Negative growth of trade surplus in 2009 would occur for the first time

At the forum on China's macroeconomy held by the Renmin University of China, Analysis and Forecast on China's Macroeconomy (2008-2009) – In-depth Downslide of China's Macroeconomy was released, which was led by the Institute of Economics of Renmin University of China. The report pointed out that the growth rates of both import and export were further decreased, wherein that of export dramatically let down. It is estimated that the growth rate of export would drop 6.9 percentage points and that of import would drop 6.1 percentage points. Thus, the trade surplus in 2009 would reduce USD 14.6 billion, the growth rate of which would be -5.5% as compared with 2008. For this judgment, related specialists and scholars expressed similar opinions.
 

"Shock of external demands" would shrink export by 5.1%

As pointed out by Professor Liu Yuanchun at the Institute of Economics from the Renmin University of China, the adjustment of Chinese economy began from the later stage of 2007 rather than the second half year of 2008. One of the core indices is that the demands from outside was reversed.
 

As looking back upon 2008, we could see that the export growth rebounded at the third quarter, while the aggregative indicators such as GDP, public finance and power output were all lowered. The trade surplus was continuously increased. However, the external environment for China's macro-economy will be further deteriorated due to the deeply drop of the world economy in 2009. The pressure on China's export will be changed from cost-related pressure in 2007-2008 to the demand-related pressure in 2009, so that the decline of China's export growth will be more than that of import growth. In this case, the negative growth of the trade surplus will occur for the past 5 years.
 

Liu Yuanchun indicated that according to the analysis on the second quarter of 2008, the world economy was facing the serious periodic drop rather than the short-run adjustment. The scope and periodic time of the global economy adjustment would go beyond the anticipation due to the "Progressively Decrease of the New Technique Spreading", "Disappearance of the Extra Dividend in the World" and "Reversion of the Global Unbalance". The above studies in this report were verified by the recently predication from 14 international bodies such as IMF, WB, OECD, ECB and UN, etc. The unexpected drop of global economy would seriously impact China's export. Thus, the demand from outside would be much lower as compared with that in 2008.
 

The report points out the core reasons thereof are as below:

Firstly, China's export earnings are provided with high flexibility, which is not as generally expected. The export is sensitive to the growth of national income in the major trading countries. The drop of economy by a wide margin in the Europe, United States and Japan at the same time will deeply affect China's export. As indicated by this report, China's elasticity for export earnings to the USA and Europe is more than 1, accounting for 7.18% and 13% respectively, this illustrates that in 2009, economic recession of the Europe and USA will decrease 5.1% of China's export.

Secondly, different with that in 2008, China's export has to face the impact from the outside demand rather than the internal cost in 2009.

Since 2007, decline of China's export growth was not arising from the financial crisis in the USA because during this period, the import demand of USA did not slow down substantially. In fact, decrease of China's export to the USA was due to the cost increase of various export products, so as to lower the competitiveness, while the financial crisis in 2009 will seriously reduce the import demand from the USA, Europe and Japan. Such demand-related impact is hard to be solved through such policies as revaluation of RMB, increase of the export rebate and export subsidy to stimulate the suppliers. Therefore, in terms of gross amount, the recession of world economy in 2009 will create more serious impact on China's export as compared with that in 2008.

Thirdly, the deeply recession of the global economy is actually caused by the off-balance mode of the economy. The collapse of the over-consumption pattern in the USA means the collapse of over-deposit and export mode in China to the large extent. China's export will slow down during the Sino-US trading in terms of the structure and gross amount. As shown by the report, for the past decade, China's economic cycle was gradually coupling with that of the US. Therefore, In terms of the cycle of unbalanced control, the adjustment for the trade deficit of US and trade surplus of China was just underway.
 

"The predication on the negative growth of the trade surplus for the first time in the next year may occur, but at all we discuss the 'surplus' rather than the 'trade deficit', said by Fan Jianping, the chief economist in the State Information Center.
 

The export rebate policy is still promising.

The report points out that due to the special mode of China's economic growth, both the growth of national economy and employment stabilization depend on the export growth by a long chalk. So, export is still the major power to drive the economic growth. In this case, the government shall launch the relevant policies to boost the stable growth of export, including the stabilization of RMB rate, so as to avoid the revaluation of RMB to other major currencies. In the short term, the government procurement could be increased to keep the operation of the export oriented enterprises. Also, in the long run, the export enterprises' abilities to make technical innovation shall be further improved, so that the technical contents of the export products and the varieties thereof could be continuously increased.
 

Particularly, the export rebate rate shall be continuously increased and the coverage area thereof shall be added, so as to lower the export cost of the enterprises. Fan Jianping indicated that recently, the export rebate rate had been adjusted and covered many industries. In the future, more industries would be included in the scope hereof. Also, the export rebate rate for some industries would return to 17%.
 

China's large population determines her comparative advantage in the production of the labor intensive products, so that the export industry covers a lot of small and medium-sized labor intensive manufacturers. Also, the problems such as low added value, high energy-consuming, polluted environment and trade disputes are raised. Due to the above reasons, as the sufficient foreign exchange reserves were available, the Chinese government narrowed the scope of the export rebate and lowered the export rebate rate for certain products in September, 2006, so as to guide the transfer of the export structure to the high end products.
 

However, the adjustment of export rebate in September, 2006 increased the export cost of the labor intensive enterprises which failed to shift to the high-end industry. In this case, as combined with other negative impact, a lot of labor intensive enterprises were difficult to exist. At the second half year of 2008, though certain export rebate rates were increased, the scope thereof should be still extended and the adjustment shall be enhanced, so that the export cost could be lowered in the near future.
 

But, different viewpoints were also raised during the conference. Professor Li Daokui, the dean of financial institute from Tsinghua University pointed out that the foreign exchange rate shall be adjusted, which was more reliable as compared with the adjustment of the export rebate rate. After Olympic Games, the exchange rate between RMB and USD was unchanged. USD was raised by 20%, so was for RMB. It was good if RMB was devaluated appropriately. He thought the devaluation was more important than adjustment of the export rebate. Increase of the export rebate rate by 1% was actually transferred to the foreign countries, while the change of exchange rate was better. Therefore, as indicated by him, the moderate devaluation of RMB would create favorable conditions for the export.

 

(Source: Market News)

(Edited by Zhang Shuo)

 (The substation which released the first issuance: Hanzhou Special substation)