SELLER BECOMES BUYER: A cargo ship sits at the loading and unloading area of Shanghai's Waigaoqiao Port. For the first time in six years, China imported more goods than it exported (PEI XIN)
For the first time since April 2004, China experienced a monthly trade deficit as imports surpassed exports. Statistics released by the General Administration of Customs on April 10 showed China's export and import volume reached $112.11 billion and $119.35 billion in March, respectively, leading to a trade deficit of $7.24 billion.
At the end of April 2004, China's trade deficit sat at $10.76 billion. But immediately, China's foreign trade entered a period of trade surplus that lasted 70 months. The monthly trade surplus at one point hit a record high of $40.09 billion.
After the outbreak of the global financial crisis in 2008, China's foreign trade suffered considerably with the trade surplus in constant decline since October 2009 until the trade deficit last March.
Some experts noted China's first monthly trade deficit in the past six years may indicate the country will gradually evolve from a "world factory" into a "world market."
The trade deficit in March derived mainly from the rapid growth of imports driven by the continual expansion and upgrading of domestic consumption as the Chinese economy stabilizes, Yao Jian, a spokesman for the Ministry of Commerce (MOFCOM), said during an interview on April 11. According to customs figures, crude oil, refined oil, iron ore, copper, automobiles and soybean made up the biggest part of imported commodities.
Customs figures also indicate three major features of the composition of trade deficit in March. First, China's trade deficits with Europe and the United States were narrowed while those with neighboring countries and regions such as Japan, South Korea, Southeast Asia and China's Taiwan had expanded. China's trade surplus with the United States and Europe stood at $9.87 billion and $6.96 billion, respectively, decreasing $360 million and $1.05 billion, or 3.5 percent and 13.1 percent, year on year. Second, general trade experienced huge deficits instead of surpluses, while the surplus of processing trade only made slight increases. Third, trade deficits by state-owned enterprises increased rapidly to $16.12 billion, a rise of $9.46 billion, or 1.4 times, from the same period of last year.
Yao said this indicated that when China implements its stimulus package to expand domestic demand, it is also opening its market and actively expanding imports from various countries, which helps promote the trade balance and improve the international balance of payment. He said the trade deficit in March fully illustrated under economic globalization the deciding factor of creating a trade balance is not the exchange rate, but other factors such as market demand and supply.
MOFCOM information showed in 2010, China will adopt measures to further expand imports while stabilizing its exports to promote the balanced and sustainable development of foreign trade.
MOFCOM will continue to expand imports, establish and improve import promotion mechanisms and expand imports of advanced technologies and equipment, key components, as well as goods and materials that are in short supply in China.
Therefore, MOFCOM will further improve the measures to facilitate import trade, sort out import administration measures, further relax import restrictions and readjust the scope of commodities under the management of automatic import certificates. In the meantime, MOFCOM will, together with the customs and quarantine authorities, promote customs clearance efficiency and simplified quarantine measures.
MOFCOM will also sponsor trade promotion at important exhibitions like the China Export and Import Fair, offering discounted exhibition areas to developing countries with substantial trade surpluses to China and free exhibition floors to the least developed countries. It will also strengthen its public information services to establish a platform allowing foreign commodities to enter the Chinese market.
Meanwhile, China will promote imports by strengthening regional cooperation and advancing bilateral trade development. Up to now, China has signed and implemented eight free trade area agreements, involving 16 countries and regions. This has effectively expanded China's imports from those countries and regions. Since the ASEAN (Association of Southeast Asian Nations)-China Free Trade Area was established on January 1, 2010, China's imports from six ASEAN members have been markedly higher than its exports to these nations.
China has now become an important export destination for many countries, Yao said. For example, in 2009, China was the largest destination of Japanese, Australian, South Korean, ASEAN, Brazilian and South African goods. China was also the third largest export destination of the United States, the European Union and India. The proportion of exports to China among their total exports all increased in 2009, indicating China's stimulus package to promote a steady and fast economic growth amid the financial crisis not only promoted China's economic development, but also made important contributions to the global economic recovery.
Yao said China is strengthening its communication with various countries, hoping for a relaxation of restrictions on hi-tech exports to China.
"We hope that related countries will eliminate exporting restrictions to China as soon as possible and create conditions for promoting balanced bilateral trade," said Yao.
Figures from the General Administration of Customs showed China's exports increased 24.3 percent in March 2010 year on year, 21.4 percentage points lower than the previous month's growth. Imports in March soared 66 percent year on year, which was 21.6 percentage points higher than the previous month.
IMPORT NECESSITY: Trains transport timber, oil and fertilizers from Russia at the Manzhouli trading port of Inner Mongolia. Increasing domestic consumption has driven up demand for imported goods (LI XIN)
Liu Nenghua, a researcher at the Financial Research Center of the Bank of Communications, estimates in the second quarter of 2010, China's export growth will drop to about 15 percent, while the import growth will likely to exceed 20 percent. The reason for this shift is that along with the weakening of the effect of stimulus policies in Europe and the United States, the growth of the international economy will be limited, which will result in a continual decline in China's export growth, while the growing domestic demand will further push up the country's import growth.
Liu said he thinks the slow export growth compared to imports will narrow the trade surplus this year, but trade deficits will continue in the coming months.
Xiao Geng, a professor at the School of Public Policy and Management at Tsinghua University, said the trade deficit in March may be a turning point, and frequent trade deficits will follow.
According to Xiao's analysis, after the financial crisis, China's domestic investment—driven by the government stimulus policy—increased rapidly. So did consumption, leading to continued import growth. On the other hand, due to the weak recovery in other countries, China's exports were less than promising. Judging from the current situation, the world economic recovery is not strong, which means China's export growth will not pick up soon, and it will be hard for the country to resume trade levels enjoyed before the crisis, he said.
As for China's future trading tendencies, figures released by the General Administration of Customs on April 10 indicate that the trade deficit in March appeared when exports grew quickly—not because of a slump in exports. The scale of the trade deficit was only 3.1 percent of the total trade volume, much lower than the warning limit of 10 percent. China's trade surplus is likely to continue to narrow, while exports and imports become more balanced.
Q1 Foreign Trade
In the first quarter of 2010, China's exports and imports totaled $617.85 billion, surging 44.1 percent compared with the same period of last year. Of the total, exports were valued at $316.17 billion and imports at $301.68 billion, up 28.7 percent and 64.6 percent, respectively, year on year. The trade surplus stood at $14.49 billion, a decrease of 76.7 percent from a year ago.
The European Union was China's largest trading partner, with a bilateral trade volume of $101.47 billion, a 35.1-percent increase year on year. The United States remained China's second largest trading partner, with a bilateral trade volume of $78.11 billion, up 25.8 percent. Japan replaced ASEAN as China's third largest trading partner with a bilateral trade volume of $63.61 billion, up 38.2 percent. China's trade with ASEAN totaled $62.91 billion, up 61.3 percent from the same period of last year.
In March, China had a trade deficit of $7.24 billion, mainly from Taiwan, Japan and South Korea, with respective amount reaching $7.9 billion, $6.53 billion and $6.13 billion.
In March alone, China's trade volume was $231.46 billion, up 42.8 percent year on year. Of this, exports were valued at $112.11 billion, up 24.3 percent, and imports at $119.35 billion, up 66 percent.
(Source: General Administration of Customs)