Press briefing on foreign trade
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E-mail China.org.cn, May 20, 2014
Hu Kaihong:
Thank you. Now is the question session. You're kindly requested to tell your organizations before asking any questions.
Wen Wei Po (Hong Kong):
China's foreign trade and exports both decreased between January and April this year, according to customs data. What are the reasons behind this development? And how do you view the overall situation of foreign trade this year?
Zhang Ji:
The foreign trade situation is attracting a lot of attention, and we have noticed that our friends in the press have interpreted the figures from various perspectives. China's foreign trade faces a tough and complicated scenario this year, and downward pressure has intensified. The customs data shows the decreases from January to April on a yearly basis. The decreases, apart from those in the same period in 2009, are the first in the last ten years or so, and have thus attracted attention from various quarters. The unprecedentedly large trade with Hong Kong this time last year contributed to an elevated base figure for this year, but the decreases also reflected some underlying issues affecting China's foreign trade, such as waning overseas demand and declining traditional advantages. The reasons are complicated.
To be specific, the slump in trade with Hong Kong contributed greatly to the decreases. Trade between the mainland and Hong Kong enjoyed an unprecedented increase between last January and April. This year, trade with Hong Kong, calculated in US dollars, decreased by 31 percent and so did the exports to Hong Kong. The decreases reduced the overall growth rate of China's foreign trade and exports by 3.7 percentage points and 6.5 percentage points respectively. Regarding the types of trade, reduced trade in manufactured goods was largely responsible for curtailing the growth rate of China's foreign trade. Foreign trade and exports of processed goods over the past four months decreased 4 percent and 3.6 percent, respectively, and reduced the growth rate of both foreign trade and exports by 1.4 percentage points.
In terms of products, exports of integrated circuits, LCD panels, data processing equipment and components, as well as ships, witnessed considerable slumps of, respectively, 58 percent, 25 percent, 6 percent and 13.5 percent. These products reduced the growth rate of the nation's exports by 4.6 percentage points. When we examine foreign trade closely, we see some underlying factors are changing. While overseas demand has not fully recovered, China's foreign trade has begun to demonstrate the following symptoms -industrial outsourcing to China is slowing down and outsourcing to neighboring countries is growing as factor costs increase. Therefore, China will face an increasingly challenging foreign trade environment in the medium to long term, and this has been especially reflected in this year's figures.
Specifically, demand in the global market is waning; the economic recovery in developed nations continues to stumble; the emerging economies are slowing, and uncertainty in the global economy keeps increasing. Among the developed countries, the United States registered a zero increase in imports in January and February, and just 2 percent growth from January to March. EU imports fell by 2 percent from January to March. Among developing nations, emerging economies contributed 88 percent of China's export growth in 2013, but demand in these markets weakened this year and risks are still on the rise. China's exports to developing countries have slackened from double digit growth this time last year to -7.2 percent this year.
Second, international competition is intensifying. Developed countries are slowing down the transfer of industry to China. Europe and the U.S. are encouraging industries to return to their home bases and, as a result, China's manufacturing industry has seen a decreased growth rate in foreign investment. Last year, actually realized foreign investment decreased by 6.8 percent, alongside a reduction of 38.7 percent in overall foreign investment. These are signs that export growth will slow in the future. Moreover, China is stepping up its own industrial transfers and outsourcing of orders to other countries, especially in labor-intensive industries.
Third, costs have increased, while traditional advantages are weakening. I suppose this is familiar to all of you. The labor costs of exporting companies in China's coastal areas are two to three times those in India, Vietnam, and Cambodia.
Fourth, it is difficult and costly to achieve financing, especially for small and medium companies.
Fifth, industrial indexes are falling. The Baltic Dry Index decreased to 1021 this mid-May, down 51.7 percent from 2113 at the beginning of the year.
Sixth, trade disputes involving China occur frequently. Trade investigations involving China increased by 18 percent in 2013.
Seventh, geopolitical risks are rising significantly. In recent years, the volatile situation in some countries and regions has increased the risks to Chinese companies engaged in foreign trade. The uncertain external situation is increasingly impacting foreign trade, and Chinese companies need to pay attention to this.
In all, China's foreign trade is facing a complicated scenario this year. The overall 7.5 percent growth rate target laid out in the Government Work Report is a daunting task. To meet it, the average growth of exports and imports has to reach 11.3 percent starting from May, which will require tremendous effort.
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