China foreign trade growth target ‘will be missed’

17 january 2013

 

Despite accelerated activity in September, China’s chances of hitting its annual foreign trade growth target this year were described as “hopeless”, according to a well-placed source.

Economists and trade watchers agreed that due to a number of factors, the euro-debt crisis being the most significant, the momentum of China’s foreign growth will remain weak as the year draws to a close.

An annual foreign trade growth target of 10 percent was set earlier this year but the chances of hitting that figure are “hopeless”, said the source on condition of anonymity.

Foreign trade in September grew by only some 6 percent year-on-year, with exports reaching nearly 10 percent and imports more than 2 percent, the source said.

The General Administration of Customs is expected to release the trade figures for September on Saturday.

Exports in August registered an increase of 2.7 percent year-on-year to $177.98 billion, while imports saw a net decrease of 2.6 percent to $151.31 billion.

In the first eight months combined, China’s foreign trade grew 6.2 percent from the previous year, amounting to $2.5 trillion.

The moderate growth in September did reflect the run-up to the Christmas and New Year holidays, the source said. But as the debt crisis continues to fester in Europe, China’s largest trade partner, and recovery remains slow in the United States, the “fundamentals that affect China’s trade situation are unlikely to improve any time soon”.

The Ministry of Commerce even forecast last month that the export outlook remained grim and external demand for the rest of the year may be weaker than in the first eight months.

Li Wei, economist at Standard Chartered in Shanghai, said imports and exports would “neither turn much better nor get worse during the rest of the year”.

“We cannot bet too much on exports to drive up the economy, despite the recent measures to stabilize trade (from further slowdown),” he said.

“China should increase efforts to boost domestic consumption as quickly as possible,” Li said.

The World Bank this week lowered its forecast for China’s economic growth this year to 7.7 percent from 8.2 percent, citing weaker exports and domestic demand, and slower investment growth. It warned there was a risk the slowdown in China could worsen and last longer than many analysts had forecast.

The State Council issued a raft of measures in September to boost trade growth, including speeding up export tax rebates, reducing administrative costs for companies, lowering financing costs for small and micro-sized enterprises and increasing credit to exporters.

According to the Ministry of Finance, China will offer importers 2.5 billion yuan ($398 million) in loan subsidies for purchases of advanced equipment, raw materials and other components.

China will also remove customs supervision charges for foreign trade enterprises in the last quarter, as well as scrap inspection and quarantine fees of all outbound and inbound goods, transport vehicles and containers, which will save foreign trade enterprises around 3.5 billion yuan.

However, for Guo Junwei, owner of a clothes manufacturer in Taizhou, Zhejiang province, the government measures to boost exports have made little difference. “We are still struggling against the sharp drop in orders and lower profits.”

Zhu Qingguo, general manager of a garment trade company in Guangzhou, Guangdong province, said “although orders from abroad did show some increase in September because of the looming holiday, they are much fewer than last year.”

“The government’s efforts could work and imports and exports could turn better in the short term, but they don’t change the key challenges China faces,” noted Zhang Yansheng, an international trade specialist and secretary-general of the National Development and Reform Commission’s academic committee.