Exporters make up with global economic slowdown
As the global economic slowdown and decreasing demand in main international markets, international trade in China is lessening gradually.
The country may bear more uncertainties in export and import business because of the worsening situation in the international market.
In the first eight months of the year, China’s exports increased to $937.7 billion by 22.4 percent and 3.3 percent less than last year. Imports were up to 785.7 billion by 30 percent, 10.4 percent than 2007.
Owing to the growth in exports decreasing while imports were increasing, the country’s trade surplus decreased to $152 billion, $10 billion less than the year 2007.
At the same time, China’s exports to U.S.A. just increased by 10.6 percent, dropping 6.1 percent from a year earlier, while shipments to Europe and Iraq increased 26.3 percent and 15.6 percent, down 5 percent and 3.9 percent year-on-year respectively.
China’s export growth has been slowed by weakening demand in major markets such as the US because the global economic problems are continuing.
According to estimation, every 1 percent decline in US GDP would lead to a 4.75 percent drop in China’s export growth rate.
Based on the procurement managers’ index (PMI) declared by the China Federation of Logistics and Purchasing, the sub-index for new export orders was 48.4 points in September, dropping 2.3 points from a month earlier, while the purchasing sub-index plunged to 44.7 points, the first time it fell below 50 since 2006.
All the above points showed that foreign demand was declining and companies depend on exports were enduring the force of foreign imports.
Since the latter half of 2007, exporters have shown their discretion in accepting foreign orders as RMB has continued to appreciate. The value of RMB appreciated more than 6 percent in 2007.
Lots of export enterprises changed long-term orders into short-term ones, and large orders into smaller ones to avoid the risk of exchange rate fluctuations.
Exporters’ production costs were increased because of global inflationary pressures which pushing up the price of raw materials on the international market.
In recent years, the price of primary products such as crude oil, coal, steel and agricultural products have risen rapidly on both the international and domestic markets.
In the first eight months of this year, the cost of China’s imported iron ore increased 77.9 percent, crude oil was up 71.2 percent, refined oil rose 91.7 percent, coal jumped 64.9 percent, and soybeans jumped 79.2 percent.
Additionally, the markup of manufactured products’ prices fell behind that of primary products because of keen competition and weakening demand on the international market.
Export-oriented enterprises’ burdens were added by other factors like increased labor costs and environmental protection expenditure.
These elements forced a slowdown in China’s foreign trade, with its growth rate expected to linger between 15 and 20 percent this year.
From 2009, the pace of growth in overall exports and imports may have slowed down largely, with the growth rate falling below 15 percent and the trade surplus remaining at $200 billion.
Coping with the situation
A number of measures should be taken to stimulate overseas demand to deal with the worsening situation in foreign trade.
First, the government should strengthen its supervision of key export products and help exporters deal with their lack of current capital and prevent risks caused by exchange rate fluctuations.
Second, the pace of RMB’s appreciation should be reduced to maintain export growth.
Putting a lid on the value of RMB or even making it slightly depreciate against the US dollar would help exporters restore their confidence.
Third, the destination of exported products must be diversified.
Increased exports to emerging markets such as the Middle East, Russia and Latin America may help to lessen the serious effect of declining exports to developed countries.
Fourth, transferring labor from exporters to other sectors slowly would relieve the heavy burden on domestic employment caused by the slowing growth of export business.
Finally, it is vital to better the quality and added value of exported products and promote export-oriented industry’s transformation from being labor-intensive to a more capital- and technology-intensive structure.
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