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More setbacks likely for rebound in China's trade growth

Commerce ministry concerned that latest support measures may not be enough to spur rebound after exports slow and imports decline

PUBLISHED : Thursday, 20 September, 2012, 12:00am
UPDATED : Thursday, 20 September, 2012, 2:02am
 

The Ministry of Commerce warned yesterday that external demand might cool further in the months ahead, making it more difficult for Beijing to meet its goal of expanding imports and exports by 10 per cent this year.

The comment reflects growing concern that the mainland's trade growth is unlikely to rebound soon, even with the latest pledges of support by Beijing to help companies cope with the deteriorating global economic situation.

Ministry spokesman Shen Danyang said yesterday the government would introduce more detailed measures before next month to stabilise trade.

The State Council recently approved eight major policy steps to support trade activities, including expanding tax rebates for exporters, cutting financing costs for companies and widening the coverage of export insurance.

But Shen said the mainland might not amend its yuan policy to help exports.

"The yuan exchange rate is a complicated issue that needs an overall study by relevant agencies based on market rules, particularly with the involvement of the financial, banking and currency departments," he said.

Mainland exports rose only 2.7 per cent last month, after surging 24.5 per cent in the month a year earlier. Imports unexpectedly fell 2.6 per cent, the first decline since September 2009, after excluding distortions caused by the Lunar New Year holiday.

"The biggest risk is still a larger global downturn," said Louis Kuijs, the chief China economist at the Royal Bank of Scotland. "Amid many fragilities, growth prospects have worsened in both the United States and Europe and major turmoil or a global recession cannot be ruled out."

Shen also warned that Sino-Japan trade relations would be damaged by a territorial dispute over the Diaoyu islands in the East China Sea that are claimed by mainland China, Taiwan and Japan - which calls them the Senkaku islands - that Japan has effectively nationalised.

"The Japan side must bear full responsibilities", he said.

Anti-Japanese protests that swept more than 100 mainland cities forced Japanese com- panies - such as carmakers Mazda Motor and Honda Motor and electrical appliance manufacturers Panasonic and Canon - to temporarily halt some operations on the mainland.

The ministry also said yesterday that foreign investors spent less on the mainland last month, particularly in its manufacturing and property sectors.

Foreign direct investment fell 1.43 per cent from August last year, after posting this year's sharpest drop of 8.7 per cent in July. In the first eight months, foreign direct investment declined 3.4 per cent from the year earlier period to US$75 billion.

Investment in the labour-intensive manufacturing sector dropped 6.7 per cent in the first eight months from a year earlier, while investment in the property sector fell nearly 10 per cent. In the services sector, excluding property, investment grew 5.3 per cent.

Investment from the US and the European Union fell in the first eight months, although spending from Germany and France jumped 27 per cent and 15 per cent, respectively.

Barclays Capital said foreign direct investment "may post an annual decline, or at best be flat" this year. But the trend of faster service sector growth would continue.

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