Trade surplus keeps declining

That prospect firmed up as figures showed China's trade surplus shrank for the third consecutive year in 2011 to $155 billion (121.7 billion euros), a 14.5 percent fall from the previous year.

Figures issued by the General Administration of Customs on Jan 10 showed that last year exports grew 20.3 percent compared with the previous year, to $1.89 trillion, and imports grew 24.9 percent to $1.74 trillion. In 2010 exports grew 31.3 percent and imports grew 38.7 percent.

The trade surplus has been narrowing since the global financial crisis erupted in 2008. It fell 34.2 percent to $196 billion in 2009, and another 6.4 percent year-on-year drop to $183 billion in 2010.

Minister of Commerce Chen Deming said at the annual national work conference on Jan 5 that the ratio of China's trade surplus to its GDP was expected to fall to 2 percent last year from 3.1 percent in 2010.

Li Jian, a researcher with the International Trade and Economic Cooperative Research Institute under the Ministry of Commerce, said this indicated that China's efforts to achieve a better balance in foreign trade have been effective.

"While the trade surplus is gradually narrowing and accounts for a smaller share of overall foreign trade, its contribution to economic growth will not be weakened," he said.

But, with the eurozone still in the throes of the debt crisis and the US struggling for an economic rebound and battling high unemployment, exports are tipped to slow further, and experts warn that growth is likely to fall below 10 per cent.

"For the first half of this year the growth of China's exports will remain slow because of the complicated international economic circumstances, and for some months the growth rate may even be a single digit," said Song Hong, a senior researcher at the Institute of World Economy and Politics at the Chinese Academy of Social Sciences.

"As for the second half, we still need to wait and see how the Western economies deal with their crises. And exports will contribute less to GDP, because this year the growth of imports outstripping the growth in exports will be a constant."

Last year bilateral trade between China and the European Union was worth $567.2 billion, 18.3 percent higher than a year earlier, and the trade surplus rose by 1.5 percent to $144.82 billion.

Trade between China and the US grew 15.9 percent to $446.6 billion, and the trade surplus grew 11.6 percent to $202.3 billion.

Zhan Weijian, president of Dongfangshenzhou Pearl Group in Zhuji, Zhejiang province, said he is pessimistic about his company's exports this year.

"The EU debt crisis badly hit companies like us whose products are luxury items. Business was difficult last year because jewelry was the first thing those short of cash struck off their shopping lists."

Zhan said one reason for falling exports was that prices were out of reach of European and US buyers.

"For products of the same quality, our prices are relatively low compared with those of international brands. But now the expectations of most of our company's Western clients on price are much lower. They seem to be in a very deep crisis."

Chen warned recently that the external trade environment would be bleak this year.

"The business environment home and abroad for Chinese exporters is severe and there are many uncertainties and unstable factors ahead, especially with the spreading European debt crisis.

"We will take more steps to stimulate exports, to consolidate and expand our market share," he said.

As a result of weak external demand, many Chinese companies have begun to focus on domestic markets.

Zhu Weixiang, general manager of Zhejiang Xuebao Fashion Co in Zhejiang, said exports to the EU and the US have dropped since the second half of last year.

"Before 2010 exports accounted for 60 percent of our annual sales revenue, but in the past year that percentage dropped to 30 percent."

Although exports have been hard hit by overseas financial turmoil, Zhu says his business has continued to grow thanks to stronger domestic demands.

Ding Qingfen and Li Jiabao contributed to this story.