Debt crisis a threat to growing exports

Updated: 2011-08-13 07:41

By Ding Qingfen and Zhou Siyu (China Daily)

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BEIJING - Despite the unexpected jump in July exports, overseas demand for Chinese goods remains shaky in the face of debt problems in the United States and the European Union, said Li Rongcan, assistant minister of commerce.

"The business environment both at home and abroad for Chinese manufacturers is very complicated and unstable and there are still many uncertainties," Li told the China Top 500 Foreign Trade Enterprises Forum 2011 in Beijing on Friday.

"The slowdown of the global economic recovery is making the growth of Chinese exports slow down, and the overlapping of the sovereign debt crisis with the US and euro bloc is adding turbulence to the world financial market," he said.

Li made the remarks two days after the latest trade figures showed that exports jumped by a higher-than-expected 20.4 percent in July, leading to a monthly trade surplus of $31.5 billion, the highest since January 2009.

However, that blip comes after the monthly figure had been on a decline for the first six months of this year.

Many exporters said they had experienced the worst time since the outbreak of the financial crisis in late 2008.

Besides the shrinking overseas demand, rising costs and the continual appreciation of the yuan are hurting exporters. On Thursday, the yuan strengthened beyond 6.4 per dollar for the first time in 17 years.

Although short-term prospects might be sound due to the increasing orders for the Christmas season, experts and manufacturers said they are not upbeat about overseas sales in the longer term, as the US sovereign treasury ratings were downgraded and the EU debt crisis is spreading.

"It's hard to predict precisely how the global debt crisis will affect our exports in the long term, but the general picture is gloomy," said Wang Huidao, general manager of Hiking (Qingdao) International Trading Service Group Co Ltd, a subsidiary of Hiking Group, the largest foreign trade company in Shandong.

Compared with the previous year, the company saw a "slight" increase in sales during the first six months, but "the pressure for the second half is huge, and probably we have to get ourselves ready for difficulties for another two to three years", Wang said.

On Thursday, the Ministry of Commerce warned that the EU is considering charging high-level import duties on goods from China, citing reports from European media that the EU is expected to levy and extend duties on tiles and bicycles.

Zhang Ji, director of the ministry's department of mechanical, electronic and high-tech industry, said recently that China's exports will decelerate and some manufacturers, especially in the mechanical and electrical sectors, will probably die out

New advantages

Also at the forum, China released a report on its top 500 foreign trade companies, showing private companies are playing a bigger role in China's foreign trade, with the proportion of their trade rising to 25 percent of the national total in 2010 from 16 percent in 2005.

"It's high time for Chinese manufacturers to strengthen their advantages through adding research and development efforts and expanding global sales networks and enhancing after-sales service, especially for automotives, household appliances and engineering machinery," said Li.

Emerging markets including Brazil, India, Indonesia and Russia, as well as South Korea, deserve more focus and effort, Li said.

During the first seven months, China's exports to Brazil and Russia rose by 38 and 37 percent, while the average growth was 25 percent.

Exports of mechanical and electrical products and high-tech goods rose by 18 and 15 percent.

"Given the complex business environment, we have to assist Chinese companies going overseas and growing into real global brands," Cheng Siwei, former vice-chairman of the Standing Committee of the National People's Congress, said during the forum.

"Establishing sales offices and even manufacturing bases abroad are the right way ahead," he said.