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Tariffs not impacting on US demand

By Cheng Yu | chinadaily.com.cn | Updated: 2018-08-23 19:46

It was an unusual email, in which Chinese casting company Anhui Yingliu Electromechanical Co Ltd asked its US clients whether they would agree to bear the additional costs brought by the ongoing China-US trade tension.

The replies were surprisingly consistent. All the US buyers were willing to undertake these fees as they found that products from this Chinese company still had an edge even with extra tariffs.

The company, based in Liu'an, Anhui province, said that the result was "as expected". Its decades of work on casting products, which are essential components in machine manufacturing, have made it confident in bargaining with US counterparts, it noted.

Similar stories can be seen from a large number of Chinese companies who are moving to become high-end manufacturers on the international stage. Their transformation came with the upgrading of the country's manufacturing sector as well as the nation's deep integration with the global value chain.

In early July, the White House imposed 25 percent tariffs on $34 billion of Chinese products, with casting products on the list.

"We are not panicking (about the trade tension). We know clearly that when US counterparts choose suppliers, quality and delivery time always come first, and the price comes after," said Ding Bangman, deputy technology head at Yingliu.

With years of experience, the Chinese company has already gained a competitive edge in manufacturing high-precision steel components. Its products have been sold to more than 60 well-known companies in 28 countries and regions including the United States.

Company representatives recently visited European enterprises to explore markets outside of the US, and it is planning to launch its engines and gas turbine blades to the international market.

"We do what the market needs. We went to Europe as European companies all showed a desire for cooperation," said Du Yingliu, the company's founder and president.

Du noted that some component suppliers including blade suppliers have a dominant role in setting prices and standards, which led to dissatisfaction among major engine manufacturers including General Electric and British jet engine maker Rolls-Royce.

"Thus, when we (Chinese enterprises) can make these components, foreign players are willing to cooperate as we are good at reducing costs," he said.

Xu Lin, former director of the development planning division at the National Development and Reform Commission, said: "The authorities will point out some key areas to develop in some guidelines, but they are guidelines only. Companies make their decisions according to market demand and technology trends and will not get preferential treatment."

Xu added that related policies in China's manufacturing sector would be more mature in the future and shouldn't become the reason for current trade tensions.

As Chinese companies transform to become high-end manufacturers, they are also promoting foreign counterparts to be more globalized.

An increasing number of foreign companies like Cerevast, a biotechnology startup assisting with neurological disorders, found that only in China could they get more strategic support to achieve mass production of their products.

The company, headquartered in Washington, has drawn Chinese venture capital Haiyin Capital in its series C round of financing, which is of great help to tackle its mass production problem as well as to tap into the Chinese market.

Wang Yuquan, founder of Haiyin Capital, recalled that it was factories in Shenzhen, a cluster of world-leading manufacturing industries located in southern China, that were confident of reducing the company's costs in mass production in a short time.

"People from both two countries will enjoy benefits brought by products as early as these cutting-edge products are launched onto the market. I believe that no wise government would be against such cooperation," added he.

In terms of future plans, Du from Yingliu said that the company is also building a professional college to nurture more technical experts and management staff to support its growing business.

"At least in the high-end casting segment, the US cannot rely on imposing tariffs to rejuvenate the sector since it lacks a large number of such employees," said Du.

"We are willing to bring our factories and even the whole professional training systems to the US to help local workers and create jobs," he added.

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