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China Voice: Grim Trade Outlook May Prove Bittersweet for China's Economy

Data Analysis 08:49:14AM Dec 21, 2011 Source:SMM

BEIJING, Dec. 20 (Xinhua) -- China has long pledged to restructure its economy which used to rely heavily on exports to fuel its growth.

There won't be too many happy hours in 2012, as some media recently pointed to a "severe export outlook" for the world's second largest economy due to weak demand from Europe and the United States.

Zhiwei Zhang, an economist with Hong Kong-based Nomura, was quoted by Reuters as saying that he expects China to see a rare trade deficit of 28.8 billion U.S. dollars in the first quarter of 2012.

If Zhang's prediction becomes reality, it would mark a sharp increase from the 1-billion-U.S. dollar deficit posted over the same period in 2011.

But will his forecast be correct?

China is becoming more tolerant of a narrowing trade surplus -- or even a trade deficit -- in a single month or quarter, with its unwavering resolve to make its economy more balanced and sustainable by reducing the country's reliance on exports while increasing domestic consumption to drive the economy.

Official statistics confirm this resolve. The contribution of exports to China's gross domestic product (GDP) turned negative in the first three quarters of 2011 because of staggering demand from the EU and the U.S., China's two largest trading partners.

To be exact, exports pulled down China's GDP by 0.1 percentage point in the first three quarters, according to the National Bureau of Statistics, underlining an 18.2-percent year-on-year decline in trade surplus from January to November this year.

China's trade surplus totaled about 180 billion U.S. dollars in 2010 and is expected to fall to 150 billion U.S. dollars this year, according to the Ministry of Commerce.

China's economic growth has been slowing to single-digits all year. Its GDP growth slowed to 9.1 percent in the third quarter from 9.5 percent in the second quarter and 9.7 percent in the first quarter.

However, development in China remains unbalanced, uncoordinated and unsustainable, thus creating the need to transform its economic development pattern and restructure its economy, according to a statement from a key conference last week which set the tone for next year's economic policies.

China does not intentionally seek a trade surplus and will beef up efforts to improve its international balance of payments, Chinese President Hu Jintao said at the conference.

Hu said China would work to boost imports while stabilizing exports next year.

Increasing imports bodes well for the debt crisis-plagued EU and U.S., which will certainly benefit from increasing Chinese demand for foreign goods and services in 2012.

Nonetheless, China still faces possible job losses domestically over falling overseas orders next year, as the export sector employs millions of migrant workers every year in the country's coastal regions, such as Guangdong province.

To absorb potential lay-offs in the export sector, China needs to accelerate the development of its service sector and further expand domestic consumption, which contributed to 47.9 percent of the country's GDP growth in the first three quarters.

If the economic restructuring finally comes as designed, China's economy will be more sustainable and more capable of heading off another global economic slowdown in the future.

From this perspective, a narrowing trade surplus or trade deficit may catalyze a more healthy Chinese economy in the long run.

But to bring such a bright vision into reality, China should first weather a tough time in the short term. 

 

 

Key Words:  China   economic outlook   export 

China Voice: Grim Trade Outlook May Prove Bittersweet for China's Economy

Data Analysis 08:49:14AM Dec 21, 2011 Source:SMM

BEIJING, Dec. 20 (Xinhua) -- China has long pledged to restructure its economy which used to rely heavily on exports to fuel its growth.

There won't be too many happy hours in 2012, as some media recently pointed to a "severe export outlook" for the world's second largest economy due to weak demand from Europe and the United States.

Zhiwei Zhang, an economist with Hong Kong-based Nomura, was quoted by Reuters as saying that he expects China to see a rare trade deficit of 28.8 billion U.S. dollars in the first quarter of 2012.

If Zhang's prediction becomes reality, it would mark a sharp increase from the 1-billion-U.S. dollar deficit posted over the same period in 2011.

But will his forecast be correct?

China is becoming more tolerant of a narrowing trade surplus -- or even a trade deficit -- in a single month or quarter, with its unwavering resolve to make its economy more balanced and sustainable by reducing the country's reliance on exports while increasing domestic consumption to drive the economy.

Official statistics confirm this resolve. The contribution of exports to China's gross domestic product (GDP) turned negative in the first three quarters of 2011 because of staggering demand from the EU and the U.S., China's two largest trading partners.

To be exact, exports pulled down China's GDP by 0.1 percentage point in the first three quarters, according to the National Bureau of Statistics, underlining an 18.2-percent year-on-year decline in trade surplus from January to November this year.

China's trade surplus totaled about 180 billion U.S. dollars in 2010 and is expected to fall to 150 billion U.S. dollars this year, according to the Ministry of Commerce.

China's economic growth has been slowing to single-digits all year. Its GDP growth slowed to 9.1 percent in the third quarter from 9.5 percent in the second quarter and 9.7 percent in the first quarter.

However, development in China remains unbalanced, uncoordinated and unsustainable, thus creating the need to transform its economic development pattern and restructure its economy, according to a statement from a key conference last week which set the tone for next year's economic policies.

China does not intentionally seek a trade surplus and will beef up efforts to improve its international balance of payments, Chinese President Hu Jintao said at the conference.

Hu said China would work to boost imports while stabilizing exports next year.

Increasing imports bodes well for the debt crisis-plagued EU and U.S., which will certainly benefit from increasing Chinese demand for foreign goods and services in 2012.

Nonetheless, China still faces possible job losses domestically over falling overseas orders next year, as the export sector employs millions of migrant workers every year in the country's coastal regions, such as Guangdong province.

To absorb potential lay-offs in the export sector, China needs to accelerate the development of its service sector and further expand domestic consumption, which contributed to 47.9 percent of the country's GDP growth in the first three quarters.

If the economic restructuring finally comes as designed, China's economy will be more sustainable and more capable of heading off another global economic slowdown in the future.

From this perspective, a narrowing trade surplus or trade deficit may catalyze a more healthy Chinese economy in the long run.

But to bring such a bright vision into reality, China should first weather a tough time in the short term. 

 

 

Key Words:  China   economic outlook   export