Friday, 16 January 2009
Sharp Import Decline More Worrying than Export Fall
Worries are greater over imports. According to China Customs, the decrease of overseas orders will affect processing trade demand. This, together with the big decline of international raw material prices and the domestic economic slowdown, means import decline will be more damaging than export decline in a short period.
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Sharp Import Decline More Worrying than Export Fall
CSC staff, Shanghai
15 January 2009
In December, 2008, a worsening foreign trade environment continued to pressure China’s imports and exports. Analysts expect exports to continue to decline in the first quarter of this year.
According to China Customs’ latest figures, revealed yesterday, China’s December imports and exports totalled $183.33 billion, 11.1% down year on year, imports totalling $72.18 billion, a drop of 21.3%, and exports reaching $111.16 billion, 2.8% down. Compared with November figures, export growth was 0.6 percentage points down while import growth fell by 3.4 percentage points.
December’s trade surplus totalled $38.98 billion, a drop from November’s record high of $40.09 billion. The long continuous monthly trade surplus growth has changed. Although the trade surplus is still high, it is no longer led by export growth but by declining imports, which has some, though not all, analysts worrying.
Export decline expected, but imports…
“These figures are not beyond our expectations. After all, the global economic environment is not good and orders of Chinese export enterprises haven’t rebounded,” said an expert in the Ministry of Commerce.
It is still hard to judge now where the real bottom for China’s exports lies, as both the US and European economies are still in a downturn. The international environment that began to worsen in October has not had its full effect on China’s exports because of the time difference between order placement and actual export. In this first quarter, China’s exports are expected to continue to decline.
Worries are greater over imports. According to China Customs, the decrease of overseas orders will affect processing trade demand. This, together with the big decline of international raw material prices and the domestic economic slowdown, means import decline will be more damaging than export decline in a short period.
Sanlian, a Guangdong-based company, mainly exports toys to the US and Europe as a step of the processing trade. Its general manager, Chen Guojian, told China Business News that processing is more easily influenced by the international environment. In 2008 the company’s export dropped by about 30%.
Processing has long been an important part of Guangdong’s foreign trade and now accounts for about 65% of Guangdong’s exports. But since its materials and markets both involve foreign countries, it is easily influenced by international economic fluctuation. Orders for companies processing such products as textiles, toys, shoes, and electronic products can drop drastically.
Export decline won’t be too bad
Due, though, to the impact of policies such as an increase in export tax rebate ratio, in December exported goods involved in the policy adjustment totaled $54.45 billion, growing 4.8% year on year, and their percentage in the total export amount rose from 45.8% in November to 49.0% in December.
People still worry whether the double-digit decrease in export growth in December indicates it will be even harder for China to restore its exports in 2009, as China’s processing trade is highly dependent on imported raw materials and intermediate products.
US Department of Commerce figures show America’s trade deficit with China dropped from $27.96 billion in October to $23.06 billion in December, the lowest in the past five months. And exports to the US continue to drop.
Merrill Lynch Hong Kong economist Lu Ting believes export growth will worsen in the coming two months but will not be too bad as China’s exporting is less fragile than, say, Taiwan’s or Korea’s, as many of its exported products are for everyday use with low value-added. Lu Ting thinks that, since consumers need cheaper Chinese goods, China’s export growth won’t drop under –10%.
Gao Hucheng, Vice-Minister of Commerce, recently said that Chinese enterprises still enjoy obvious advantages in matching facilities and labor costs. Although many exported goods are mid- and low-end, Chinese products of good quality and low price are more competitive.
Still, export companies clamor for government support. A Dongguan-based company director told China Business News that due to the lack of fixed assets, private processing trade companies find bank loans almost impossible to arrange. He hoped the government would launch more supportive polices to help them expand into emerging markets and create their own brands.
But the government has already launched policies to support the export sector, and tax rebate ratios for many exported goods have been lifted to historical highs. The RMB exchange rate is also stable now. There is little room left for further policy adjustment. China’s exporters can look for improvement only from a change in the external environment.
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