Foreign trade situation far from optimistic this year: China

Thwarted global demand, rising domestic costs, harsh trading environment weighs

China's foreign trade this year faces a situation "far from optimistic" due to thwarted global demand, rising costs at home and a harsh trading environment, the government has said.

China should clearly understand that trade development is facing mounting challenges and complicated constraints, and "the situations are far from optimistic," said a Commerce Ministry statement here.

A major problem is the seriously withering global demand due to weak world economic growth, especially in Europe that is on the verge of a recession, said the statement carried by the official media.

China's export companies have felt the strain, as they are receiving far fewer orders than in the same period last year, it said.

Adding to woes, domestic companies are experiencing higher costs of labour and raw materials, which is cutting into their profitability and increasing operating pressures.

Urban workers' incomes have risen by an average annual rate of 33% during the past three years, and minimum wage standards in most regions rose by more than 20% in the past two years.

"China's small and mid-sized enterprises still face prominent difficulties in getting loans, and those that can get loans said the costs are quite high," said the ministry.

The ministry also pointed out that the country is facing a relatively harsh trade environment, as "China has encountered the most trade frictions in the world for 17 consecutive years.

"In the first quarter, other countries launched 16 trade- remedy investigations for Chinese products involving a total value of $3 billion," it said.

The number of such cases surged 80% over the same period last year, while the total value involved jumped 140%, the statement said.

After trade growth slowed for a second consecutive quarter in the January-March period, China's trade will continue to grow at a slow pace in the second quarter and the annual rate will drop from that of 2011, the Chinese Commerce Ministry said in the statement issued last night.

In the first quarter, China's imports and exports expanded 7.3% from the year-ago period to reach $859.37 billion. The growth rate was 22.3 percentage points lower than that of a year ago marking the slowest pace since the fourth quarter of 2009.

"Considering both the international and domestic environments, there are certain advantages and positive factors for maintaining steady trade growth, but 2012 is going to be an extremely challenging year for China's foreign trade," the statement said.

Since the beginning of this year, the global economy has shown some positive signs, it said citing examples such as better-than-expected economic growth in US and Japan and efforts to contain EU debt crisis.

Domestically, China's economic situation is basically sound, as its economy expanded steadily in the first quarter and market confidence remained stable, it said.

China's economy expanded 8.1% year on year in the first quarter, marking the fifth consecutive quarterly decline and the slowest growth pace since the third quarter of 2009.

"The growth of the economy still has great potential and there is a relatively large amount of leeway for macroeconomic regulatory policies," it said.

The ministry however predicted that China's foreign trade growth will remain at a low level in the second quarter and be slower than the growth registered last year. "The trade balance situations will further improve," it said.

The Ministry has released a programme for foreign trade development during the 12th Five-year Plan (2011-2015) period, saying that China will pursue balanced, progressive and mutually beneficial trade development during the period.

This is the first time for the Chinese government to have released a five-year programme on foreign trade development.