Trump brews the US low-tax storm. Where does China's manufacturing industry go?

The US is moving towards a low-tax model, which should be said to be basically a fixed number. In the face of US tax changes, the Chinese government should actively consider how to shift to a low tax model to cope with the upcoming global tax revolution. At present, globalization and de-globalization coexist, and the foreign trade situation is not optimistic. However, some trade frictions cannot stop the overall pace of globalization.
In the field of foreign trade, Chinese SMEs are faced with a “paradigm shift” in participating in international trade. They face three foreign trade model choices: traditional foreign trade, namely “foreign trade 1.0”, mainly using traditional offline trade; old-style foreign trade e-commerce Platform mode, namely "Foreign Trade 2.0", using the online supply and demand information platform, without the use of big data support; the new foreign trade e-commerce platform model, that is, "foreign trade 3.0", or "new foreign trade", using online supply and demand information platform At the same time, using big data support to create a global trade ecosystem.
On the eve of the 2016 G20 Summit in Hangzhou, the “G20 Business and Industry Activities” (B20) released the “B20 Policy Recommendation Report”, one of which is that the G20 establishes a world e-commerce platform to promote public-private dialogue in cross-border e-commerce ( eWTP)”. eWTP was first proposed by Ma Yun at the Boao Forum in March of the same year. When Trump met with Ma Yun, he talked about how to help American SMEs and American farmers to reach China and more countries through Alibaba’s platform. Market and consumer.
Whether it is China or the United States, a large number of SMEs are choosing to embrace the new economy, new opportunities and new foreign trade.

1. The foreign trade situation is not optimistic
2016 is almost the worst year for global trade. Statistics show that the total global trade volume in October 2016 decreased by 1.1% from the previous month, and the September data was revised down to 0.5% from the previous 0.4% decline. The World Trade Organization (WTO) predicts that global trade growth in 2016 is expected to be 1.7%, the slowest growth in the past seven years.
China is also unable to maintain its own uniqueness. According to customs statistics, in 2016, the total value of China's import and export of goods trade was 24.33 trillion yuan, down 0.9% from 2015. Among them, exports were 13.84 trillion yuan, down 2%; imports were 10.49 trillion yuan, up 0.6%; trade surplus was 3.35 trillion yuan, narrowing 9.1%.
Trump's election to the US president brought some uncertainties to China's future foreign trade. In an election speech, he once said that he imposed a 45% tariff on Chinese goods. He also proposed to reduce the current corporate income tax rate of up to 35% in the United States to 15%, while punishing US companies that have shifted employment opportunities overseas.
Because the US government only imposes corporate income tax on companies, this means that US companies do not need to pay taxes as long as they lose money. Chinese companies still have to pay a lot of taxes and fees even if they lose money. The United States will thus become a low-tax model country suitable for investment or “re-manufacturing”, which will trigger a global tax revolution.
For Chinese foreign trade companies, this will also bring huge variables. The US is moving towards a low-tax model, which should be said to be basically a fixed number. In the face of US tax changes, the Chinese government should actively consider how to shift to a low tax model to cope with the upcoming global tax revolution.

2. Globalization and new economy bring new opportunities
China and the United States are currently leading the new economy and leading globalization. Among many Internet companies, although companies such as Apple, Google and Facebook are still global leaders, Chinese Internet companies such as Baidu, Ali and Tencent (BAT) have already achieved global leadership in some areas. In the field of Internet finance, China and the United States also lead the world. The expansion of Ali Ant Financial's Alipay in the country is unstoppable, and the year of Yu Bao's birth in 2013 was called the first year of China's Internet finance.
No matter what dialogues and policy obstacles exist between China and the United States, disputes over the atmosphere, and even institutional competition, globalization cannot be stopped. Moreover, institutional competition such as tax competition will eventually become an important global promoter.
In the field of foreign trade, China's SMEs face both challenges and opportunities in the coexistence of globalization and de-globalization:
First, there is a “giant country effect” in China. China's more than 1.3 billion people form a huge market. As Adam Smith stated in The Wealth of Nations, the division of labor is influenced by the market. China has 39 industrial categories, 191 medium-sized, and 525 sub-categories. It is the only country in the world that has all the industrial categories in the UN industry classification, thus forming a world-wide industrial system with complete industry.
China's reform and opening up in the past 40 years has promoted China to become a major global manufacturing center, forming a huge number of engineers, technicians and skilled workers. China is also currently the world's number one patent in the world each year. It is easy for Chinese companies to strike a balance between choosing domestic trade and foreign trade, making it easier to balance the two and making it easier to use the domestic division of labor to serve the international market.
Second, people often only notice that China's foreign trade is highly dependent, but it does not see another important feature of China's foreign trade, that is, its low concentration and average trade distance. Among the major trading nations in the world, the same characteristics as China are basically net importers such as the United States, India and Japan.
The low concentration of export trade is reflected in the fact that goods are exported to various countries in a more dispersed manner rather than concentrated in certain countries, indicating that China’s foreign trade has a low overall risk and a large space for vacancies, although the foreign trade volume of developed countries such as Europe and the United States has declined, but with West Asia. The trade space between ASEAN, Africa and South America is expanding.
Third, from the structure of the main body of foreign trade, the private economy's share of China's foreign trade is growing, which means that the overall vitality of foreign trade enterprises is growing. In 2015, the export value of the private economy exceeded that of domestic and foreign enterprises, accounting for 45.2%, becoming the largest share of foreign trade. State-owned foreign trade enterprises still hold monopoly resources, or focus on high-end imports, and the proportion of foreign trade has decreased year by year. Most foreign-funded export enterprises are mainly processing trade, which is at the low end of the global value chain. The decline in this part of trade share is more beneficial than harm.
In addition, according to the "new trade theory", high-productivity enterprises are able to obtain sufficient profits and are more able to bear the high fixed costs required for export. Enterprises engaged in foreign trade are generally more efficient and profitable than domestic trade enterprises. Then, as a foreign trade subject, the private economy will raise the level of China's foreign trade in terms of innovation consciousness, profitability and commercial ability.
Fourth, the depreciation of the Renminbi is conducive to the export of Chinese foreign trade enterprises. Domestic expectations for the depreciation of the renminbi are basically the same, and with the relative strength of the US dollar, export companies will be more price competitive.
Fifth, mobile Internet and big data technologies have reshaped global business forms. China and the United States are leading the world in the use of mobile internet and big data. The combination of mobile internet technology and China's foreign trade is enough to offset the adverse effects of the global economic downturn.

3. New foreign trade model PK old foreign trade mode
Despite the low concentration of China's foreign trade, the long-term trade distance, and the large space for foreign trade enterprises, it is difficult to make full use of this opportunity with the help of the traditional foreign trade model (foreign trade 1.0). This is because in the traditional industrial era, large companies engage in cross-border trade and use large logistics such as containers to complete the transfer of goods.
The traditional foreign trade model uses the above opportunities to make the system transaction cost too high. They include: the cost of searching for commodity information and transaction object information (search cost), the cost of acquiring transaction object information and information exchange with the transaction object (information cost), The costs (bargaining costs) for bargaining, price, and quality bargaining, the internal costs (decision costs) required to make decisions and sign contracts, and the costs of supervising transactions (supervising costs).
At present, several foreign trade e-commerce platforms are leading the "Internet + foreign trade", including China Manufacturing Network, Global Sources and Alibaba International Station. The opportunities and challenges they face are different. These foreign trade e-commerce platforms actually mean that business entrepreneurs themselves self-organize and promote globalization.
This kind of globalization can hardly reach the end, and overall it should be infinite. These foreign trade e-commerce platforms are innovative foreign trade business models. The platform company establishes and maintains a cross-border Internet platform and uses it as a medium for foreign trade transactions to match the supply and demand information of both supply and demand sides in a flat manner, matching the supply and demand of both parties.
These cross-border trade e-commerce platforms are profoundly reshaping China's foreign trade. At the end of the 20th century, the e-commerce platform for foreign traders started in China. The earliest cross-border e-commerce platform was closer to the “Yellow Page of Foreign Trade Enterprises”, providing information display and basic transaction consulting services for small and medium-sized export enterprises. Subsequently, the format of cross-border e-commerce began to enrich, from the earliest production and wholesale (B2B) to the retail (B2C, C2C), from the basic information consulting platform to the online trading platform, from the domestic export enterprises The service is extended to serve importers and exporters around the world.
Among the domestic cross-border e-commerce platforms, Alibaba International Station is increasingly playing a leading role. Domestic consumers often only know Alibaba's Taobao, but do not know Alibaba International Station, Alibaba International Station as a foreign trade B2B platform was positioned by the Ali people as the online Silk Road.
The average trade distance of China's trade is far, only slightly behind the trade distance of the United States. This shows that China's foreign trade frequency is high, and the transaction costs of long-distance foreign trade are also high, and the new economy can reduce transaction costs substantially. However, the old cross-border e-commerce model (foreign trade 2.0), as an ordinary "Internet + foreign trade" model, mainly relies on expanding offline search to online platforms, not precipitating transaction data, not using big data to match supply and demand, nor sufficient. Take advantage of the above opportunities.
The competition between foreign trade models is harsh. The traditional foreign trade model and the old cross-border e-commerce model as "foreign trade 1.0" and "foreign trade 2.0" have made great contributions to China's foreign trade, but have become "old foreign trade", which is insufficient to cope with and utilize new challenges and new ones. Opportunity.
Alibaba's foreign trade e-commerce platform is different from other existing cross-border e-commerce platforms and is called "new foreign trade" or "foreign trade 3.0". Alibaba's foreign trade e-commerce platform is dedicated to building an e-commerce platform based on global trade big data, cloud services and big ecology, and introduces the “One Datong” import and export process outsourcing service platform to provide one-stop customs clearance, foreign exchange settlement, tax rebate, The import and export links required for foreign trade transactions such as logistics and finance meet the foreign trade service needs of import and export enterprises.
Alibaba International Station uses “One Datong” to provide one-stop import and export service; use “One Datong” to precipitate export order transaction data, form big data, increase the credit line between supply and demand, and use big data to promote the matching of foreign trade supply and demand. Back-feeding suppliers get more trust and more orders; “One Datong” uses “one-stop” and other organizational innovations to create an “ecological circle” for small and medium-sized foreign trade enterprises that join Alibaba International Station.
“One-shot” is a new foreign trade service partner model created by “One Datong”. As a foreign trade comprehensive service platform of Alibaba, “Yidatong” has introduced various localized foreign trade service enterprises (such as freight forwarding, import and export agents, customs brokers, taxation companies, etc.) to become a close partner of “One Datong” and form a small and medium-sized foreign trade enterprise. The “ecological circle” of services provides a complete localized and personalized low-cost export process comprehensive service for small and medium-sized foreign trade enterprises, reducing the manpower and capital costs of enterprises and creating a one-stop overall service and solution.
At the same time, the use of Ali "trust insurance" that is credit guarantee transaction services, to ensure that the payment is paid in time or pay. Ali “Xinbao” is a special transaction method based on commercial credit opened to Alibaba to users (including buyers and sellers). Users can open services of corresponding creditors (including but not limited to “trust payment”, “cheng e”信用", etc.) for credit guarantee transactions.
In the course of the transaction, the buyer can use the credit line obtained through the acceptance of the secured transaction service to make the advance payment. The partner introduced by the creditor or the creditor will guarantee the performance of the buyer's payable obligation according to the conditions stipulated by the service. And when the buyer fails to fulfill its payable obligations due to expiration, the seller will directly pay the seller to ensure that the seller receives the payment as scheduled.
It is precisely in many parts of the country that there are many platforms like Alibaba International Station. Although the total value of China’s import and export of goods has declined in recent years, the total import and export volume of cross-border e-commerce has been on the rise and has been growing rapidly. The situation. In 2015, the total import and export value of China's goods trade was 24.59 trillion yuan, and the cross-border e-commerce trade volume accounted for 19.5%, reaching 4.8 trillion yuan, of which B2B business accounted for 84.3% of the total cross-border e-commerce.

4. Advantages of new foreign trade
The goal of Alibaba International Station is to create a global trade ecosystem. And Ma Yun proposed to create "eWTP", which is an electronic world trade platform for public-private dialogue, which undoubtedly makes its new foreign trade even more powerful. New foreign trade can maximize the opportunities and advantages that China's foreign trade faces.
First, participants can be highly global, diversified, decentralized, and small and medium-sized. New foreign trade cross-border e-commerce has enabled SMEs and even individuals to participate in all aspects of global trade, and the global dividend has expanded and sank to the bottom of global consumers.
Traditional foreign trade has a very high information cost because it cannot solve the problem of information asymmetry between the supply and demand sides. These costs include searching for supply and demand costs, matching supply and demand costs, negotiating costs, credit costs, customs clearance costs, and logistics costs. New foreign trade uses Internet technology to fundamentally solve information problems, and various costs attached to information asymmetry will It is greatly reduced.
Since the Internet platform can reduce costs and provide specialized services in all aspects of the transaction, the cost of contact between the supply and demand sides is almost zero, which greatly increases the breadth and density of foreign trade transactions. At the same time, due to the reduction of transaction costs, the amount of revenue and profits deposited by the parties to the transaction is also increasing.
Second, logistics can also be highly globalized, diversified, decentralized, and small and medium-sized. In the era of new foreign trade, small and medium-sized enterprises use small parcels and terminal logistics to complete the handover of goods. As a trading platform, the network platform can enable the producers to concentrate on the production through the integration of logistics, customs clearance and payment links, and hand over the other links to the network platform and related supporters to complete other links.
Different from the traditional foreign trade middlemen, the new foreign trade network platform can collect many small parcels and terminal logistics to overcome the logistics bottleneck of the last mile.
Third, there has been a subversive change in the method of credit information and financing methods. The new foreign trade model has had a profound impact on the reform of foreign trade credit and financing methods. Information and credit are the core of trade, and financial business is derived on the basis of information and credit.
The backwardness of China's finance is largely hampered by the credit system, especially in the foreign trade. Many foreign trade companies with high quality products and smooth channels have been forced to go bankrupt or transform because they cannot get financial services.
Under the new foreign trade model, the credit information system will be formed at a very low cost. A good foreign trade enterprise will receive more fair and cheap financial services, which will have a profound impact on China's entire foreign trade sector.
The fourth is to rely on big data, big ecology, and network effects. The information precipitation under the new foreign trade model is connected with big data. The core of the transaction under the new foreign trade model is transaction information. This information can be distributed to various transaction entities at low cost, and the information is publicized and symmetrical. The integration of these transaction information into big data has a higher application value. . The use of trading big data can not only analyze the trend and direction of global trade, but also more accurately match the trading intentions of both the supply and demand sides, so that global production overcapacity and excessive consumption no longer exist.
Looking at new foreign trade on a global scale, the Internet model will inevitably lead to a shift in the global trade chain and trade pattern. New foreign trade is likely to form a “network effect”, which will increase user benefits. The so-called "network effect" means that the more users participate in the network, the greater the benefits of users, the more they will attract new users, thus forming a "positive feedback effect."
New foreign trade can bring a lot of benefits to China's small and medium-sized foreign trade enterprises. In Yiwu, a female entrepreneur from Wenzhou not only succeeded in expanding its foreign trade business based on Alibaba International Station, but also opened an Alibaba International Station Network Business Incubation Center, which holds 51% of the shares of each incubator. Train the founders of these companies to help them establish Alibaba International Station and guide them to take orders for online and foreign trade. With this business model, the female entrepreneur became an “entrepreneur in the entrepreneur” and hatched many young foreign trade companies.
The above examples also show that under the new business model and the new international economic situation, China's small and medium-sized foreign trade enterprises should actively embrace the new economy, new opportunities and new foreign trade.
(The author of this article: Feng Xingyuan, researcher at the Institute of Rural Development, Chinese Academy of Social Sciences.)

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