China is stabilizing the import and export to tackle the financial crisis

China is stabilizing the import and export to tackle the financial crisis

 

 

Nov 4, 2008 09: 38 

 

The global financial crisis triggered by the subprime mortgage crisis in the U.S. is sweeping the world, and the world economy is apparently slowing down. As a country with a foreign trade dependence of 60%, the Chinese economy is encountering huge challenges. It is imperative to stabilize the import and export growth, enhance the competitiveness of China and fight against this global financial crisis.

 

“Made in China” is impacted

 

Grim foreign trade

 

Gao Hucheng, the Vice Minister of Commerce, said in an interview that currently there are more uncertain factors in the international economic environment impacting the Chinese economy, especially the export; trade protectionism will be intensified in the global economic depression; trade frictions shall be aggravated as well.

 

In the 104^th Guangzhou Trade Fair known as “Foreign Trade Vane”, 140,000 overseas businessmen made procurement in the first two sessions, amounting 24.76 billion U.S. dollars. The turn volumes of mechanical and electrical products, furniture and toys all decreased, showing the inevitable impact of the financial crisis on the Chinese economy.

 

The Customs data proved this point. In the first three quarters this year, the export of China amounted to 1.0741 trillion U.S. dollars, representing an increase of 22.3%, which dropped by 4.8% than the corresponding period last year. Export to the U.S. dropped by 4.6% than the corresponding period in the last year; the export in Hong Kong where the intermediary trade predominates dropped by 12.7%; the growth rate of export to the EU in August and September also dropped from 27.1% to 22% and 20.8% respectively.

 

Besides, the growth rate of the export of labor-intensive products dropped significantly, among which, the export of apparel and toys in the first three quarters dropped by 21.2% and 16.3% than the corresponding period in the last year respectively.

 

Zhang Yansheng, the director of the International Business Research Institute of the National Development and Reform Commission, said: impacted by the financial crisis triggered by the subprime mortgage crisis in the U.S., the domestic consumption in the U.S. began to slide since May, and the demand for consumption was weakened; however, the impact on the export of China shall be shown in half a year; besides, due to factors such as the money squeeze in the U.S. dollars since September and October and hugely increasing default rate of overseas orders, it is estimated that the export of China at the end of this year and in the first half latter of the next year shall decrease significantly.

 

The foreign trade is basically ok.

 

The enterprises are “seeking opportunities in the crisis”

 

“In general, the foreign trade in China is basically ok. There are many favorable conditions and positive factors to enable a steady and fast growth of foreign trade”, said Gao Hucheng. He admitted that it was not easy for the Chinese foreign trade to remain a steady and fast growth in the financial crisis and complicated international trade context.

 

Meanwhile, the export composition as well as quality is being improved. According to the data provided by the Ministry of Commerce, the export of mechanical and electrical products grew by 24% in the first three quarters; the growth of the export of watercraft, auto and engineering machinery has been faster; the export volume of the products from “high-polluting and energy-intensive resource industries” has decreased, e.g., the export of maize decreased by 95.9%, billet decreased by 81%, and rolled steel decreased by 2.1%.

 

Experts pointed out that since 2006, the RMB was appreciated by 17.4% accumulatively, the labor cost has been rising continuously, the tax rebate rate of some goods were reduced, the demand in the international market had been weakened since this year, and the export enterprises in China are facing huge pressure. However, data show that the growth rate of export in the first three quarters remained to be 22.3% based on the total export volume of 1.2181 trillion U.S. dollars last year, which fully shows that the Chinese enterprises are more capable of coping with the changes in the external environment.

 

“Under the circumstance that the overseas market demand is low due to the financial crisis, only the making of special products through innovation can enable the success. The market will still be ours if we can hold on and make it, since no other countries in this world can produce such household appliances with high quality and low price in large quantities”, said Wu Kunqiang from Guangdong Vision Electrical Mfg. Co., Ltd.

 

For many exporting enterprises, the weakened overseas market demand resulted from the global economic depression is already a reality, and the cut of orders and reduced production scale will be the common problem for them in the future. Meanwhile, there is still huge demand for Chinese products in the world market. “holding-on” has become a precondition for the existence and development of the enterprises in the future.

 

Zhang Yansheng pointed out that the financial crisis is a crisis as well as opportunity for Chinese enterprises; to seek opportunities instead of waiting, improve the productivity of labor, enhance the added value of products, have innovation on the composition of products, and continual upgrading are the key for a successful overcoming of the crisis.

 

Active measures to cope with the risks

 

Maintaining a steady growth of the foreign trade

 

The slowing-down of the growth rate of export and the fall of the profits of some exporting enterprises have aroused the attention of the central government and related administrative bodies. A series of measures have been adopted targeting the risks and pressures endured by the export section and the changes of the international economic situation.

 

Recently the tax refund rate of some textile products, apparels, toys, furniture and mechanical and electrical products with high added value have been increased, which shall be implemented since Nov 1, 2008. Meanwhile, the government will further improve the foreign trade environment and adopt necessary measures in the administration of import and export, facilitating the clearance, taxing in import and export, and foreign exchange management to support the export of good enterprises and products, encourage the financial institutions to give more loans to small and medium enterprises, expand the financing channels of SMEs, and increase import of needful products.

 

According to Li Jian, a research fellow of the Foreign Trade Research Institute of the Ministry of Commerce, there is great potential in the emerging market and developing countries. The continual implementation of the strategy of multiple export markets and maintaining the steady growth in emerging markets including Brazil, India and ASEAN will offset the sliding export growth in the European and American market.

 

The statistics of the Ministry of Commerce show that our export to Brazil grew by 90.2%, to India grew by 43.1%, to the Republic of Korea grew by 41.8% and to ASEAN grew by 28.4% in the first three quarters.

 

According to Gao Hucheng, we should keep track of the changes both domestic and abroad closely, steer and support the enterprises to stabilize the import and export and fasten the pace of the structural readjustment, and create a sound environment for the export. The enterprises should fasten the pace of the structural readjustment, optimize the product composition, improve the grade and added value, enhance the internal governess, reduce operation cost, maintain the share in traditional market, explore the potential market in the world, and try their best to cushion the impact.