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Ministry of Commerce: China's export situation to remain bleak for some time
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13:39, May 14, 2009

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Although there have been some positive changes to China's current economic situation, leading indicators show that China's export condition will remain bleak for some time, said an official at the Department of Foreign Trade in the Ministry of Commerce recently.

As he pointed out in one of a series of comments on the current business situation published on the Ministry of Commerce's official website, at present the number of already-placed orders has dropped for most exporters, and overseas buyers are opting for short-term, small contracts instead of long-term, large orders. At the 105th China Import and Export Fair, the number of export deals made dropped by 16.9 percent compared with the 104th. In the first quarter of 2009, processing trade imports fell by 35.7 percent, aggregate contracted foreign capital in the entire country dropped by 37.2 percent, and the amount of foreign capital utilized dropped by 20.6 percent. All these figures indicate that there will be a lack of power and stamina in the growth of processing trade and exports of foreign-funded enterprises for some time.

The official also pointed out that China's current foreign trade situation remains complicated and grim. Firstly, external demand has shrunk and international trade has dropped. According to the latest forecast by the International Monetary Fund (IMF), the global economy will shrink by 1.3 percent in 2009, the first recession since World War II. The latest prediction by the WTO states that the volume of global trade will drop by 9 percent in 2009, the largest drop since World War II.

Secondly, conditions for trade financing have deteriorated and risks have increased. At present, worldwide trade financing gap stands as high as 100-300 billion USD. Importers and exporters in many countries have been forced to cut back their businesses or go bankrupt because of funding shortages. The situation has seriously affected the normal operation of international trade. At the same time, Chinese export enterprises are facing escalated risks.

Thirdly, trade protectionism has started to surface, making it harder to develop new markets. The financial crisis has led to a slowdown in the global economy. Some countries and regions have successively adopted a number of trade protectionism measures such as raising import tariffs, or prohibiting or restricting imports, which has resulted in a period of high trade friction among countries.

Fourthly, a number of countries are competing against one another to devalue their currency in order to weaken the price competitiveness of Chinese exports. In the first quarter of 2009, South Korea, Indonesia, Malaysia and Mexico all devalued their currencies against the US dollar by 9.6 percent, 5.4 percent, 5.3 percent and 2.7 percent respectively, while the exchange rate of renminbi to the US dollar essentially remained unchanged, creating an exchange rate appreciation of 2.58 percent. This has weakened the price competitiveness of China's exports in international markets. 

By People's Daily Online

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