China-EU trade rises, but pessimism still rules

Exports drop under weight of debt woes

The European debt crisis took a toll on Chinese exports to the EU in the first two months of this year. [Provided to China Daily]

Despite the prolonged debt crisis in the European Union, China increased trade with the 27-nation group in the first two months of the year.

Bilateral trade between the two grew 4.7 percent to $79.8 billion (61.1 billion euros) in January and February compared with the previous year. Chinese exports fell 1.1 percent to $47.6 billion, and imports rose 14.7 percent to $32.2 billion.

The trade surplus between the EU and China reached $15.4 billion, a year-on-year drop of 29.9 percent.

However, China's exports to certain EU member states dropped sharply.

"Italy's poor economic performance may be the biggest contributor to the sluggish exports in these two months," says Han Xiusheng, a researcher with the International Trade and Economic Cooperative Research Institute, a think tank under the Ministry of Commerce.

During the first two months of the year, bilateral trade between China and Italy fell 18.7 percent from the previous year to $6.3 billion. Chinese exports fell 31.1 percent year-on-year to $4.1 billion.

China's exports to Germany, the country's largest export destination in Europe, also dropped, by 3.7 percent to $10 billion compared with last year.

"The figures showed that the January downside should not be largely attributed to seasonal reasons," Han says. "It is harsh, but true to say, that trade between China and the EU is still not that bright."

Wang Tao, an economist with UBS AG, agrees that Chinese exporters should brace themselves for a hard year. "The outlook is not positive," she says.

China's export volume to the EU is especially weak because of the debt woes, she adds.

Han says the EU market as a whole is shrinking because of the debt crisis, which largely affects China's export volume.

"There is no doubt that the growth of exports to the EU will continue to fall in the coming months," she says.

At the beginning of this year, Wang Jinbiao, a socks and leggings exporter in Yiwu, China's largest center of small commodities, in Zhejiang province, was already voicing concerns that the worst was yet to come.

"Even for daily necessities like socks - let alone for other products, especially high-end ones - orders from Europe are falling."

The company had received two-thirds fewer orders from regular European clients, he says.

Yao Jinchao, a professor at the University of International Business and Economics in Beijing, says the priority for China now is not to dwell on the shrinking European market, but to develop new markets and stimulate domestic demand.

"European countries are working out their own ways to recover from the crisis, but that will take some time, and should not become a burden on the Chinese economy."

He predicts that the difficult export situation will drive top decision-makers to work out new stimulus plans on domestic demand.

"With so many Chinese people buying goods abroad, we can see that demand is very strong in China."

While exporters and experts are decidedly pessimistic on trade between China and the EU, Chinese officials are still expressing confidence about a European recovery.

"We believe that Europe will ultimately overcome the debt crisis through their own efforts as well as with help from the international community," says Yi Gang, vice-governor of the People's Bank of China and head of the State Administration of Foreign Exchange.

China will continue to invest part of its foreign exchange reserves in European bonds and invest in industrial and strategic assets in Europe, he says.

Last year, Europe became the biggest destination for Chinese overseas investment, overtaking the US for the first time.

China's total overseas investment last year was $68 billion, $10.4 billion of which was spent on mergers in Europe.

Ding Qingfen and Wang Xiaotian contributed to this story.

yanyiqi@chinadaily.com.cn