China Export Story and Trade Scenario with India and other Economies
November 2012’s trade data, published by the General Administration of Customs, showed that China’s trade surplus for the month was $US19.6 billion ($18.7bn), down 38 % from $US32bn in October 2012.
The weaker-than-expected data sparked speculation that Beijing may introduce stimulus measures to spur growth. Exports rose by mere 1% year on year to USD 176.9 billion in July, plummeting from the 11.3 % growth seen in June and well below market expectations.
The ministry attributed the slower growth to the slowing economy, dropping inflation and structural tax reductions.
India- China trade
A steep decline in Indian exports to China in October 2012 has widened the trade imbalance between both countries to $23 billion.
While officials say Indian demand for sourcing in China is still strong, a sharp fall in iron ore exports and continuing uncertainties in the power and telecom sectors – where the imports of Chinese equipment have emerged as a key driver of trade – have left an uncertain future for the trade relationship, and cast doubt on whether a $100 billion target set for 2015 will be met.
Officials attributed the decline to a close to 50 % fall in Chinese purchases of iron ore, the biggest Indian export to China.
Also, exports were partly hit by depreciation of the rupee, which is discouraging the Indian exporter to aggressively market their products in Chinese markets as returns are poor.
Besides, steel consumption in China, till recently regarded as the world’s factory for its massive export potential, has come down due to fall in its global markets especially, the EU and the US.
Many Chinese steel factories including the country’s biggest factory — the Bao Steel in Shanghai — have been closed as a result.
Significantly China’s exports to India also registered a downturn. According to the figures, China’s exports totalled $39.3 billion from January 2012 to October 2012, registering a decline of 5.7 %.
At the inauguration of the “India Show” in Beijing, more than 80 Indian automobile companies are participated.
CII has sent a 19-member business delegation to China to discuss ways to strengthen trade and investment ties between the 2 countries.
CII President Designate S Gopalakrishnan said Indian companies, operating in areas like manufacturing and IT, are also investing in China.
China’s central bank has been intervening to keep the currency steady by trying to mitigate rising inflation and declining currency that could kindle political unrest. Yet at the same time, it is assuring that money supply growth continues at a moderate and rising pace.
Purchasing Managers’ Index (PMI) is an indicator of financial activity reflecting purchasing managers’ acquisition of goods and services. The Purchasing Managers’ Index (PMI) surveys on a monthly basis by polling businesses that represents the make up of the respective sector. The surveys cover private sector companies, but not the public sector. China’s official factory purchasing managers’ index slipped to 50.1 points in July 2012, lowest in 8 months.
Beijing is also supporting new local government spending proposals, pushing the state sector back into a role it played after the onset of the 2008 global financial crisis.
China’s industrial profits have slipped and capital has been flowing out of the country, putting greater pressure on local governments and the banking sector. And while property prices have begun to rebound, that seems unlikely to revive growth or stabilize the labor market.
China announced the rate cut as the Bank of England launched a third round of monetary stimulus and the European Central Bank cuts its main interest rate. Policymakers globally are trying to combat the impact of the euro area debt crisis on the world economy and announced a series of bold spending packages aimed at reviving construction and government projects, such as the nation’s high-speed rail system.
Beijing has also allowed its currency, the renminbi, to weaken against the dollar in recent months, in what seems to be an effort to aid struggling exporters. However, that has not helped exports to Europe, as the renminbi has not weakened against the euro and demand on the Continent remains soft.
Trade between China and the European Union has doubled since 2003, rising to 428 billion euros ($558 billion) in 2011, making the EU China’s biggest trading partner.
However, ongoing disputes range from metal tubes to China’s restrictions of exports of rare earth metals.
The European Union implemented a landmark free-trade deal with South Korea in 2011, which went beyond tariff reductions and took in regulation and services. Now it is seeking to forge similar pacts with Japan and the United States.
The slowdown in China’s economic growth has eased recently, but trade with Japan continues to feel the effects of the territorial dispute over the Senkaku Islands. China was Japan’s largest trading partner in 2011, and Japan is China’s second-biggest trading partner after the United States.
While the two countries are mutually dependent economically, some analysts in both places warn that Japan is overly dependent on China. Automakers, electronics companies and even supermarkets and convenience stores have begun investing heavily in China in part to escape shrinking demand at home.
China, Japan and South Korea are attempting to limit the economic fallout due to territorial tensions.
While a free-trade pact between China and Europe is unlikely even in the medium term, Brussels and Beijing could agree on an investment pact that would lay down rules for companies expanding in both regions.
He Jun, senior researcher at Anbound Consultancy Company, one of the largest independent think tanks in China, told The Australian that the government should scrap its export growth targets. China has to give up annual target for trade to grow at 10 % this year and be more realistic.