Foreign trade of China’s pilot FTZs up 2.2% in first quarter

Foreign trade of China’s pilot free-trade zones (FTZs) reached 2 trillion yuan (about $416.26 billion) in the first quarter of this year, up 2.2 per cent year-on-year, a spokesperson for the Ministry of Commerce said in Beijing.

Speaking at a press conference, He Yongqian, the spokesperson, said that amid the current complex and severe international situation, the development of the country’s pilot FTZs has demonstrated remarkable resilience.

According to China Central Television (CCTV), the Ministry of Commerce will continue to advance the strategy to enhance free trade zones and improve the quality of their development.

“Benchmarking against high-standard rules such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Digital Economy Partnership Agreement (DEPA), we will carry out broader, deeper and more vigorous institutional opening-up trials in developing service trade and facilitating cross-border data flows among other areas,” she added.

Meanwhile the 90-day tariff truce agreed by the United States and China during trade talks in Switzerland last weekend is too short, China’s state-backed Global Times said on Friday, as envoys from the world’s two biggest economies regrouped in Korea.

During the Geneva summit, the US agreed to cut the extra tariffs it imposed on Chinese imports last month to 30 per cent from 145 per cent for the next three months, while China commited to cutting duties on US imports to 10 per cent from 125 per cent.

“The window for mutually beneficial cooperation should extend far beyond a mere 90-day period,” said the Global Times, which is owned by the newspaper of the ruling Communist Party, People’s Daily, and has often been first to report China’s next steps in trade disagreements over the last few years.

“Hopefully, the US side will build on the outcomes of the recent talks and continue to meet China halfway.”

Beijing also agreed to pause or remove the non-tariff countermeasures it has imposed against the US since April 2, although China so far has only paused its decision to add around 50 US firms to various lists restricting their ability to trade and invest.

In addition to easing the curbs, China agreed to lift export countermeasures issued after April 2, raising prospects for the lifting of restrictions on rare earth minerials, which Beijing has not yet clarified its position on.

Analysts say Beijing is unlikely to rush to announce how exactly it will meet all of its pledges.

“There is no point in China clarifying the non-tariff barriers it plans to lift to give itself the flexibility it wants,” said Dan Wang, China director at Eurasia Group.

“The tariffs will likely go back up 90 days and China may sign some purchase agreements, but the non-tariff barriers will be important in future talks,” she said. China’s commerce ministry did not respond specifically to questions on what non-tariff barriers it would lift - rather than pause - during a regular Thursday news conference.

US Trade Representative Jamieson Greer met Chinese trade envoy Li Chenggang on Thursday on the sidelines of an Asia-Pacific Economic Cooperation meeting on South Korea’s Jeju Island.

Neither side has provided details on the substance of that meeting.

New rules for Chinese active funds unveiled this month that are set to drastically change fund flows in the country’s stock markets have prompted immediate action from some of the biggest players in the industry to introduce fresh products.

China Asset Management (ChinaAMC), China Merchants Fund and E Fund Management Co said they have applied or will soon apply to launch so-called variable-fee products, where fees are tied to the performance of investments.

Variable-fee investment products - currently rare in China - more closely align the interests of fund managers with investors. Fees can rise if a fund does well and fall if it underperforms.

The new rules, which are in the words of China Securities Regulatory Commission Wu Qing, aimed at promoting Warren Buffett-style longer-term value investing, represent the biggest overhaul of China’s $4.5 trillion mutual fund industry in decades.

Chinese active funds have long been criticised for chasing profits from fees and focusing on short-term investments rather than concentrating on performance and creating longer-term value.

“Previously, many mutual fund managers put their own interest ahead of investors... contributing to irrational market fluctuations,” said Dong Baozhen, chairman of Beijing-based asset manager Lingtong Shengtai.

In addition to forcing the introduction of variable-fee structures, the rules mandate big pay cuts for portfolio managers who underperform benchmarks by 10 percentage points or more in a three-year time frame.

“This would nudge a fund manager to switch to a more suitable benchmark or build a more balanced portfolio” to avert outsized underperformance,” said Yu Zhanchang, a fund manager at Penghua Fund Management.