China Watch Blog

China Watch Blog came across this news item that despite the high growth in exports during June, the overall prospects for 2010 still look bleak as the European debt woes and the monetary tightening policies will crimp demand for the nation’s goods.

The report in the People’s Daily quoted the Ministry of Commerce as  urging the government not to tweak the export policies further, as changes will further hamper export prospects. Exports for June jumped 43.9 percent to $137.4 billion, the highest since July 2008.

The growth momentum cannot be sustained and prospects for exports are not so hopeful in the months ahead, ministry spokesman Yao Jian said, adding that the uncertain global economic recovery and domestic challenges like rising labour costs and growing trade friction will make the situation more complicated for exporters.

European debt woes worsened in April this year after Greece had to be bailed out of a debt crisis by other nations. At that time there were also apprehensions that the debt contagion would soon spread to other European nations.

Consequently most of the nations in the region like Spain, Italy and Germany decided to reduce spending. The measures may queer the pitch for exporters, as outside of the US these are the major export destinations for Chinese exporters.

Apart from Europe, exporters are also facing problems in emerging markets like Brazil and India as they are also contemplating austerity measures.

The Brazilian central bank had hiked its benchmark lending rate to 10.25 percent from a record low of 8.75 percent in April. Since March, India has tweaked its interest rate three times, and the next monetary policy decision is likely on July 27.

According to the ministry, during the first half of this year, China’s shipments to emerging markets like India, Russia, Brazil and South Africa grew 58.1 percent to $45.36 billion, 23 percentage points higher than the export growth for the same period.

“It’s not all about foreign demand. There are some domestic factors also that makes it hard for exporters,” Yao said, referring to the yuan’s peg to the dollar as part of its currency reforms.

China Watch Blog reports that the Hong Kong Monetary Authority and People’s Bank of China have signed a supplementary memorandum of co-operation on the expansion of the renminbi trade-settlement scheme.

The two bodies will strengthen co-operation and further promote Hong Kong’s status and role as a renminbi market platform in the process of developing renminbi business outside the Mainland.

The bank and the Renminbi Clearing Bank, Bank of China (Hong Kong) Limited, also signed a revised settlement agreement on the clearing of renminbi businesses.

Monetary Authority Chief Executive Norman Chan said, following the revision of the settlement agreement, there will no longer be restrictions on banks in Hong Kong in establishing renminbi accounts for and providing related services to financial institutions; and individuals and corporations will be able to conduct renminbi payments and transfers through the banks.

“I expect that many more types of financial intermediary activities denominated in the renminbi will be introduced in the market, helping Hong Kong’s renminbi business platform leap to new heights.”

China Watch Blog has picked up this news that the volume of Hong Kong’s total goods exports recorded a year-on-year increase of 19.2% in May.

The Census & Statistics Department said today the volume of Hong Kong’s goods re-exports rose 19.3% over a year earlier, while that of domestic exports rose 14.5%. Concurrently, the volume of goods imports increased 22.7%.

The prices of goods re-exports during the month rose 4% over a year earlier, while those of domestic exports increased 6%. Taken together, the prices of total goods exports increased 4.1%. Concurrently, the prices of goods imports rose 6.8%.

Comparing the first five months of this year with the same period in 2009, the volume of goods re-exports grew  21.1%, while that of domestic exports increased 16.4%. Taken together, the volume of total goods exports  increased 21%. The volume of goods imports rose 27.2%.

During the first five months, the prices of goods re-exports increased 3.3% over a year earlier, while those of domestic exports increased 4.3% – thus the prices of total goods exports went up 3.4%. The prices of goods imports increased 4.8%.

Comparing the three-month period ending May with the preceding three months on a seasonally adjusted basis, the volume of total goods exports increased 5.2%. Within this total, the volume of re-exports increased 5.4%, whereas that of domestic exports fell 0.9%. The volume of goods imports rose 2.1%.