China Watch Blog

China Watch Blog is considering a number of policies to boost the country’s imports and improve its trade balance, which include adjustments to import tariffs and measures to facilitate fund-raising and customs clearance for import enterprises.

According to a State Council, or cabinet, executive meeting presided by Premier Wen Jiabao on Wednesday, China will cut import duties on some energy and raw material products, consumer products as well as some high-tech goods.

It said the country will put more attention on increasing imports, which will help improve people’s living standards and ease frictions with the country’s trade partners.

The country will also encourage commercial banks to support the imports of high-tech technologies, equipment, key parts as well as energy and raw material products, it said.

Other policies will include measures to expand fund-raising channels of import firms, improve the cross-border trade settlement in the yuan, cut import costs and remove irregular restrictions.

China is now the world’s largest exporter and the second-largest importer. The growth of its imports has recently outpaced exports as the country tries to increase domestic demand.

The countries’ exports rose 18.4 percent from a year earlier to $114.47 billion in February, while imports were up 39.6 percent, the highest growth in 13 months, to $145.96 billion, according to customs data.

China Watch Blog has learnt that the situation surrounding China’s exports will become more complicated and severe in the coming months amid an increasing number of trade protectionist measures and slackening global demand, the China Daily reported, citing the Ministry of Commerce.

China will roll out policies regarding currency and tax rebates to bolster exports, Zhong Shan, deputy minister of commerce, said at a forum in Beijing, adding that it will be more arduous for the Chinese government to stabilize export growth.

According to the General Administration of Customs, China’s exports declined 0.5 percent over the year in January, the first fall in more than two years. During the first two months, Chinese shipments grew by merely 6.9 percent year-on-year.

The figures are far less than the previous year and they set a pessimistic tone for the whole year, Zhong said.

From January to February of 2011, China’s exports grew by 21.3 percent year-on-year.

According to Zhong, industrial competitiveness, global demand and the business environment are the decisive trends for the nation’s exports, and they are all “not favorable”.

China is losing its dominant competitiveness in labor costs as the nation pledges to raise minimum wages for workers to improve their livelihoods, Zhong said.

China Watch Blog has learnt that the volume of Hong Kong’s re-exports of goods in January 2012 decreased by 13.6% over January 2011, while that of domestic exports dropped sharply, by 47.9%. Taken together, the volume of total exports of goods decreased by 14.3%. Concurrently, the volume of imports of goods fell by 14.9%.

Kwai Tsing container terminals

According to the external merchandise trade statistics in value terms for January 2012 released by the Census and Statistics Department (C&SD), comparing the three months ending January 2012 with the three months ending January 2011, the volume of Hong Kong’s re-exports of goods decreased by 4.5%, while that of domestic exports dropped sharply, by 41.1%. Taken together, the volume of total exports of goods decreased by 5.3%. Concurrently, the volume of imports of goods decreased by 3.2%.

Comparing the three-month period ending January 2012 with the preceding three months on a seasonally adjusted basis, the volume of total exports of goods increased by 1.0%. Within this total, the volume of re-exports increased by 1.1%, whereas that of domestic exports decreased by 9.5%. On the other hand, the volume of imports of goods decreased slightly, by 0.3%.

Changes in volume of external merchandise trade are derived from changes in external merchandise trade value with the effect of price changes discounted.

Comparing January 2012 with January 2011, the prices of re-exports of goods increased by 7.3%, while those of domestic exports increased by 3.3%. Taken together, the prices of total exports of goods increased by 7.2%. Concurrently, the prices of imports of goods increased by 6.6%.

Price changes in external merchandise trade are reflected by changes in unit value indices of external merchandise trade which are compiled based on average unit values or, for certain commodities, specific price data.

The terms of trade index is derived from the ratio of price index of total exports of goods to that of imports of goods. Compared with the same period in 2011, the index increased by 0.5% in January 2012.

Changes in the unit value and volume of total exports of goods by main destination are shown in Table 1.

Comparing January 2012 with January 2011, double-digit decreases were recorded for the total export volume to Germany (-16.4%), the mainland of China (the Mainland) (-16.4%), the USA (-13.9%), Japan (-11.7%) and Korea (-10.0%).

Over the same period of comparison, the total export prices to all main destinations increased: the USA (+9.8%), Japan (+8.4%), Germany (+7.3%), the Mainland (+7.1%) and Korea (+2.0%).

Changes in the unit value and volume of imports of goods by main supplier are shown in Table 2.

Comparing January 2012 with January 2011, double-digit decreases were recorded for the import volume from Taiwan (-23.7%), Japan (-21.1%), Singapore (-17.7%), the USA (-17.5%) and the Mainland (-13.6%).

Over the same period of comparison, the import prices from all main suppliers increased: Singapore (+9.9%), the Mainland (+7.1%), the USA (+6.2%), Japan (+6.0%) and Taiwan (+3.2%).

China Watch Blog has learnt that China’s new export orders shrank in February the most in eight months, a preliminary HSBC business survey shows, defying expectations of a pick up after Lunar New Year holidays and a worrying sign of the impact of the euro area debt crisis.

Chinese port in Shanghai

Many analysts had expected some rebound in February after imports and exports fell the most in two years in January, when factories closed for several weeks for Lunar New Year holidays.

But HSBC’s February flash PMI, which showed the overall manufacturing sector shrinking for the fourth-straight month, suggested overseas demand was sliding even further.

“This suggests trade may continue to be disappointing and we cannot see any improvement in the near term,” said Kevin Lai, senior economist at Daiwa Capital Markets in Hong Kong.

HSBC flash PMI, the earliest indicator of China’s industrial activity, rose to a four-month-high at 49.7 in February from 48.8 in January. The PMI has been below 50, which demarcates expansion from contraction, for most of the last eight months.

The new export orders sub-index dropped to 47.4 — the lowest in eight months — from 50.4 in January as the European debt crisis cast a shadow over Chinese exports. Overall new orders were flat at 49.1, a level that indicates they were falling.

An output sub-index rose to 50.1 in February from 47.6 in January.

HSBC said the data, based on 85-90 percent of responses to a monthly survey, suggested further policy easing was needed. The final PMI is subject to revision and will be released March 1.

“Growth remains on track for a slowdown, despite the marginal improvement in the headline flash PMI led by quickened production after the Chinese New Year,” said Qu Hongbin, HSBC’s chief economist for China.

“With a meaningful rebound of domestic demand not in sight, external weakness is starting to bite, adding more downside risks to growth. The PBOC, after delivering this year’s first RRR cut, should step up policy easing as inflation pressures continue to ease.”

China’s economic growth is widely seen slowing down in January to March for its fifth consecutive quarter. Economists expect full-year growth to slip below 9 percent for the first time in a decade.

Official trade data for January showed imports and exports falling at their fastest rate since 2009, which analysts said at the time showed an economy weaker-than-previously thought even accounting for distortions caused by the Lunar New Year holidays, which occurred in January.

China Watch Blog reports that Chinese companies will face growing risks involving short-term export trade credit in the first quarter.

Waigaoqiao port

“Italy, Germany, South Korea, Spain and Mexico are the major countries that Chinese exporters should be particularly concerned about over short-term export credit insurance,” said Ai Renzhi, chief credit analyst with the China Export & Credit Insurance Corp, also knowen as Sinosure.

The China Daily reported that the insurer on Tuesday launched a short-term export trade credit risk index, an indicator tracking the risks of the nation’s major trading partners.

The index is meant to help Chinese companies hedge the risks of doing business overseas.

Italy, Germany and Spain have been primarily affected by the debt crisis, while South Korea and Mexico pose a risk because they rely heavily on exports, said Ai.

Chinese exporters should be more careful about trading in electronic products and metal products, mainly steel, Ai added.

Most economists believe that China’s exports will drop further this year since the global economy is expected to falter in 2012.

“Moreover, as external demand shrinks, the value of orders is also likely to drop and unit prices will be lower because of strong competition, thus leading to higher credit risks with trading partners,” said Xie Zhibin, assistant president of Sinosure.

As more Chinese exporters shift their business from developed countries to developing ones, Xie said the credit risks of export-driven developing economies should not be overlooked.

China Watch Blog has learnt that the export growth of China’s electronic products slowed markedly last year to 11.9 percent, the Ministry of Industry and Information Technology (MIIT) announced on Monday.

The total export value last year reached 661.2 billion U.S. dollars, up 11.9 percent year-on-year. However, the growth rate was 17.4 percentage points lower than that of the previous year, the MIIT data showed.

The export value of electronic products accounted for nearly 35 percent of the nation’s total export value in 2011, according to the data. Computers and cell phones were the top two categories of exported electronic products.

In 2011, computer and mobile phone exports increased by 11.1 percent and 34.3 percent, respectively, to 105.88 billion U.S. dollars and 62.76 billion U.S. dollars, the data showed.

Meanwhile, the MIIT also announced that the country’s imports of electronic devices hit a new high of 468 billion U.S. dollars last year, up 11 percent year-on-year. However, the growth rate saw a sharp decrease of 23 percentage points in comparison with that of 2010.

Chinw Watch Blog has learnt that China’s new export orders shrank in February the most in eight months, a preliminary HSBC business survey shows, defying expectations of a pick up after Lunar New Year holidays and a worrying sign of the impact of the euro area debt crisis.

Cosco Taicang port

A local newspaper reported that many analysts had expected some rebound in February after imports and exports fell the most in two years in January, when factories closed for several weeks for Lunar New Year holidays.

But HSBC’s February flash PMI, which showed the overall manufacturing sector shrinking for the fourth-straight month, suggested overseas demand was sliding even further.

“This suggests trade may continue to be disappointing and we cannot see any improvement in the near term,” Kevin Lai, senior economist at Daiwa Capital Markets in Hong Kong, was quoted as saying.

HSBC flash PMI, the earliest indicator of China’s industrial activity, rose to a four-month-high at 49.7 in February from 48.8 in January. The PMI has been below 50, which demarcates expansion from contraction, for most of the last eight months.

The new export orders sub-index dropped to 47.4 — the lowest in eight months — from 50.4 in January as the European debt crisis cast a shadow over Chinese exports. Overall new orders were flat at 49.1, a level that indicates they were falling.

An output sub-index rose to 50.1 in February from 47.6 in January.
HSBC said the data, based on 85-90 percent of responses to a monthly survey, suggested further policy easing was needed. The final PMI is subject to revision and will be released March 1.

“Growth remains on track for a slowdown, despite the marginal improvement in the headline flash PMI led by quickened production after the Chinese New Year,” said Qu Hongbin, HSBC’s chief economist for China.

China Watch Blog has learnt that small and medium-sized enterprises (SMEs) are unlikely to close on a large scale this year, as they will receive 3 billion yuan ($475.6 million) annually in central government support for the next five years.

According to the Ministry of Industry and Information Technology, since the first quarter of 2010, SMEs have faced such problems as high production and labor costs and an unfavorable international environment, and export-driven SMEs have been hurt by the weak global economy.

China Daily reported the State Council as urging local governments to offer support for the development of smaller companies.

On Feb 1, the council discussed the issue in an executive meeting and announced that the government would further support SMEs by establishing a 15-billion-yuan fund.

Small companies “serve as a significant channel for creating jobs, a major platform for the growth of entrepreneurship and an important force for scientific innovation”, according to a statement released on Feb 1 and reported by the Xinhua News Agency after the State Council executive meeting presided over by Premier Wen Jiabao.

“The Ministry of Finance will allocate 3 billion yuan every year over the next five years and the State Council will release policy documents on further development of SMEs in the near future,” said Zhu Hongren, spokesman and chief engineer at the industry and information technology ministry.

The ministry noted that exports had cooled, and industries’ export shipments had increased by just 16.6 percent last year, slower than in previous years.

China Watch Blog has learnt that Hong Kong’s exports and imports shrank sharply in value in January, the Census & Statistics Department said.

Hong Kong port

The value of total exports of goods decreased 8.6% over a year earlier to $259.3 billion, after a year-on-year increase of 7.4% in December. Within this total, the value of re-exports dropped 7.9% to $255.6 billion, while the value of domestic exports decreased 39.7% to $3.7 billion.

Exports to Asia dropped 11.8%, with substantial decreases recorded in major markets, such as Taiwan, Singapore and Thailand.

Decreases were also recorded in other regions, particularly Germany and the US.

The department warned Hong Kong’s export outlook remains bleak in the near future, as the eurozone crisis continues to plague the global economic outlook and weigh on Asia’s production activities.

China Watch Blog has learnt that the mainland’s online retail sales volume reached 226.5 billion yuan in the fourth quarter of 2011, according to the Fourth Quarter Online Retail Market Survey released by the EnfoDesk.

Jiefang Daily reported that the total online retail trade volume amounted to 806 billion yuan in 2011, a year-on-year growth of 55 percent.

The retail market maintained a steady growth in 2011. The rapid development of Business to Customer (B2C) mode made great contribution to the online retail market. In 2011, B2C increased 5 percent from the previous year to account for 30 percent of the total volume of online retail sales.

The increasing speed of B2C was obviously higher than that of the Consumer to Consumer (C2C) mode.