Analysts: China may miss its trade target

17  January 2013

China is likely to fall short of its goal of increasing its trade by 10 percent this year, as demand remains weak both overseas and at home, officials and experts said.

“China will definitely not achieve its 10 percent goal, given that its foreign trade proceeded slowly in the first half of the year and the prospects are dim for the second half,” said Li Xunlei, deputy CEO and chief economist at Haitong Securities Co Ltd in Shanghai. “And we maintain our prediction that the country’s foreign trade will increase by about 9 percent year-on-year in 2012.”

Xiang Songzuo, chief economist of the Agricultural Bank of China Ltd, said China’s foreign trade “will increase by less than 7 percent in 2012.

“Because of the continuing global economic downturn, China will see weaker external demand in the next few months of this year than it had seen in the first eight months,” Ministry of Commerce spokesman Shen Danyang, said at a news conference on Wednesday. “Although faced with a mountain of difficulties, we will still try to achieve our goal of having trade increase by 10 percent, which we had set at the beginning of this year.”

China’s exports increased by 2.7 percent year-on-year in August, up from 1 percent in the previous month but still below the 3 percent the market had expected.

The decline in external demand is being blamed on the global economic downturn, especially the European Union’s debt troubles, as well as rising costs in China.

“The slowing of exports in August mainly results from the sluggish world economy and the EU debt troubles, which have significantly reduced international demand,” Shen said.

Xiang said China saw its trade with the EU and Japan decrease in the first eight months of the year and that trade with emerging markets now tends to be more responsible for increases in the country’s exports.

China’s trade with the EU, its chief trade partner, declined by 1.9 percent year-on-year in the first eight months of 2012 and its trade with Japan decreased by 14 percent in the same period, according to the ministry.

Zhang Rui, the owner of Chuangsi Optical Spectacles in Wenzhou, Zhejiang province, said overseas orders usually quickly rise in number in August, as people in Western countries prepare for the Christmas season. This year, though, the boost hasn’t been as great as it had been.

“As Chinese exports already make up 10 percent of the world’s total exports, the country’s foreign trade will increase at a slower pace in the future, at a pace that more closely tracks increases in world trade,” Li said. “Meanwhile, China’s exports are also rising in cost, causing them to lose their chief competitive advantage.”

Karel De Gucht, EU trade commissioner, said China should adopt reforms that prevent it from relying so greatly on cheap exports, the development of infrastructure and large government-led enterprises.

In August, the value of China’s imports dropped for the third month, falling 2.6 percent year-on-year to $151.31 billion.

“China’s economic growth slowed and the country’s demand for construction, mining and textile machinery contracted significantly while the weakness in international demand caused there to be fewer imports of the materials and parts needed in manufactured goods,” Shen said.

China introduced various measures on Sept 12 intended to bring stability to its exports. Among other changes, they required faster payment of rebates on export taxes and for more money to be lent to exporters. The measures’ details are to be published before October, Shen said.

“Although the central government had established certain measures to encourage the export industry to expand at a faster pace, we haven’t seen the benefits yet,” said Ye Mingchun, manager of Zhejiang Tianyiqi Shoes, based in Taizhou, Zhejiang province.

Zhang Jianping, director of the Institute for International Economic Research, a think tank under the National Development and Reform Commission, said “the measures are taking some time to show their effects, and the important thing is to see how these measures will be put into practice.”