Latin America.

Lin Shunjie revealed that the Council for the Promotion of International Trade is supporting Tangshan to build a China-Latin America industrial park, hoping to attract more Latin American companies to Tangshan for inspection and research through this China-Latin America Entrepreneurs Summit, promote production capacity cooperation and product export, and facilitate Latin American companies to settle in Tangshan.

Cracking domestic overcapacity

The investment seminars in the four African countries and the China-Latin America Business Summit all chose Tangshan City, Hebei Province, which highlights the urgency of resolving domestic overcapacity. "I hope that the three industries of Hebei's glass, steel, and cement will move abroad as soon as possible, and find opportunities to settle down, so that our air can be better." Lin Shunjie said.

On February 4, the State Council issued the "Opinions on Resolving Excessive Capacity in the Iron and Steel Industry and Realizing Difficulty Development", proposing to reduce the excess steel production capacity by 100 to 150 million tons within 5 years. For Hebei Province, which accounts for a quarter of the country's steel production, it is urgent to realize industrial transformation and upgrading through foreign cooperation.

However, some commentators believe that the “Belt and Road” initiative and the Asian Infrastructure Investment Bank are not enough to absorb China's excess capacity. On February 22, the European Union Chamber of Commerce in China quoted David Dollar, the former director of the China Bureau of the World Bank, stating that the AIIB can lend out US$20 billion each year, and that it would require US$60 billion each year to absorb the current excess capacity of China's steel industry.

In response, Lin Shunjie responded that China is using its superior production capacity to help African countries achieve industrialization. At present, countries such as South Africa and Kenya have a higher starting point for industrialization than China in the early stage of reform and opening up, and the technical standards of infrastructure construction and other industries are correspondingly higher. Therefore, China must pay great attention to local development needs in the process of industrial transfer, and stimulate local development. Starting from the industrial level, achieving mutual benefit and win-win results.

In his view, overall, Chinese companies will have huge development advantages in Africa. “In December last year, I visited the Eastern Industrial Park in Ethiopia. For example, there is a crude steel company in Jiangsu that has been in a backlog for three consecutive years in the country. In Ethiopia, the price of crude steel is 10 times that of Jiangsu, and its output has expanded five times in one year, and is expected to increase to ten times in three years. For another example, there is a textile company in Jiangsu that is basically shutting down production in China. Status, but as much as produced in Ethiopia can be sold."

At the same time, Lin Shunjie also admitted that there are obstacles to China's development in Africa. For example, the exchange rate of Ethiopia is very unstable, which can depreciate by 10% to 30% overnight, and the amount of foreign exchange exchangeable is very small, which brings a lot of difficulties to companies with both ends. In the future, this may further hinder the repatriation of Chinese corporate profits and the development of third-party markets.

"These issues are awaiting for the government and public service agencies such as the CCPIT to provide professional services to enterprises and lobby the local government." Lin Shunjie said that CCPIT has advised the government to provide policy advice to countries like Ethiopia to help them develop industrial parks. Construction will create conditions for Chinese companies to "go to sea in groups".

The Thai-Chinese Rayong Industrial Park is one of the 16 national-level overseas economic and trade cooperation zones built by my country. It focuses on the development of auto and motorcycle parts, new materials and new energy, and electronic machinery industries. Xu Genluo, general manager of the industrial park, pointed out to the 21st Century Business Herald reporter that domestic traditional advantageous industries have great development prospects in Thailand. For example, there is already a surplus of steel in the country, but Thailand still relies on imports. If products can be introduced into Thailand, sales channels It will be better than domestic, but it is still affected by some domestic policies in Thailand. He believes that industrial parks can further form industrial clusters, allowing companies of different scales and levels to develop together, share various resources, and cooperate with enterprises in the park to establish a strong ecosystem, and promote the collective export of my country's superior production capacity and superior equipment.