Surplus growth expected to slow

Last year wasn't easy for Chinese exporters, faced with an appreciating renminbi, tighter domestic policies and rising labor and material costs.

But the country's exports still surpassed imports by $262.2 billion last year. The surplus was up 47.7 percent from the previous year, according to the General Administration of Customs.

Exports reached $1.22 trillion last year, up 25.7 percent from 2006, while imports hit $955.8 billion, up 20.8 percent.

At this year's national commerce conference in Beijing, the ministry did not highlight "narrowing the trade surplus" as it did in 2007.

Experts predict China's trade surplus growth will slow this year, as exports could face "overlapping negative elements", but the surplus is set to stay high.

The government delivered the first blow to exports last year when it introduced measures to curb the growing surplus, such as scrapping tax rebates on high-polluting exports and imposing tariffs. These measures will continue to hit exporters this year, and analysts believe the gap between exports and imports will gradually narrow.

The measures' effects were already seen late last year. The country's soaring trade surplus eased in the fourth quarter, with imports catching up and exports slowing, the General Administration of Customs said.

"As a result of policy adjustment, exports in sectors like steel and textiles are expected to drop markedly," said Zhang Yansheng, director of the International Economic Research Institute affiliated to the National Development and Reform Commission.

He predicted China's net exports of crude steel would decline to 36 million tons this year from 53.1 million tons in 2007.

Price increases in labor and materials - such as oil, steel and plastic - reduced many exporters' profit margins last year, in particular those specializing in labor-intensive industries.

Reports said labor costs in China have increased to 77 US cents per hour, compared to 35 US cents in Vietnam.

Meanwhile, some experts said a possible recession in the US this year could affect China's exports.

US demand for Chinese goods will slow, which is expected to have a negative impact on industries including furniture, electronic equipment, office supplies, textiles and footwear, according to Ha Jiming, China International Capital Corp Ltd chief economist. "The effects are likely to be seen in two to three quarters."

But some argued that a slowdown in the US would not hurt but stimulate China's exports to the nation.

"The slowdown in economic growth will reduce overall imports by the US but, at the same time, increase its demand for low-end and inexpensive goods," said Mei Xinyu, researcher at the Chinese Academy of International Trade and Economic Cooperation, a think tank affiliated to the commerce ministry. "So far, China's exports to the US largely focus on these price-competitive goods."

He said China's exports to the US are likely to increase, citing the fact that they have been growing steadily while the US economy has slowed since late 2000.

Despite the negative elements, analysts agreed that China's trade surplus is unlikely to fall significantly in 2008.

Citigroup economist Huang Yiping said China's exports should continue their strong growth as long as the US avoids a recession.

"We are not expecting the surplus to drop substantially," Huang said. "We are still expecting the overall trade surplus to rise a bit further" this year.

Analysts also reiterated that pursuit of a "soft landing" in terms of trade should be a government priority this year.

The commerce ministry will pursue "balanced development in foreign trade" this year, commerce minister Chen Deming said at the national commerce conference in Beijing in January.

Chen said imports of "advanced technology and equipment, energy-saving and environment-friendly equipment, key parts as well as important materials" will continue to be encouraged.

The government will also organize buying missions and exhibitions for importers, Chen said.

He added that the government will facilitate imports of certain goods and reduce restrictions to further open the market.

The government will also try to improve the structure of exports by enhancing quality and value-added products.

At the same time, it will continue to curb exports of polluting and resource-intensive products.

The nation is also putting more emphasis on service trade. According to Chen, China is expected to boost exports in tourism, transport, construction, finance, insurance and accounting.

(China Daily 02/27/2008 page15)