China and the United States tire special security case, Fujian Jiatong serious loss

This week a year ago, the financial crisis in the world shook the world. Lehman Brothers, a large Wall Street investment bank, fell to the ground. As a result, the once-perennial financial crisis quickly swept the world. “The world financial crisis broke out!” — The newspapers around the world almost all adopted the same title.

Subsequently, the stock market plummeted, the commodity market weakened, the unemployment rate rose, and various economic indicators deteriorated... These economic declines have come one after another. In the face of this global financial crisis, all economies in the world have injected liquidity and launched an unprecedented bailout campaign.

Fortunately, one year later, although the haze of the crisis has not completely dispersed, the global economy has begun to show signs of recovery. However, we should also note that this time the US tire security plan has cast a shadow over the resurgent global economy. It also reminds us that the aftermath of the financial crisis is still in place, and some countries have started to save their economies with trade protection. In this special tire protection case, the relevant industries in Fujian Province have become the main victims.

Needless to say, manufacturing is not only our strength but also the short-run, export-oriented manufacturing overcapacity. As a coastal open province, Fujian’s dependence on foreign trade (imports and exports as a proportion of GDP) has reached 65%. If the manufacturing industry still relies on low-cost competition and does not accelerate the transition, the impasse will still be revived when the next financial crisis is encountered. Fortunately, after the financial crisis, many companies in Fujian Province have begun to seek transformation.

Core tips

Fujian Jiatong Tire and Xiamen Zhengxin Tire also came to the United States President Barack Obama announced the "US Tire Special Protection Case." This trade friction initiated from the other side of the ocean may affect the wages and even the employment of Fujian workers.

Despite the emergency intervention of relevant domestic authorities, the special security case still has some rotation. However, the two tire giants in Fujian have begun to brewing coping strategies, including the fight for tariff support, order relocation and so on.

Once the special safeguard measures are implemented, Chinese tire companies may completely withdraw from the US market, and the United States is the main export market for Fujian Jiatong Tire.

What's even worse is that the tire protection case has made a bad head. For a time, followers of protectionism followed.

In nearly 20 anti-dumping investigations this year, Fujian shoes and other industries have often become the hardest-hit areas in the country.

Tire industry to suffer $1 billion in losses

From September 26, the United States will impose a punitive tariff for three years

In April this year, the U.S. Steel Workers Federation submitted an application for special safeguard measures for China's use of tires and light truck tires. On September 11, U.S. President Barack Obama approved the US special case for China's tire protection.

According to the special safeguard case, starting from September 26 this year, the United States will impose a three-year punitive tariff on Chinese cars and light truck tires that are exported to the United States. The tax rate is 35% for the first year and 30% for the second year. The second year is 25%. Once the special safeguard measures are implemented, Chinese tire companies will suffer a direct economic loss of US$1 billion and may completely withdraw from the US market.

This "bad news" made the Fujian tire industry feel a bit surprised. Former U.S. President George W. Bush has repeatedly vetoed similar special security cases at the last minute. The Fujian Provincial Fair Trade Bureau stated that the special security case will have an impact on the tire industry in Putian and Xiamen in Fujian Province, especially in Putian, but the level of specific impact has not been expressed by the authorities.

Fujian Jiatong has issued a warning notice

Most affected, the amount of impact can currently not be accurately estimated

The reporter learned that Fujian Jiatong Tire and Xiamen Zhengxin Tire are Fujian tire giants.

Xiamen Zhengxin said that Xiamen Zhengxin, which is the mainstay of domestic sales, is not affected by the special security case because the volume of this piece of business to the United States is several million US dollars a year. However, Zheng Xin is also paying close attention to the development of the situation and exploring countermeasures. According to statistics from the Xiamen TDC, last year, the export of tires from the Xiamen Customs Zone to the United States was 12 million US dollars. From January to August this year, there were only 6 million US dollars. The overall security case has a smaller direct impact on Xiamen.

Fujian Jiatong Tire Co., Ltd. in Putian is obviously more “sad”. Its staff revealed that the United States is one of the important markets for its export products. Last year, the passenger car and light truck tires in the US market accounted for about the company’s annual sales revenue. 1/4.

S.Getter is an A-share listed company headquartered in Heilongjiang. Fujian Jiatong Tire Co., Ltd. is a 51% subsidiary of S.G.T., which is registered in Putian City, Fujian Province and is mainly engaged in the production and sales of automotive tires. By June 30 this year, Fujian Jiatong had total assets of 2.897 billion yuan, net assets of 1.082 billion yuan, and net profit of 122 million yuan in the first half of this year.

Fujian Jiatong is also one of the leading enterprises in Putian. From Monday's A shares of listed companies such as tires, Qingdao Double Star, S-Gatton, Shuangqin shares, Nguyen Tire, Aeolus shares, etc. have issued an early warning announcement, S good pass the most affected. The S-Gatton Announcement verifies the opinions of Fujian Jiatong staff. The announcement also stated that the specific impact amount cannot be accurately estimated at present.

The reporter was also informed that a number of domestic tire companies have already gone to Beijing to discuss countermeasures and hope to obtain tariff support. At present, the tire tax rebate rate is 9% and the standard natural rubber import tariff is 20%. Related associations and companies propose to raise the export tax rebate rate and reduce import tariffs. In addition, some tire companies in Fujian have factories in many countries and regions, and they may be able to reduce their losses through business “outward movements”. Giti’s insiders even bluntly stated: “The top management is still discussing options. Some options include moving some of the business to Indonesian factories.” However, the industry expects both sides to conduct effective “re-negotiations” and make more progress.

Fujian Province has become a disaster-hit area

The number of anti-dumping cases in Fujian reached 15 in the first half of the year, a doubling from the same period of last year

In fact, the financial crisis that has swept the world is causing a multiplicity of chain reactions. The financial crisis has forced the "old tricks" of trade protection to the front. The reporter learned from the Fujian Provincial Department of Foreign Trade and Economic Cooperation yesterday that in the first half of this year, Fujian Province encountered 15 anti-dumping cases involving a total amount of US$120 million, which has doubled from the same period of last year. The industries involved include textiles, shoes, machinery, and light industry. From July to September, new anti-dumping cases were also received.

"In the financial crisis, affected by the reduction in consumer demand, many countries not only encourage the use of domestic goods, but also raise the threshold for entry of foreign goods because of the reduction in consumer demand." Since the beginning of the first quarter, the internationally initiated anti-dumping investigations have increased. Among them, anti-dumping investigations on footwear in Fujian Province are the most serious. In less than two months, three countries in Brazil, Argentina and Canada launched anti-dumping investigations on footwear in succession. Among them, in Brazil's anti-dumping case, the amount involved in the country was 108 million U.S. dollars, of which the amount involved in the case of Fujian reached 54.61 million U.S. dollars, and hundreds of embarrassing enterprises involved. In the two cases of Argentina and Canada, the damage in Fujian Province was equally serious, and the case value ranked first in the country.

In addition, it is worth noting that recent frictions have not only come from countries such as Europe and the United States, but also that emerging markets have initiated trade frictions such as anti-dumping due to the difficulty of selling domestically produced goods. This also means that when the markets of Europe and the United States are limited, export companies will also face greater variables in their transition to emerging markets. Fuzhou Customs experts said that some exporting companies vicious competition, competing to lower prices, and dismantling each other, not only cause low export prices, but also easily cause foreign complaints against unfair competition in our country, and the reason why products frequently encounter trade protectionist resistance. To a certain extent, enterprises and products lack the overall competitiveness in the international market, so enterprises should deepen their internal strength.

News observation

Trade protectionism continues to spread

The special security case is just a start. The World Trade Organization’s just-released “Global Trade Early Warning” research report shows that countries in the world have violated their commitment to not adopt protectionist measures and are preparing to issue 130 protectionist measures. The countries that are preparing to implement protectionist measures include Russia, South Africa, and Japan. Many protective measures are directed against China.

Yesterday, it was reported that the US Steel Company is currently petitioning China to impose 60% or more anti-dumping tariffs on imported steel pipes and 15% to 30% of countervailing duties. In addition, the dispute over the United States tire protection case has just started, China's tire industry has met resistance in Argentina, Argentina may follow the example of Brazil, the anti-dumping duties imposed on Chinese automotive tires. Once this practice has spread, the doors for Chinese tire exports to South America may be closed.

More anti-dumping investigations followed. Russia has also filed a number of anti-dumping investigations these days. Energy companies in the United States and Germany also want to launch anti-dumping investigations against China. New energy companies such as Germany's Q-Cells, the world’s largest solar cell manufacturer, and Sun’s Power from the United States have appealed. Argentina’s production department also announced this week that it will follow Brazil’s anti-dumping investigations on imports of centrifugal pumps, tape measures and syringes from China.

“This is an example of the behavior of the U.S. special protection case. It is a protectionist approach,” said Li Wei, director of the Americas and Oceania Research Department of the Ministry of Commerce. The U.S., as a major trading nation, has a benchmark role in its trade policy. The case serves as a model for countries that pursue protectionism. Latin America has always been a "professional household" for anti-dumping investigations. Among the countries and regions that initiated anti-dumping investigation against China, India ranked first, and Latin America was the second.
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