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Special> China International Fair For Investment & Trade> Beijing Review Exclusive> Trade
UPDATED: July 27, 2009 NO. 30 JULY 30, 2009
Export Uncertainties
A lack of foreign trade has dragged China's economic growth down

"Due to the above-mentioned factors, we forecast China will export $1.26 trillion this year, down 12 percent compared with that of last year, which will serve as a negative factor in the country's GDP growth," said Chen.

Trade policy at a crossroad

The bleak external demand and domestic production suspension have put foreign trade policy-making in a difficult situation.

Sun Jun, an economic information researcher at the China Council for the Promotion of International Trade, said of the target 8-percent GDP growth, exports should contribute at least 10 percent and make up 0.8 percentage points of the growth rate.

The first-half's export performance, however, will make it difficult to attain the 0.8-percentage point contribution to GDP growth.

Confronted with such a predicament in exporting, the question arises about how Chinese foreign trade policy can be readjusted to achieve the growth.

The Ministry of Commerce (MOFCOM) adopted policies that promote free trade and oppose trade protectionism, as well as export-oriented policies, in a bid to spur exports. "But the effects of those policies are not obvious," Sun said.

The current trade policy is stuck in a dilemma, Sun said. It must not only safeguard free trade by requiring foreign countries to keep their markets open so that "made-in-China" products get access to international markets, but must also address the shrinking market demand that are taking their tolls on exports.

Exploring new markets

Given its current export situation, China should not start a new round of export tax rebate hikes, Chen said.

Since the outset of the global financial crisis, China has raised export tax rebates seven times, adding competitiveness to exporters and increasing employment. However, unless exports continue to plunge, no new rebate hikes should be adopted, since the current rebate rates have already yielded positive effects, Chen said.

The most urgent task, Chen said, is to expand cross-border renminbi settlement pilot bases (where importers and exporters are able to trade in renminbi), a procedure in line with the export expansion demand and a prerequisite for the future reform of the renminbi exchange rate system. Chen urged the government to set up more pilot bases and enact details covering cross-border renminbi settlements.

Exporters can also explore emerging markets on top of stabilizing traditional markets, Chen suggested. "Our exporters should take advantage of the economic slowdown to invest more in the Middle East, Latin America and Africa, especially the markets in Russia, Brazil and India," Chen suggested. In the meantime, "we can expand exports by way of providing aid to foreign countries. We can provide financial support to recipient countries, but require those countries to buy Chinese products," Chen said.

Africa and India, the two economies with expected high growth rates, are also the markets where Chinese exports saw slight declines in the first half of this year. Hence, domestic companies may try to expand their exports to these regions in the second half of this year, Chen added.

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