Obama reelection: A win for China exporters?

Posted: November 09, 2012

With President Barack Obama winning a second term at the White House, some China exporters are breathing a sigh of relief.

But should they?

The consensus, at least at first glance, is yes.

The China business community is welcoming Obama's reelection for the continuity it brings to US-China trade relations.

Obama's win is "good for both the export industry in general and my company's 2013 US exports," said Gavin Cheung, general manager of Brentorma Electricals (Shenzhen) Co. Ltd. The company is an OEM and ODM supplier of bottled water dispensers and POU water coolers.

Cheung believes a Republican victory would have meant the US taking a tougher stance against China.

Mitt Romney vowed to label China a currency manipulator, a move that did not exactly win the Republican candidate fans across the Asia market.

A Romney win would have shaken US-China relations, Cheung said. "Ties between the two countries will eventually return to normal, but that will take time, during which our exports to the US would suffer."

Michael Shang, sales manager of Qingdao Touran Tyre Co. Ltd shares Cheung's opinion. "My main concern over a Romney victory was the changes in US-China trade policies. With little time to respond and cope, China exporters would have faced losses."

Qingdao Touran is owned by the Sinosea Group, one of the largest tire makers in China. The company expects the US to take in 5 percent of exports in 2013.

Others, however, are casting a wary eye on the next four years.

Yale University finance professor Chen Zhiwu said via Weibo (the Twitter equivalent in China) he expects more bilateral economic disagreements under Obama.

"More restrictions are likely, especially during his second term. He will have to pay back those voters in Ohio, Wisconsin and, of course, Michigan." The three are manufacturing-driven states that have been affected by the outsourcing of jobs to low-cost hubs, including China.

Many netizens in the country voiced similar opinions through Weibo and other microblogging sites.

Some analysts think that beneath Romney's tough stance was the intent for China to simply abide by free trade rules.

"Romney would have been better for China-US trade relations if he was elected," Chen put it simply on his Weibo page.

Sun Lijian, associate dean of the economics department at Fudan University wrote on Weibo that Obama's reelection will have two consequences, both of which will put more pressure on China's export industry.

First, the US dollar will drop and the yuan will gain strength. Second, trade barriers will escalate.

As seen on chart 1, the yuan has gained 2.3 percent against the dollar since July 13, 2012 contradicting market predictions of a depreciation and squeezing low-value segments further. More than half of garment makers in China, for example, have reported losses due to the appreciating yuan. Statistics indicate that for every 1 percent gain of the yuan, profit margins of garment and textile exporters fall by 1 to 4 percent.

Shenzhen City Dingrun Light Textiles Import & Export Co. Ltd sales manager Linda Guo said, "Romney is more self-controlled while Obama is more aggressive. There will be more disputes between China and the US in the next four years." Shenzhen City Dingrun offers towels, cloth diapers, bed linen and fabric-based home furnishings.

Interestingly enough, the sense of continuity that the pro-Obama camp is rejoicing about pervades even among the naysayers. But for the latter, the familiarity has a negative connotation.

"Anti-dumping and countervailing duty investigations in the PV industry, other trade barriers and the yuan appreciation will continue," said Li Lijun, export manager of Ocean Electric Ltd.

Zhang Monan, associate researcher for State Information Center, wrote on Weibo that Obama's economic policy on China has always been tough. To boost the US economy and create more jobs after his reelection, Obama will apply more economic interventions and measures, including the escalation of trade barriers against China, Zhang added.

According to Linda Hu, export manager for Acever Electronics (Shenzhen) Co. Ltd, trade disputes between the two countries are inevitable. "The China government will launch protective policies to help China suppliers already facing anti-dumping measures, yuan appreciation and unemployment rates, and pull us through."

For Lu Zhengwei, chief economist and market research director for Industrial Bank Co. Ltd, Obama's second term is "long in short-term and short in long-term" for China. "His polices of QE, doubling US exports, clean energy development, reindustrialization and investing in infrastructure will sustain US economic recovery in the short term and eventually squeeze China out."