China's overall trade surplus shrank 12.5 per cent last year as its tight monetary regime curtailed domestic consumption and imports, but many economists expect Beijing to unleash measures to spur growth this year.
Ahead of the official release of 2011 trade data early next week, Commerce Minster Chen Deming said yesterday the trade surplus shrank to about US$160 billion last year from US$183 billion in 2010. But it was still bigger than the US$150 billion central government policymakers had targeted.
Chen vowed to stabilise trade this year in the face of the unsettling debt crisis in the European Union and sluggish demand in the US, China's top two export destinations.
Economists with Citigroup, Daiwa Capital Markets, HSBC and UBS anticipated China's exports would slow to a single-digit increase in the next three months. To avoid an economic downturn as a result of slower exports, they forecast the central government would spur growth by offering tax incentives for companies and reductions in the reserve requirement ratio, the level of cash banks must set aside when lending.
The government is expected to continue sharp increases in the minimum wage to lift spending power and spur domestic consumption.
Still, some economists said a dwindling surplus could ease the constant pressure on Beijing from US policymakers to raise the value of the yuan. Holding off an increase would give temporary breathing space to growth-challenged Hong Kong exporters across the border.
But as a regional banking and finance hub, Hong Kong was vulnerable to the euro-zone crisis if European banks withdrew lending from Asia, HSBC economist Donna Kwok said. 'Hong Kong escaped recession in 2011, but another dip into recession is possible for 2012,' she said. Kwok forecast the city's economy would slow to 3.1 per cent this year from an estimated 5 per cent last year and 7 per cent in 2010.
Acting Chief Secretary Stephen Lam Sui-lung warned yesterday that Hong Kong's economic growth would slow from last year, but consumer price inflation would be lower than last year.
Bank of East Asia chief economist Paul Tang Sai-on said Hong Kong would instantly feel the pinch if the European debt crisis worsened.
But for the first quarter of this year, he said the 'feel-good' factor hovered around the city on the back of an average 9.9 per cent pay rise in the third quarter last year and relatively low unemployment at 3.4 per cent in November. 'The desire to spend is still so strong that diners are unlikely to get a table without booking in advance even though it is more expensive to dine out,' he said.
The rate at which Hong Kong's economy is expected to grow this year, says an HSBC economist
- Last year it was 5 per cent
- In 2010, 7 per cent