According to the statistics released by the Customs, the export growth in June dropped by 20.6 percent to $21.35 billion, compared with that of May which witnessed a growth of 28.1 percent. Experts attribute the slowdown to the shrinking demand caused by the global economic slowdown and the increasing pressure on Chinese manufacturers because of yuan appreciation and high raw material cost. Based on this, it is estimated the export slowdown may continue in the next half of the year, forcing the government to reconsider certain export-related policies.
Some insiders said that the declining export growth is attributable to the rising labor and raw material costs, and the government’s tightening policies implemented since last year. And the global economic slowdown is making the situation worse.
The custom figures also show that the trade between China and India is increasing the fastest among China’s major trading partners. The bilateral trade stands at $29 billion, up 69 percent. EU remains China’s largest trade partner, followed by the US. And the imports of primary goods increased fast, which many be caused by the increasing price of the commodities in the international market.
An analyst with HSBC, said that the figures should raise people’s expectations on favorable government policies for export sectors. For example, the textile industry has called for a rise in export tax rebate. And Chinese government has since last years lowered or even removed the export tax rebate of some productions to curb the trade surplus. But some sectors are struggling as a result of a global slowdown, yuan appreciation and rising operating costs, hampering exports anyway.
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China Economy
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With an increase of 5.1 percent compared with the end of December, China’s foreign debt rose to $ 393 billion by the end of March. According to the State Administration of Foreign Exchange (SAFE) such a phenomenon attributes to the growth in short-term debt, which indicates the risk of influx of speculative capital that expects yuan appreciation.
The SAFA said on Friday in a statement that the short-term accounts for 60.3 percent of the total foreign debt, amounting to $236.7 billion, with an increase of 88 percent, or $18.97 billion by the end of March. While the medium and long-term debt rose by $2.3 billion in the first quarter to $155.9 billion, making 39.7 percent of the total foreign debt.
Guo Tianyong, economist of the Central University of Finance and Economics explained “the increase in the proportion of the short-term borrowing may be related to the speculative hot money inflows,” “although the short-term borrowing look like normal debt, as it is included in the official statistics, the capital can be used for some speculative purposes”.
Guo also explained that official statistics show that China’s foreign currency lending has been rising in recent months, which is the main reason for the continual increase in short-term borrowing. Some banks, especially foreign ones, have borrowed from overseas to lend to domestic enterprises. “Some of the lending may be used for speculative purposes”.
As the yuan has kept appreciating, the speculative capital is estimated to flow into China in a accelerated pace, the total amount of which could be the same as China’s foreign exchange reserves.
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China Economy
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