Export growth tipped to stay on even keel

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 surplus was up 47.7 percent from the previous year, according to Customs.

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

This year, the country is expected to maintain steady export growth despite a US slowdown, Minister of Commerce Chen Deming said.

His remarks came after Customs figures were released showing the monthly trade surplus shrank to $8.56 billion in February - roughly a third of the level in the same month last year.

Chen attributed the decline in exports in the last two months to the Spring Festival holiday, during which Chinese factories shut down.

"Hit by the subprime mortgage crisis, the US economy has slowed down and the country's consumption expenditure decreased," he said.

China's exports to the United States increased only 0.4 percent in the first two months from a year ago, compared with the 14 percent growth rate in the same period last year.

Chen said government moves last year to curb exports of resource-intensive and high-polluting products are beginning to show.

As a result of these measures - such as lowering export tax rebates and restricting processing trade - exports of crude oil and billet were nearly zero last month, while steel declined to 3.11 million tons from 5.64 million tons in January.

The appreciating yuan also contributed to the export decline. The yuan broke the 7 benchmark against the US dollar on April 10.

It already appreciated by 4.3 percent so far this year, compared to an annual rise of 6.9 percent last year.

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.

They believe measures to curb the growing surplus will continue to hit exporters this year, and 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, Customs said.

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

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

Higher costs for labor and materials - such as oil, steel and plastics - cut into exporters' profit margins last year, in particular those in labor-intensive industries.

Labor costs in China are reported to have increased to 77 US cents per hour, compared to 35 US cents in Vietnam.

Meanwhile, some experts said a possible US recession 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," Mei Xinyu, a researcher at the Chinese Academy of International Trade and Economic Cooperation, a think tank affiliated to the commerce ministry, said. "So far, China's exports to the US largely focus on these price-competitive goods."

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

Despite the negative factors, 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 still expecting the overall trade surplus to rise a bit further," he said.

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

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

Chen said imports of "advanced technology, energy-saving and environment-friendly equipment" will continue to be encouraged.

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

He said 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.

(China Daily 04/15/2008 page37)