The Ministry of Commerce of China released a report in May predicting that shrinking external demand, tight liquidity and mounting protectionism constitute a sever, complicated external environment for China's foreign trade in 2009.
The report said that there was little possibility of world economic recovery in the near future as the international financial crisis was still spreading. Both developed countries and developing countries will experience further economic slowdown in 2009. As a result, trade value will be likely to decrease significantly due to trade contraction and price plunge.
China has already felt that pain since November last year when its exports and imports went down for the first time in seven years. That downward movement continued and even accelerated in the following months. There were signs of improvement in March this year, with the country's foreign trade contraction getting modest.
In the first quarter of this year, China's trade with emerging economies declined at a pace higher than the decrease of the country's total imports and exports. Exports to Russia and Brazil, for example, were down by 43.5 percent and 36 percent respectively, compared with the 19.7 percent decrease in the country's total exports.
The situation with its top three trading partners, the EU, the US and Japan was better. Trade contraction with those three was lower than the slowdown of China's total foreign trade and even showed signs of rebound in March.
However, the report warns that consumption in those three developed economies may continue to be at a very low level as enterprises and consumers there were facing deteriorating income.
The tight liquidity is also putting great pressure on traders. There are growing risks of payment default for exporters when their foreign importers are facing financing difficulty. In addition, domestic banks are still reluctant to lend to exporters, particularly small and medium sized ones.
Competition has been intensified by significant devaluation of currencies of some developing countries against the US dollar which exports similar products as China.
Multinationals struggling in financing difficulty and shrinking profits are less motivated to expand their investment. Reduction in FDI will affect the international industrial transfer, which in turn will affect world trade for a long period of time, said the report.
According to data from the Ministry of Commerce, FDI into China had declined for six months in a row by March this year.
Protectionism, in the forms of tariff hikes, non-tariff barriers and abuse of trade remedy measures, is gaining ground in the context of mounting pressure of employment and competition. The WTO reported in March that there was a significant increase in trade restriction measures in the past few months.
China was the subject of most new trade investigations in the first quarter of the year. The Ministry of Commerce warned in the report that Chinese companies may be involved in more trade disputes if protectionism cannot be contained globally.
The report also noted that the signs of improvement in China's macro-economy, the more competitive Chinese enterprises, and tax rebates will help ease the tough time for Chinese importers and exporters.
The Ministry of Commerce urges in the report for enterprises to make more efforts on marketing and innovation, and respond actively to trade disputes.
By People's Daily Online
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