Foreign trade to survive tough times
Downturn in Europe means government will monitor figures and fine-tune fiscal policies to ensure balanced exports and imports, Ding Qingfen reports.
China's foreign trade in the first two months of 2012 expanded 7 percent yearon-year, and the nation's 10 percent growth target for imports and exports this year is "achievable", Minister of Commerce Chen Deming said on March 7.
Reflecting shrinking global demand and the week-long Spring Festival holiday, exports fell 0.5 percent in January.
"China's exports and imports increased by 7 percent year-on-year during the January-February period, with export growth remaining at 7 percent and imports a little higher," said Chen at the annual meeting of the National People's Congress in Beijing.
Nomura Economics Research said in a note that "our estimate shows exports grew by 18.7 percent year-on year in February and imports by 37.8 percent, leaving the trade deficit at $28 billion".
Chen warned that domestic and global business conditions for Chinese manufacturers are worsening, "with the financial crisis still deepening and spreading, and the European debt crisis having crimped consumption in the region".
But "the target of 10 percent for the whole year's foreign trade growth", set in Premier Wen Jiabao's Government Work Report, could be achieved, said Chen.
Conditions in debt-stricken Europe were affecting China's foreign shipments. "China's exports to the European Union witnessed a slight drop of 2 to 3 percent during the first two months of this year," said Chen.
In January, China's exports to the EU, the nation's largest foreign trade destination, fell 3.2 percent year on-year, according to the General Administration of Customs.
"The eurozone is experiencing unprecedented difficulties, and consumption is shrinking, but China's door is always open to Europe," Chen said.
"China has confidence that Europe and the eurozone can step outside the economic shadow, but this needs time."
China posted its largest trade deficit in the past two decades last month, while the nation's imports surged by 40 percent. Exports grew at half the rate of imports.
Economists say the spike in imports and the large trade deficit in February is an "individual case" and could be attributed to "seasonal factors". They predicted imports will moderate in the months ahead as China's economic growth slows.
They also said the gloomy outlook will probably lead to a "slower pace of gains in the Chinese currency and the easing of government policy".
According to the General Administration of Customs, China's imports rose 39.6 percent from a year earlier, after a 15.3 percent slump in January. Exports grew 18.4 percent year-on-year, with a drop of 0.5 percent.
This caused a trade deficit worth $31.5 billion in February, the largest since 1990.
Because the Chinese Lunar New Year fell in January this year, the year-on year growth rates for Chinese exports and imports were distorted, and combined figures for January-February "could better reflect the current situation", said Li Wei, an economist from Standard Chartered Shanghai.
In that period, China's foreign trade rose 7.3 percent to $533 billion, with imports increasing 7.7 percent and exports 6.9 percent. The first two months saw a trade deficit worth $4.25 billion.
In his government work report, Chinese Premier Wen Jiabao cut the economic forecast for this year to 7.5 percent, saying China's 2012 priorities are to stabilize economic growth and expand domestic consumption.
Wen also said China's foreign trade this year is expected to grow by 10 percent.
"The outlook is not positive," said Wang Tao, economist with UBS AG. China's export volume to the European Union is especially weak due to the debt woes, she said. "But the US market is a little better."
From January to February, China's exports to the EU dropped by 1.1 percent, pulled down by the crisis in Italy, where imports from China fell by 31.1 percent. But sales to the United States gained 12 percent.
Emerging markets helped Chinese exports. Sales to Russia and Brazil gained 10.3 and 10.9 percent, respectively.
But the scale of the deficit in January and February may soften accusations, especially from the US, that China supports its exports by keeping its currency artificially weak, said experts.
"By the end of the third quarter, we should see mild growth for China's exports and imports," said Li.
"This will slow down the pace of the yuan's appreciation. China could achieve a target of 10 percent growth in foreign trade this year, but the task will be arduous."
Wen said in the work report that the government will "carry out timely and appropriate anticipatory adjustments and fine-tuning" of fiscal and monetary policies.
People's Bank of China Governor Zhou Xiaochuan also said recently that China may "appropriately" widen the yuan's trading band "to better reflect market supply and demand".
About Chinese companies in Libya, Chen said: "The bad news is China's engineering projects in Libya were severely damaged during the political turmoil, civil war and foreign intervention, and Chinese companies incurred huge losses."
The ministry said China has engineering projects worth $17 billion in Libya. "China is negotiating with the Libyan government. We expect the Libyan government could compensate for (losses incurred by) these projects according to international practice and laws," it said.
Ministry officials recently led a business delegation to Libya to inspect market conditions.
"We expect to evaluate the current situation and security environment there, to see whether we could restart operations and business there," said Chen. "We are waiting until the situation is safe enough."
With regards to tripartite free trade areas, Chen said: "We hope that China, Japan and South Korea can open trilateral free trade agreement talks this May when the heads of the three sides meet."
"The three nations are very active in pushing forward the project."
When he delivered his annual government report on March 12, Wen said China will take steps to reach free trade agreements with other nations this year.
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