China's foreign trade growing robustly

Editor's note: The Report on China's Foreign Trade Situation (autumn edition) was jointly released by the Department of Planning and Finance of Ministry of Commerce and the Chinese Academy of International Trade and Economic Co-operation last week. It analyzes the nation's trade figures from January to September, and forecasts the full year's performance. It also predicts next year's economic situation.

With favourable economic climate at home and abroad, China's foreign trade saw the robust growth last year.

Trade volume in the first nine months of this year has risen by 36.7 per cent to reach US$828.5 billion, measuring roughly last year's total, reported China Daily on Friday.

Exports came to US$416.2 billion, an increase of 35.3 per cent year-on-year, while imports jumped by 38.2 per cent to US$412.3 billion resulting in a trade surplus of US$3.9 billion.

China's foreign trade boasts the following features:

High growth rate
Except for January's 18 per cent increase, other monthly growth rates were all above 27 per cent. Trade volume reached a record US$106.6 billion from January to September.

With the central government's macroeconomic measures gradually put into place, domestic investment cooled to some degree and led to a decline in imports.

In September, China's trade figure ran into the black after five consecutive monthly surpluses since May rectified the US$11 billion deficit of the first four months.

Trade composition
Exports of machinery and electronic products and high-tech products increased by 44 per cent and 54.3 per cent, respectively.

Among them, notebook computers, mobile phones, and liquid crystal displays enjoyed a surge of more than 100 per cent.

Exports of metal and motorcycles increased by 118 per cent and 50.9 per cent, respectively.

China's traditional mass commodities such as textiles, apparel, furniture, cases and boxes retained brisk growth rates from January to September, coming in at 26.4 per cent, 19.4 per cent, 40 per cent and 23.2 per cent.

Imports of needed resources saw a steep surge.

China imported 150 million tons of iron ore, 90.31 million tons of crude oil and 27.8 million tons of refined oil in the first nine months, reflecting an increase of 36.6 per cent, 34.4 per cent and 28.6 per cent year-on-year, respectively.

However, with macroeconomic controls taking effect, imports of some goods slowed down from the second quarter.

Commodity price hikes
Big price rises have been seen in both imports and exports.

Prices of imported crude oil, refined oil, iron ore, copper and steel were up 20.2 per cent, 12.6 per cent, 107.9 per cent, 40.8 per cent and 25.3 per cent year-on-year, respectively.

Imported grain, soy beans and edible oil also saw price jumps by 7.2 per cent, 46.5 per cent and 19.4 per cent, respectively.

Among exports, prices of coke, coal and steel were 169.8 per cent, 42.6 per cent and 30.6 per cent higher than the same period of last year.

Processing trade
Processing trade grew at a brisk pace, chalking up a trade volume of US$387.9 billion in the first nine months or a year-on-year increase of 36.9 per cent.

The growth was 2.9 percentage points higher than that of the last year.

By contrast, the increase in the general trade volume dropped 5.6 per cent to 33.8 per cent, standing at US$358.6 billion by value.

Traders' ownership
Foreign-invested and private companies are the major forces in driving volume higher.

Foreign-invested companies notched up trade volume of US$472.9 billion, representing a yearly increase of 43 per cent.

Private businesses gained a 68.7 per cent increase to US$114.5 billion.

Trading partners
Trade growth with the Chinese mainland's major trading partners was above 26 per cent.

Among them, South Korea, Australia and Canada saw increases of 46.7 per cent, 50.3 per cent and 56.2 per cent in trade here.

Trade volume with the European Union, the United States and Japan accounted for 44.9 per cent of the total, down 1.5 per cent compared with the same period of 2003.

The EU has become China's largest trading partner after its latest enlargement in May.

The United States moved up to become China's second largest trading partner, with Japan coming in a close third.

The United States is still China's largest exporting destination, while Japan is China's biggest importing source.

Regional performance
The Yangtze River Delta notched up trade volume of US$301 billion, accounting for 36.3 per cent of the nation's total. It was up 2.5 per cent compared with the proportion last year.

Jiangsu, Shanghai and Zhejiang respectively saw a trade volume of US$121.4 billion, US$117.8 billion and US$61.7 billion, up 54.9 per cent, 45.6 per cent and 39 per cent year-on-year.

South China's Guangdong Province was still the largest trading province in China, which had US$253.7 billion in trade volume in the first nine months.

Central and western China's trade enjoyed high growth as well.

A total of 12 provinces and municipalities there witnessed growth higher than the nation's average.

Among them, Shanxi, Guizhou, Qinghai and Chongqing realized growth rate exceeding 50 per cent.

Reasons behind the growth can be attributed to the following:

Macro control measures
The central government put in place a series of macro control measures this year, rectifying unstable and unhealthy elements in the national economy.

That ensured the fast and sound development of the nation's foreign trade.

Soaring economy
The first nine months of the year witnessed a gross domestic product growth of 9.5 per cent and fixed-asset investment increase of 27.7 per cent. The high growth gave a rise to the demand of imports of energy products, raw materials and machinery and equipment.

World economy
The recovering global economy quickened the pace of cross-border investment and international trade.

The US economy was up 4.5 per cent and 2.8 per cent in the first and second quarters, respectively. The Euro zone saw an increase of 0.4 per cent, its largest rise in the past three years. Russia, India and Singapore notched up GDP growth of more than 7 per cent.

The World Trade Organization predicted that the international trade will rise by 8.5 per cent.

The US Conference on Trade and Development forecast that the global foreign direct investments will grow 10 per cent this year.

In addition, China lured foreign investment of US$48.7 billion in the first nine months, giving a boost to the foreign trade.

Policy adjustments
The newly-launched export tax rebate mechanism solved the arrears. By September, export tax rebates amounted to US$335.1 billion yuan (US$40.5 billion), including 200 billion yuan (US$24.2 billion) in overdue rebates.

Since July 1, trading rights could be obtained through registration rather than licensing, which activated private and foreign-funded joint ventures.

National and local trade promotion policies were improved.

And China actively participated in regional economic co-operation, bringing with it an improved trading environment.

In conclusion, China's foreign trade volume will increase by some 30 per cent to US$1.1 trillion this year, which is likely to rank the country as the third largest trading power of the world.

Prospects for 2005
Basically, the domestic and international climates will continue to be favourable for China's foreign trade, however, they will likely not be as good as in 2004.

World's economy growth to slow
It is predicted that the world's economic growth rate will slow down compared with 2004 due to a combination of factors such as hovering oil prices, global inflation pressure, US interest rate hikes, unbalanced development and weak domestic demand in the Euro zone, and a likely slow down in some Asian nations and regions.

According to a forecast by the International Monetary Fund, global economic growth in 2005 will drop to 4.3 per cent from this year's 5 per cent.

In general, however, a 4 per cent growth will still offer ample room for the development of China's foreign trade.

Foreign investment to China
In the first half of 2004, the cross-border merger and acquisition capital, an indicator that foresees the scale of multinational corporations' cross-border investment, increased 3 per cent, the first rise since 2001.

It is predicted that multinational investment will grow to be active in 2005, and developed countries will continue to pour their money into developing ones.

This will be conducive for China to absorb overseas funds and improve its industrial structure and push up the trade.

Chinese economy to grow
The Chinese economy will continue develop quickly in 2005.

Macroeconomic adjustments that were put in place in April have laid a solid ground for the economic growth next year.

On the other side of the coin, some negative factors will affect China's trade.

Unstable global economy
High oil prices, inflation pressures and fiscal imbalances in the world's major economies will take a dent in the global economy. And regional tensions and terrorism may also affect the international economy.

Rising trade frictions
China has faced an increasing number of trade friction.

In the first nine months of the year, a total of 13 nations and regions launched 46 anti-dumping, anti-subsidy and safeguard investigations, involving US$1.11 billion.

Diversified technical barriers were launched against China. Among them, labour standard issues have become a cause of trade disputes.

Judging from the current trend, international trade protectionism will be more serious in 2005. And Chinese exports will face more limits, especially after global quotas of textile and apparel are phased out.

Problems in tax rebate mechanisms
Updated export tax rebate mechanisms have played a big role in promoting trade in 2004. However, the pressure for local governments to shoulder parts of the rebates will be prominent in 2005.

Some local governments in central and western China cannot pay the rebates on time due to poor fiscal capacities.

And in some areas, local governments do not encourage cross-regional purchases and exports and put restrictions on the establishment of circulation firms.

In addition, price hikes of energy and raw materials, weak supplies of coal, power and oil transportation, and a large base will make it harder for trade growth to be maintained at a blistering pace in 2005.

China will witness a 15 per cent increase in its foreign trade in 2005.

Source: China Daily

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