2010-07-14 10:07

Nation's traders hit by appreciation of yuan, lowering of tax rebates

BEIJING - A leading Chinese trade think-tank called on the government to ensure there are no major changes to currency and export-related policies, citing the "unhopeful" prospects for Chinese exports in the coming months despite the better-than-expected performance in June.

Long Guoqiang, a senior research fellow from the Development Research Center of the State Council, told China Daily that the nation's export growth will "decelerate" in the second half and the strong growth momentum witnessed in June cannot be sustained.

Last weekend, the Customs announced China's exports for June jumped 43.9 percent to $137.4 billion, the highest growth since July 2008, which sparked speculation that a robust export recovery was under way.

A Deutsche Bank report said the rise in exports boosted sentiment and eased concern that the economic slowdown worldwide had shrunk demand for Chinese goods.

"I cannot see any clues that the nation's exports will surge. Given high unemployment rates, coming austerity policies and the conclusion of stock replenishment in overseas markets, China's shipments overseas will be lower in the second half of the year," said Long, also director-general of the center's Research Department of Foreign Economic Relations.

"I strongly suggest that policies related to external demand remain unchanged, at least for the rest of the year. Any big move in the short term will make things even worse for Chinese exporters," Long said.

The Chinese government recently initiated a series of new policies that impact exporters. In mid-June, China launched a reform of its foreign exchange regime, ending a two-year peg to the dollar. During the past three weeks, the yuan has gained by 0.7 percent.

But China still remains under pressure from US political and business figures to let its currency rise further, with threats from some in Washington to bring the yuan issue up at the World Trade Organization.

"The reform does not mean a major yuan appreciation. A sharp rise would deal a big blow to exporters," said Long.

Also in late June, China announced the lowering of tax rebates on a package of goods for export, including steel products, further hurting exports.

"Considering unstable external demand, the best way for the Chinese government to ensure that exports don't slide much further is to make the policies stable," he said.

According to the Customs, China's exports climbed 35.2 percent year-on-year earlier to $705.1 billion from January to June. In June alone, exports to the US and EU increased by over 40 percent, and shipments to the emerging markets including Russia and Brazil outperformed developed economies, with growth standing at 84 and over 100 percent respectively.

But as they began to withdraw stimulus policies, emerging markets were not strong enough to offset the decline in demand in the US and EU.

During last month's G20 Summit in Toronto, the Chinese government said that the outlook for the nation's exports would not be optimistic in the months ahead due to yuan appreciation, rising labor and raw material costs and uncertainty over the global economic recovery.