Analysts forecast slowdown of trade growth

10:14, August 11, 2010      

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China's exports hit a record high in June, and the momentum slowed but continued in July. Analysts pointed out that monthly exports may not continue to set new records.

They believe the growth rate of both exports and imports will decline in the coming months, while trade surplus may fluctuate around normal level.

Li Huiyong, a macro-economic analyst with Shanghai-based Shenyinwanguo Securities said that booming new orders earlier this year was one reason for the higher-than-expected export data.

Current high growth reflects the effect of earlier orders, he said, adding the government's announcement that it would cancel tax rebates for more than 400 products was another reason.

"The exporters wanted to seize the last chance," Li said.

Most analysts said that exports may slowdown in the future.

Lu Zhiming, a researcher with the Bank of Communications, said that because emerging economies are raising interest rates and taking austerity measures coupled with the fact that developed countries are experiencing a weak rebound, demand for products exported from China will decline.

"Higher pressure for wage adjustment for laborers and larger fluctuations of yuan exchange rate are likely to swallow exporters' profits," Lu said.

The United States' purchase manager index (PMI), which is regarded as a leading index for China's exports, has been going down for three consecutive months since May, indicating that China's exports may not hit a new high in the coming months.

In contrast with rapid growing exports, China's imports increased only 22.7 percent year on year in July.

Slower fixed-asset investment growth and the government's strategy to eliminate out-dated production capacity are believed to be the reasons for smaller demand for resources and raw materials.

In July, import values of primary plastics, steel and crude oil all declined.

Although both China's imports and exports are facing pressure, its trade surplus will continue to fluctuate around normal level because China is still a global manufacturing center. The emerging markets in Asia rebound faster and the world commodity market is stabilizing, said Lu Zhiming.

"Trade surplus is unlike to see a significant plunge in the short-term," he added.

By People's Daily Online


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