Trade winds to blow hot and cold

China Sails into 2013 with exports and imports set to grow steadily

In 2012, with the eurozone crisis and shrinking global demand, China's foreign trade growth slowed to about 6 percent - but this was still higher than the world as a whole and that of some major economies.

The picture for 2013 looks similar, with the outlook for the global economy remaining gloomy, while China's foreign trade is set to grow slightly higher than in 2012.

Since the second quarter of last year, the recovery of the US economy has slowed, the eurozone debt crisis deepened and Japan stepped into economic recession. The growth of emerging and developing economies also slowed.

According to the latest International Monetary Fund report, the global economy will grow 3.6 percent in 2013, only 0.3 percentage points higher than in 2012. Demand from developed economies will grow by 1.3 percent, 0.2 percentage points higher than last year. It also predicted that the emerging economies will grow faster than developed ones, but the growth rate will still be dropping. All this indicates that sluggish external demand will not change in 2013.

In China, a series of policies were enacted in time to stimulate internal demand. In the second half of last year, China regained its economic growth rate gradually. This year, internal demands for daily commodities will grow mildly due to rising incomes and living standards. Also, with the increased pace of industrialization and urbanization, demand for energy resources will grow.

In November, the new generation of leaders signaled greater economic reform and opening-up. The Ministry of Finance released new import tariffs for 2013 on 784 imported products as part of a major effort to boost domestic consumption. The temporary adjustment will allow the products to be imported on a tax rate lower than the most-favored-nation tariff.

The move is expected to increase imports, facilitating the global trade balance and creating a better external economic environment for China.

From an international standpoint, whether the eurozone can prevent its debt crisis deepening is the most important issue. The next is whether the US can continue its economic recovery. Washington will inevitably take measures in 2013 that will impose negative effects on its economy.

The other important factor is whether emerging economies can survive the global financial and commodities market. Key economies including the US, the EU and Japan are all employing quantitative-easing policies, and some countries, such as Australia, have lowered interest rates to stimulate economic development.

In 2013, fluctuation in exchange rates and turbulence in global financial market are inevitable. The pricing trends of bulk consumer goods are unclear, which will hit emerging economies that rely on the export or import of energy resources.

In China, the problems in balancing its economy still exist. It is also losing its demographic dividend, leading to shrinking profits for enterprises, and environmental issues are hampering economic development.

The advantage China used to have in being able to stimulate its economy is fading, and a new strategy for competitiveness has not been formed yet. Economic growth will continue to slow down gradually.

China's growth is predicted at 8 percent this year, with annual trade volume of around $4.2 trillion (3.2 trillion euros).

In the second half of 2012, the government took measures to stabilize China's foreign trade. It is estimated that total exports last year exceeded $2 trillion. Little change is expected to China's foreign trade policy this year.

The country's efforts in optimizing industrial structure in recent years are being rewarded now. Exports of machinery, high-tech and unique or well-known Chinese products and brands should grow steadily. In 2013, China's total exports are expected to reach $2.2 trillion.

China's imports growth also slowed in 2012 to only 4.1 percent year-on-year at the end of November, and leading to an increased trade surplus.

In 2013, China will continue to stimulate domestic demand, and with the lowered tariffs, the country's imports will record slight and steady growth.

In recent years, trade between China and emerging markets has grown fast, becoming a key engine for China's exports. Although it slowed down greatly in 2012, the growth of exports to developing markets was still higher than to developed economies. In the first 11 months, trade between China and the ASEAN nations grew by 9.3 percent year-on-year, by 11.9 percent with Russia and 30.4 percent with South Africa. The ASEAN market has surpassed Japan as China's third-largest trading partner. These trends should continue in 2013.

China-US trade volume is likely to grow, given a stable recovery of the US economy. However, trade with the EU will continue to drop in 2013.

For years, private enterprises have been driving China's foreign trade development. The growth rate of private companies' exports was much faster than that of state-owned and foreign enterprises in 2011. Last year, from January to November, private enterprises realized trading growth of 18.1 percent year-on-year, the trade volume accounting for 26.4 percent of China's total.

Private enterprises have shown their competitiveness in exploring overseas markets and adjusting to market demands, and this year they are likely to increase foreign trade, with an estimated volume of $1.2 trillion and double-digit growth rates.

In 2012, the performance of the traditional foreign trade provinces of China's east coast fell below the national average. However, in the central and western areas, trade volume greatly increased. In the first 11 months, Chongqing's export growth was 110 percent year-on-year, followed by Anhui province with 62.3 percent, Henan 58.3 percent, and Sichuan 15.6 percent.

In 2013, exports by these provinces are likely to continue growing fast. Eastern provinces, which have been making efforts to optimize their exports structure, should have a better year.

Last year, trade frictions between China and its foreign partners became fiercer, with protectionism playing a bigger role and moving from traditional industries to emerging ones. In the first three quarters, Chinese exports worth $24.3 billion were involved in 55 anti-dumping and anti-subsidy investigations, 38 percent more than in the previous year. As global demand will continue to be weak, competition will be fiercer and trade disputes more serious in 2013.

Above all, China's traditional reliance on low-cost advantage to maintain foreign trade growth rate is no longer viable. China should quicken its step in nurturing new export advantages through brand building and adding technology, quality and service values into its products. It should also try to develop trade in services to reduce costs in resources.

In 2013, the exchange rate of the yuan will remain stable. The government should facilitate a united and regulated market to boost internal economic growth. And as well as attracting foreign investment, China should encourage domestic companies to go overseas.

Under these conditions, foreign trade will continue to contribute to a healthy and stable development of China's economy.

The author is a researcher with the Chinese Academy of International Trade and Economic Cooperation. The views do not necessarily reflect those of China Daily.

(China Daily 01/04/2013 page7)