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Warning of no short term fixes to China's trade decline

DECLINES in China's trade may be hard to reverse in the short term because of a delayed global economic recovery, changes in foreign consumer habits and rising trade protectionism, Chinese Vice Minister of Commerce Fu Ziying said today.

"There has been no big change in the major three factors which pose a huge negative influence on China's trade, so it is hard to say whether China's imports and exports can rebound in the second half," Fu said at a conference in Beijing.

Although major powerhouses including the United States, Japan and members of European Union have shown signs of economic improvement, uncertainties still pervaded, Chen said.

The gloomy global economic meltdown made many consumers in the West limit their spending. In the US, people's deposit ratio grew to 6.9 percent from nearly zero. To some extent, such changes affected China's exports, Chen said.

Also, trade protectionism has been growing ?the US-China trade dispute on tires reflected such a trend, he said.

"The accusation by the US is groundless. Chinese tire exports to the US tripled from 2004 to 2007. During the same period, profit of American tire manufacturers also doubled. That is to say, the growth of Chinese tire exports did not do any concrete harm to the US counterparts," Chen said.

"It is the global financial crisis which leads to the recession in the US tire industry, not Chinese exports. The dispute, if not properly settled, will harm interests of both countries."

The US has threatened to impose a 55 percent hike in tariff on Chinese tire exports and a final decision by the Obama Administration is to be made next month.

China's trade last month fell 19.4 percent from a year earlier to US$200.2 billion. Exports dropped 23 percent and imports decreased 14.9 percent.

Trade still declined in July after the government carried out measures such as providing export tax rebates, cutting administrative fees and extending tax payment time-limits.

In the first seven months, China's trade slumped 22.7 percent on an annual basis to US$1.14 trillion yuan. Chen expected the total amount of trade to hold at about US$2 trillion this year.

Sherman Chan, an economist at Moody', said that by being the world's manufacturing hub, China was highly vulnerable to the global recession and an expected annual export contraction seemed inevitable.

"However, recent data has shown signs of optimism, with the sub-index of new export orders under the Purchasing Managers Index returning to expansionary territory," Chan said.

To sustain the signs of recovery, Chen said the government would continue to carry out supportive measures for exporters in the second half, reducing their financial burden and helping them expand distribution networks.

Also, the government would encourage the upgrade of exports to more value-added products in high-tech, clean energy and modern service industries.

To cope with rising trade protectionism, China will strengthen talks with countries to seek win-win solutions. It will also accelerate the establishment of free trade agreements and push forward the Doha Round negotiation under the World Trade Organization, Chen said.


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