Beijing to retaliate, boost spending after US tariffs

China said it will retaliate against another round of US tariffs and plans to increase infrastructure spending to offset negative effects of their growing trade war.

The US will impose a 10pc tariff on an additional $200bn/yr of imports from China on 24 September and increase the rate to 25pc from 1 January.

"In order to safeguard its legitimate rights and interests in the global trade system, China will have to retaliate," China's commerce ministry said. "The US insists on imposing tariffs, which brings more uncertainty to the negotiations between both sides. We hope that the US will recognise the negative consequences of its actions and take convincing measures to correct them in a timely manner."

China did not announce countermeasures but has said it will add tariffs on $60bn of imports. These duties could hit US exports of LNG, chemicals and metals.

Beijing is seeking to accelerate construction of existing and new infrastructure projects and asked local governments to utilise funds worth 1.35 trillion yuan ($197bn) to support infrastructure construction.

Beijing has cleared proposals for investment in all planned projects for this year by end of May, the fastest rate of projects clearance in recent years, which has helped construction to begin early for several projects, said Chinese economic planning agency the NDRC today.

The central government had allocated around $78bn for infrastructure investments for 2018 at the beginning of the year. Banks and local governments can float bonds totalling Yn1.35 trillion to support infrastructure projects.

Beijing is also deepening reforms of project clearance system to cut the time for planned infrastructure investments to start construction. The infrastructure speed-up announcement supported market sentiments, with the most active iron ore contract on the Dalian commodity exchange rising by 1pc and the Shanghai futures exchange rebar contract up by 1.4pc.

The NDRC did not mention any linkage of the accelerated progress of projects and the escalating tariff friction with the US. But a swifter project implementation will shore up economic growth and partially buffer against the fallout of a higher tariff on Chinese exports. Beijing has said it will announce its response to the US announcing a fresh 10pc tariff on Chinese imports worth $200bn at an appropriate time.

China's infrastructure investment growth fell to 4.2pc during January-August from 19pc in 2017. The NDRC had earlier pointed to initial problem in public-private partnership projects and closer scrutiny of project viability and rising provincial debt levels as reasons for slower growth. Projects that have financial appeal for private-sector companies will be promoted for developing public-private investment projects and norms for these are being clarified and streamlined further, said the NDRC. But vanity projects without clear social purpose will still not be allowed to be built, it added. Among projects currently under construction are water conservation projects, railway networks and airport expansions.