China passes fresh policy support for trade growth

BEIJING - After a disappointing trade sheet for the first half of the year, the Chinese government has stepped up support for the sector with a fresh package of policies, which are expected to nourish the nascent recovery seen in June.

At a State Council executive meeting on Wednesday, the government pledged to further facilitate trade growth by improving the business environment and easing burdens on trade companies.

Specific measures include improving clearance efficiency at port customs, encouraging imports of advanced technology and equipment, key components and foreign consumer goods with great domestic demand, as well as regulating administrative and service fees for import and export links.

"The targeted and practical policies are expected to boost trade growth and help put the broader economy on a firmer footing," Huo Jianguo, a researcher with the Chinese Academy of International Trade and Economic Cooperation, said.

The move came after data on Monday showed China's foreign trade dropped 6.9 percent year on year to 11.53 trillion yuan ($1.89 trillion) in the first six months, slipping further from a 6-percent decline in the first quarter.

Sluggish external demand, high export costs due to yuan's appreciation, downward pressure on domestic economy and the plunging commodity prices are major drags on trade growth.

The official exchange rate of the yuan against the US dollar, the euro and the yen strengthened by 0.2 percent, 6.9 percent and 2.2 percent respectively during the past 6 months.

To help enterprises avoid risks in cross-border trade, the government stressed it will stabilize the exchange rate of the yuan at a reasonable and balanced level, and facilitate renminbi settlement.

But in some areas, government efforts may only have limited impact. For example, Chinese exporters are facing increasing challenges from their peers in both developed and emerging countries as the former are attracting advanced manufacturing back home and the latter are catching up with their low costs.

This will require Chinese enterprises to constantly upgrade their technologies and brands to remain competitive, according to Bai Ming, a senior researcher with a Ministry of Commerce think tank.

He singled out e-commerce cross-border trade and service trade as the new area that Chinese enterprises may play a larger role.

Seeing opportunities in the sectors, the State Council highlighted support for cross-border e-commerce and foreign trade service companies, in addition to the previous plans to advance manufacturing prowess and promote industrial cooperation.

On the back of the latest policies, analysts largely predict a modest recovery for trade growth for the latter half of 2015 as the economy is also likely to bottom out and stabilize during the period.

Signs of recovery have already emerged. In June, China's exports rose 2.1 percent from a year earlier, ending a three-month losing streak, and the decline in imports narrowed to 6.7 percent from an 18.1-percent slump.

"We expect real export growth to recover to about 4 percent to 4.5 percent in the second half of the year...but the sharp drop so far led us to mark down our 2015 export growth forecast from 5.5 percent to 2.6 percent," noted a UBS report.