Trade growth tipped to slow to 10pc

PUBLISHED : Monday, 16 January, 2012, 12:00am
UPDATED : Monday, 16 January, 2012, 12:00am


China expects foreign trade growth to slow to around 10 per cent this year, the lowest level since the financial crisis first hit in 2008.

Foreign trade for the world's second-biggest economy would face challenges from weak external demand, a stronger Chinese currency, rising trade competition and rising costs, Xinhua quoted an official from the mainland's top economy planning agency as saying.

'This year our country faces grim export challenges', especially in the first half, Zhang Xiaoqiang from the National Development and Reform Commission said at a public forum in Beijing over the weekend.

Last year, China's foreign trade grew 22.5 per cent to US$3.6 trillion, according to the General Administration of Customs.

Shanghai-based Lu Zhengwei, chief economist at Industrial Bank, said China had maintained average annual export growth of 29 per cent since it joined the World Trade Organisation.

'[But] whenever China experiences a drop in property prices and weakening exports, there's going to be a problem with the economy. I see both of these factors this year,' Lu said. 'Without export and property growth, what else will help China maintain its GDP growth?'

Lu added that China's decision to not depreciate the yuan against the dollar had intensified export challenges.

Zhang said the government would improve tax policies and also ask banks and other financial institutions to provide more funding for trade finance, especially to small and medium-sized enterprises (SMEs).

A slump in export demand has prompted the central government to relax the tightening measures that characterised last year.

Beijing has promised to help struggling manufacturers and exporters, and issued policies giving banks incentives to lend to smaller firms.

To avoid currency exchange risks, Zhang encouraged exporters to settle trade using yuan more often.

Export growth in China fell 40 basis points to 13.4 per cent in December compared with November, amounting to a total of US$174.72 billion.

Brian Jackson, a Hong Kong-based strategist with Royal Bank of Canada, said in a report that December's export data suggested that trade flows were continuing to soften. But he added that there was little to suggest that 'China is facing another collapse in exports and imports similar to that seen in late 2008 and early 2009'.