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China

Trade Winds Change in China

China’s role in international trade is changing rapidly, but export prospects in major markets are ‘bleak’

China’s role in international trade is changing rapidly, but export prospects in major markets are ‘bleak’ China, the world’s second-largest economy after the U.S., saw foreign trade grow at its slowest monthly pace in two years in December, and although the value of imports and exports reached a record $3.6 trillion last year, the country’s trade surplus sank to a three-year low.

The numbers are in part attributable to weak external demand and the world’s currency markets – the yuan has been gradually appreciating – but they signal the emergence of distinct new trends in trade flows to and from China.

This was evident at the country’s harbors. While northern ports such as Tianjin-Xingang, Dalian and Lianyungang racked up double-digit growth in throughput for much of 2011, traditional hubs in the south saw minimal growth, and Hong Kong saw exports of loaded containers decline by some 8 percent year-over-year in the third quarter.

Air cargo operators also reported a decline in exports from most destinations during 2011, but trade to Europe and the U.S. achieved greater balance as imports increased, while demand for uplift capacity from thriving internal industrial centers such as Chengdu and Chongqing soared.

Several factors contributed to the shifts in the trading landscape. Of most importance has been the growth of China’s growing middle class and its ravenous appetite for finished products, and the accelerating migration of manufacturing in China inland and north to avoid higher labor costs in the south.

Richard Strollo, managing director for Southeast Asia at Philadelphia-based BDP International, said China is undergoing fundamental structural change as government policy encourages a reduction in the economy’s reliance on export markets, a move, he said, that is creating new challenges and opportunities both for producers and the transport managers that support them

“We’re looking at how we can support this growth in consumerism in China,” he said. “There’s now more focus on Chinese consumers of finished goods, there is more balance on imports and exports, the middle class is growing, economic development is moving west and north.”

“We’re looking at how we can support this growth in consumerism in China. There’s now more focus on Chinese consumers of finished goods, there is more balance on imports and exports, the middle class is growing, economic development is moving west and north.”

Richard Strollo, Managing Director – BDP Southeast Asia

This year, China’s foreign trade growth is forecast to be around 10 percent, far slower than in 2011 because of the poor state of export markets, particularly Europe. “We expect more difficulties in foreign trade, and the export situation will be grim in 2012, especially in the first half of the year,” Zhang Xiaoqiang, deputy director of the National Development and Reform Commission, said this month.

Zeng Peiyan, a former vice premier, said the economic situation in Europe left China’s export outlook uncertain, and the appreciation of the yuan adds to the pressure on small and medium-sized enterprises. But he predicts the government will lower import taxes this year on some consumer goods to help boost imports.

IHS Global Insight also sees the export outlook for China as bleak. “Even if the eurozone avoids a near-term blowout, its longer-term growth will likely remain weak given the fundamental structural problems of the monetary union remain unresolved,” the analyst group said. “That said, the purchasing managers’ indexes suggest that demand withdrawal in the current downturn is nowhere near as severe as in 2008-2009.”

The key question for China’s export sector, says IHS, is whether it can reorient itself and create a supply-side boost to offset weaker demand abroad

“To some extent, improvement in the U.S. economy has cushioned the demand correction in Europe,” IHS said. “Given the eurozone crisis has, thus far, been a slow-bleeding process – unlike the sudden collapse of the U.S. financial crisis – China’s hard landing risks are not imminent, at least from the external sector.”

Source: The Journal of Commerce

What China wants in 2012

China believes in deepening cooperation with all of the world’s major regions

By: Li Zhaoxing

With economic globalisation and the advent of a multi-polar world, China and other emerging countries are clearly set to play much more important roles not only in 2012, but in the coming decades. As China’s economic power and influence in the world economy have increased following the financial crisis of 2008, the idea has been floated that China and the United States should co- lead the world under some sort of ‘G-2’ arrangement.

But such a G-2 framework is not consistent with China’s independent foreign policy, nor with the general trend toward wider dispersion of geopolitical power within the international community. Although China’s senior leadership will change this year, this position will not change.

Indeed, when China’s Premier Wen Jiabao visited Prague in May 2009 for the 11th China-European Union (EU) summit, he explained that China is opposed to the G-2 concept. It is China’s firm intention never to seek hegemony, nor to support global domination by a small minority of countries.

What China does believe in is deepening cooperation with all of the world’s major regions. Consider Europe - a splendid and time-honoured civilisation and now a major player on the world stage. The progressive deepening of EU integration has brought dynamic vigour to the European continent; despite Europe’s current difficulties, it still boasts extraordinary overall strength and international influence.

China has always supported European integration and hopes that the EU will become a pillar of international order. In the wake of the global financial crisis and the eurozone’s sovereign-debt crisis, China has bought government bonds, made direct investments, and sent business delegations to Europe.

During Spanish Prime Minister Jose Luis Zapatero’s visit to Beijing in April 2011, Mr Wen reaffirmed China’s willingness to continue purchasing Spanish government bonds as a further demonstration of our support for Europe’s efforts to emerge from its crisis. Moreover, China’s huge market and labour pool have created important opportunities for Europe.

In this new multi-polar era, China and Europe must work together and they are now at a critical moment if they are to deepen their cooperation. What we do to share opportunities, meet challenges, and pursue development will be directly relevant not only to our own peoples’ welfare, but also to the world’s future. China-EU cooperation will be essential to maintaining global peace and stability.

We share a commitment to resolving international issues through political means and both sides have already played a constructive role in addressing global challenges such as climate change, terrorism, and the proliferation of weapons of mass destruction.

The parallel launch of China’s 12th Five-Year Plan and Europe’s 2020 Strategy has also helped to deepen our cooperation. China and Europe worked together after 2008 to prevent a global financial meltdown, oppose protectionism, and promote reform of the international financial system, thus facilitating worldwide economic recovery.

China also takes its relations with the US very seriously. Indeed, our bilateral relationship is among the most important in the international community. That relationship has gone through some rough patches since diplomatic ties were established in 1979, but, overall, it has continued to grow and benefit both sides. Today, China and the US share more interests than ever, and there are encouraging prospects for still broader cooperation.

When President Hu Jintao visited Washington, DC in January 2011, he and President Barack Obama agreed to build what Mr Hu referred to as ‘a China-US cooperative partnership based on respect and mutual benefit’.

They reaffirmed their deference for each other’s sovereignty and territorial integrity and reached agreements on major strategic issues, including efforts to strengthen cooperation in the Asia-Pacific region and in multilateral institutions, and to respond jointly to regional and global challenges to peace and stability, for example, on the Korean Peninsula.

China is the world’s largest developing country; Europe is the largest bloc of developed countries; and the United States is the largest single developed country. Together, we account for nearly a third of humanity and two-thirds of the world economy.

As the three major global powers, China, the EU, and the US must strengthen their cooperation and must work with the rest of the world to face the complex international issues that challenge us all. Together, we must shoulder the great task of upholding world peace and promoting common development.

While China is committed to its own independent foreign policy, it cannot achieve development in isolation. Likewise, the world cannot develop without China.

Mr Hu once said that the 21st century should be a century of peace, development, and cooperation. China is willing to join with the EU, the US, and the rest of the world to realise the potential of a truly harmonious world.

Li Zhaoxing was China’s foreign minister from 2003-2007 and is currently chairman of the Foreign Affairs Committee of the National People’s Congress.

Source: The Business Times