China's rapid trade growth is at an end, says top government official

Beijing official says rising labour costs and global competition mean the mainland can no longer rely on foreign trade for high growth rates

PUBLISHED : Wednesday, 21 May, 2014, 1:11am
UPDATED : Wednesday, 21 May, 2014, 4:58am

The mainland's era of high trade growth is over, a senior Commerce Ministry official warned, who added that in the short term the country would still need to rely on investment and exports to drive growth.

Zhang Ji, head of the ministry's Foreign Trade Department, cited rising labour and financing costs and intensified global competition for the forecast.

"Generally speaking, the era for foreign trade to maintain continued high growth is gone forever. Our country's foreign trade is expected to operate at a reasonable range of medium- to low-growth rate," he told a press briefing in Beijing yesterday.

Labour costs in China's coastal regions are double, or even triple the costs in countries such as India, Vietnam, and Cambodia, he said. During 1995-1999, China's manufacturing workers' average labour cost was US$729 per year, or a fortieth of that of the US and a quarter of that in Thailand.

Meanwhile, companies in European countries and the United States have reduced their investment in China as governments there rolled out policies to lure their funds back home, said Zhang.

He also noted the rising tensions with Vietnam recently sparked by China's deployment of a mobile oil rig in disputed waters in the South China Sea as a factor that may hurt bilateral trade.

The mainland reported export growth of just 0.9 per cent year on year in April, reversing a 6.6 per cent decline in March. That represents a sharp slowdown from the pace seen in the past few decades.

Between 1978, when Deng Xiaoping initiated the national policy to reform the economic system and open up the previously tightly regulated market, and 2013, China's total foreign trade expanded by an average of 15.9 per cent annually while exports rose 16.3 per cent on average per year.

But demand from developed nations has cooled for China-made products while the mainland's workforce has also been shrinking.

China has already missed its annual trade growth targets for two consecutive years. Last year, the total value of exports and imports grew 7.6 per cent, shy of the annual target of 8 per cent.

Zhang said China would face "a very arduous task" of meeting its annual trade growth target of 7.5 per cent.

"Should we meet this target, we would have to make sure the growth rate for exports and imports to average at 11.3 per cent each month starting in May. That would still require very hard work," Zhang said.

The central government has pledged to transform the mainland's economic structure, hoping to cut its reliance on investment and exports in favour of consumption.

Importing more commodities from abroad would help China ease bottlenecks in resource supplies, Zhang said.

After China's economic growth eased to 7.4 per cent in the first quarter from 7.7 per cent in the fourth quarter of 2013, the State Council recently rolled out steps to bolster foreign trade growth, including cutting fees on exports and imports and expediting export rebates.