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Expert: China to prepare for hard deals
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17:20, November 20, 2008

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Although China's trade figures look good so far, the country has to get adapted to the increasingly changing and challenging world market environment in the days to come before the world economy hit hard by the global financial turmoil can recover.

Prof. Zhao Zhongxiu, Dean of School of International Trade and Economics, Beijing-based University of International Business and Economics, gave that warning in an interview with People's Daily Online on Nov. 19.

China's imports and exports grow by 24.4 percent over the first ten months of the year, even higher than the growth rate in the same period of last year. The Ministry of Commerce predicted in its latest report that China's foreign trade would rise about 20 percent for the whole year of 2008.

Zhao believes that those figures just reflect the demand of six to three months ago. Lower figures will be seen in the next months, particularly in early next year following a spending frenzy for Christmas. Consumers getting thriftier amid the financial crisis will make the slack season bleaker for enterprises.

The risk of mounting protectionism and fiercer competition on the world market are the other two challenges that Chinese producers have to deal with. Zhao suggested that China improve its competitiveness on the world market on one hand and make full use of the rules in the international trade system and bilateral talks to solve trade disputes on the other.

Another strategy that China can adopt is to further diversify its markets. Zhao believes that emerging markets have the most potential to grow to be more important buyers and sellers to China. He argues that they are more complementary to China in terms of economy and closer economic and trade relations between China and those countries would be mutually beneficial.

"It's also time for China to reconsider its import strategy", said Zhao. Although China is a big buyer of many products on the world market, it does not have much say on pricing. The only way is to develop collective bargaining system on the international commodity market which is highly monopolized. The price of imported iron ore, for example, has nearly doubled the most in 2008 for Chinese steel producers.

Zhao also urged Chinese enterprises to do more "homework" before they decide to go global. There are many arguments about whether China should make more overseas investment in the financial crisis. Zhao thinks that Chinese investors should not expect to achieve that "over a night".
However, they should hold a more active attitude, said Zhao, toward that "long term strategy" by making some preparations, including contacting with potential sellers, establishing collaborations, extending their supply chains, etc.

The most important thing, he highlighted, is that Chinese enterprises interested in global market should improve their financial management level.

By People's Daily Online

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