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More Chinese businesses shift from exports to home market
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Exports, a driving force of the Chinese economy along with fixed-asset investment, have come to a turning point, as evident in the declined monthly growth rate in January, industry experts said.

China's trade surplus jumped 22.6 percent year-on-year to 19.49 billion U.S. dollars in January, according to the General Administration of Customs. However, the trade surplus declined in monthly growth rate for the third consecutive occasion. In addition, the surplus has been at least 20 billion U.S. dollars a month since last May.

Noticeably, imports grew 42 percent year on year to US$45.65 billion under the general trade mode in January. The year-on-year growth rate was 8.8 percentage points higher than that of exports. Imports via general trade exceeded 50 percent of the gross import values for the month, the first time ever in recent years. In January, China exported US$51.9 billion of goods, up 33.2 percent year on year.

"The slowdown in export growth in January is largely a result of weakening demand from abroad, a fallout from the U.S. subprime mortgage crisis, the appreciation of renminbi and, in some cases, China's decision to curb exports of certain items by cutting export rebates or imposing export taxes," said Li Yushi, Chinese Academy of International Trade and Economic Cooperation vice president.

Resembling their counterparts in the textile and garment sector, hosts of Chinese grain enterprises have also felt the chill and decided to turn their eyes away from European and American markets and focus back on the domestic market. This assuredly serves as a "cardinala ampoule" to ease ever-mounting inflation pressures in the country, industry experts said.

Chinese grain exporters made big profits last year. In the first 11 months, net cereal exports grew 320 percent, compared with the same period a year earlier. The impressive growth was largely a result of price increases on world markets, observers said. They said a decrease in grain yields worldwide caused by unfavorable weather and growing demand for cereals used for bio-fuel production conspired toward the continuous price rises. However, industry observers forecast the growth will slow this year.

Wenzhou Ouhai Xingda Flour Co. Ltd., a pillar enterprise in the cereal sector in the eastern Jiangsu Province, suspended exporting flour as it neared 2008, said Zhu Yihuai, manager of the business. Following on his heels were a list of major flour mills in the province that exported substantive amounts in 2007.

The suspension was stimulated by the promulgation of three policies meant to curb grain exports boosted by climbing international prices, and to stabilize domestic food prices.

On Dec. 20, the Ministry of Finance (MOF) decided to scrap export rebates for 84 agricultural products to discourage exports and to ensure the domestic supply of farm produce in the nation where food prices drove inflation to an 11-year high of 6.9 percent in November. The products included wheat, oat, maize, paddy, rice, broomcorn, soybean and their powdered byproducts.

Prior to the scrapping, export rebates for grain were 13 percent. The move would be conducive to regulating the import and export of grain, and the export growth would somehow slow, observers said.

One week later, to prevent the country from importing high international grain prices and to rein in surging domestic prices, the MOF said it would levy export taxes on wheat, corn, rice, soybeans and various processed grains in 2008. The export tax rates would range from 5 percent to 25 percent and affect 57 types of grain and grain products.

On Jan. 1, China started a temporary-quota policy on the export of wheat, corn and rice powder to guarantee an adequate domestic supply.

"Global staple food supply has been tightly balanced," said Liu Longheng, a Beijing University tax law professor. "China must give priority to feeding its 1.3 billion people. It is natural for the government to control grain exports. It is even likely to take further measures to harness exports of processed grain products."

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