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World trade faces downside risks (2)

(People's Daily Online)

08:13, August 14, 2012

Pushing regional trade in Asia forward

The economists are not optimistic about when the global trade can resurge. Quan Dejian believes that Asian economy will continue to slow down in the second half of 2012, but begin rebounding from the fourth quarter of 2012 to the first quarter of 2013. The condition is similar in the United States but will be lasted longer in Europe. As a whole, the global trade will still maintain a slow growth in 2013.

Gu Xingyang said that the future international trade cannot always depend on Europe, the United States and Japan. The trade volume of developing countries especially emerging-market countries will increase. According to the World Bank, the developing countries have contributed over 50 percent to the global trade growth since 2009 and their GDP growth rate will twice than the developed countries in 2012. Therefore, the trade between developing countries will grow into the engine of global trade growth.

In order to promote the regional trade, the Asian Development Bank (ADB) had authorized renminbi and Indian rupee as the currencies of settlement on July 17. The ADB said that currently many countries are short of U.S. dollar and the authorization of this time will encourage the circulation of regional currencies and promote the Asian trade. The statistics of ADB show that currently more than 90 percent of foreign trade in Asia is settled by U.S. dollar, but the proportion will reduce in the next few years. The regional trade of Asia will account for at least 50 percent of the Asian countries' total foreign trade in the future 10 years.

Comments from Zhang Monan, an associate research fellow with the Economic Forecasting Department of the State Information Center:

Influenced by the sustained deterioration of European credit crisis and simultaneous deceleration of global economic growth, the global trade will show a trend of further slowing down in 2012. The European credit crisis has exerted an influence to the global demand side and even impacted the export-oriented economy of Asia through trade, investment and financing channels. The relevant data show that Asia has obviously reduced its exports to Europe and the United States in the past 10 years, but greatly increased regional trade, forming an Asian supply chain centered in China. However, after deep analysis, we found that 60 percent to 65 percent of Asian trade volume was achieved through the intermediate product trade, namely produced in such regions as South Korea and Taiwan, assembled in Chinese Mainland and then sold to the West. As the European Union is the largest export market of China, which accounted for 20 percent of China's total exports, the European credit crisis first led to the slowdown of China's economic growth in the Asian supply chain centered in China, then spread to more developing countries of Asia and at last formed a pattern of simultaneous deceleration of global demand side (the Europe and the United States) and supply side (Asia).

The future trend of global trade is not so optimistic. The Baltic Dry Index, leading indicator of global trade, has accumulatively down to about 52 percent since the beginning of 2012. With the influence of sluggish market demand and adjustment of supply chain, the downward tendency of the global trade growth rate will hardly be changed in the second half of 2012.

Read the Chinese version at: 全球贸易面临下行风险, Source: People's Daily

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