Mar 24

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.

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Dec 18

China Watch Blog has learnt that a slowdown in the country’s export growth could continue at least into the first quarter of next year with a “more severe” outlook, the Ministry of Commerce said.

But the government has confidence in keeping stable growth in foreign trade, said ministry spokesman Shen Danyang at a monthly news briefing.

With demand weakening from the European Union, China’s largest trade partner, overseas sales have been on the decline. In November, the nation’s exports increased by 13.8 percent from a year earlier, the smallest gain since 2009, according to the General Administration of Customs.

And things will probably get worse. “China may see negative export growth next year in some months although shipments for the year could rise 10 percent if there’s no world recession,” said Yu Bin, director of macroeconomic research at the State Council’s Development Research Center.

“It’s too early to predict the prospects of export for the whole year of 2012, but one thing is for sure, the first quarter will be very severe for China’s exports,” said Shen.

Besides shrinking worldwide demand, trade protectionist measures of various types are challenging Chinese exporters. On Thursday, the European Union imposed five-year tariffs as high as 71.9 percent on imports of steel pipes from China.

According to Shen, new measures to help China maintain export growth will be released during the annual China commerce work conference, to be held in early January.

The three-day Central Economic Work Conference, which closed on Wednesday, pointed out China will try to stabilize growth for exports next year, by stabilizing its foreign trade policies and promoting industrial transformation.

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Oct 16

China Watch Blog has learnt that Mainland China has established the framework for yuan-denominated foreign direct investment, a step toward the government’s goal of expanding the currency’s international credentials.

The Shanghai Daily reported the People’s Bank of China saying that foreign institutional and individual investors raising yuan legally from offshore markets, such as Hong Kong, will be able to make direct investments that conform with Chinese laws and regulations.

The Ministry of Commerce said foreign investors making yuan investments will not be allowed to trade negotiable securities and financial derivatives, nor to use offshore-raised yuan to provide or repay loans.

It said funds of 300 million yuan (US$47 million) or more will require regulatory approval, as will investments in certain industries, including cement, steel, and ship making and leasing.

The move followed Vice Premier Li Keqiang’s remarks in August pledging support for Hong Kong enterprises making direct investments on the Chinese mainland using the yuan as the means of settlement.

Magnus Montan, head of international business at HSBC China, said: “The announcement is another significant step forward in the development of the yuan into an international currency. The new regulations introduce a streamlined process, bringing added transparency and clarity to yuan investing on the mainland.”

He said overseas businesses will be key beneficiaries, as greater flexibility in selecting the investment currency will enable them to minimize foreign exchange risks and costs.

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Sep 08

China Watch Blog has picked up an interesting article published in the Shanghai Daily that China has released a new guideline on investment opportunities in foreign countries that may be looking to attract Chinese investors, but does not cover the United States, and it does not give any reason why the country is not covered.

According to the Ministry of Commerce, the National Development and Reform Commission and the Ministry of Foreign Affairs, which jointly issued the 306-page guideline, the booklet gives an overview of industries in 115 countries in Asia, Africa, Europe, North America and South America that are keen to attract foreign investments.

The guideline provides the latest progress industries in foreign countries have made and is part of China’s strategy and efforts in “going out”, the commerce ministry said.

The guideline profiles each country for development priority, key targets of major industries, specialized zones, basic rules governing foreign investment and existing Chinese investments.

In the chapter on Japan, for example, the guideline lists environment protection, information technology, manufacturing and tourism as key industries the Japanese government has identified for future development.

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Aug 26

China Watch Blog has learnt that China’s trade surplus fell to 1.44 percent of the country’s gross domestic product (GDP) in the year’s first half and the proportion is expected to drop further this year.

Shanghai's Yangshan deepwater port

Xinhua reported the Ministry of Commerce as saying that China has seen its trade surplus-GDP ratio decline in the past few years, down from 6.7 percent in 2008 to 2.2 percent in the first half of 2010.

Ministry spokesman Shen Danyang told a press conference that to promote trade balance, China will continue to actively expand imports of advanced technologies, key components and resources that China lacks, Shen said.

The world’s second largest economy, China reported a record trade surplus of US$31.48 billion in July, sharply higher from June’s US$22.27 billion and the US$28.7 million in the same period a year ago.

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Jun 29

China Watch Blog has learnt that China will reduce import duty on luxury goods once key ministries have reached general agreement on the issue, and it is only “a matter of time”.

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The China Daily reported citing Yao Jian, China’s Commerce Ministry spokesman, as saying that the commerce and finance ministries are likely to submit a proposal on measures to promote imports to the State Council, the Cabinet, and this will include details on cutting duty on luxury items.

China has committed itself to doubling imports by 2015 to balance trade. Amid a decline in import growth over the past few months there were suggestions that the government was considering cutting duty on some luxury goods, such as cosmetics, cigarettes and alcohol.

“The relevant authorities have, in principle, reached agreement on lowering import duty on some luxury goods to help boost imports, although there are differences of opinion on the specifics,” Yao said, without elaborating.

With rising disposable income and a growing brand awareness, China is expected to surpass Japan by 2012 as the world’s largest luxury consumer market, with an estimated value of $14.6 billion, according to the World Luxury Association.

But industry figures also reveal that Chinese consumers spend four times more on luxury goods abroad than at home, thanks to high import duty and taxes.

“Cutting duty (on luxury goods) is a general trend,” Liu Huan, an adviser to the State Council and deputy director of the School of Taxation at the Central University of Finance and Economics, said.

“It should stimulate domestic consumption as consumers will spend more in the domestic market.” Reducing duty will also mean that China honors commitments to the World Trade Organization (WTO), he added.

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Sep 06

China Watch Blog has learnt that China has bucked international trends in both outbound and inward investment, and now ranks as the fifth largest global investor in outbound direct investment (ODI) with a total volume of $56.5 billion, compared to a ranking of 12th in 2008, the Ministry of Commerce said on Sunday.

On top of this, foreign direct investment (FDI) this year was set to “surpass $100 billion”, compared to $90 billion last year, ministry officials predicted.

Globally, foreign investment decreased by almost 40 percent last year amid the financial downturn and is expected to show only marginal growth this year, according to a China Daily report.

The growth in both outbound investment from, and inbound investment to, China reflects the nation’s rising economic power and attractiveness as an investment destination.

The ministry made the announcements during a press conference held in Xiamen on the upcoming United Nations Conference on Trade and Development (UNCTAD) World Investment Forum and the 14th China International Fair for Investment and Trade. Both forums will start on Tuesday.

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Jul 21

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.

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