China’s foreign trade situation under the international financial crisis

China’s foreign trade situation under the international financial crisis

1. Foreign trade continued to grow rapidly in the first three quarters
In the first three quarters of 2019, despite the slowdown in economic growth, the rise in international energy resource prices and the substantial increase in domestic production costs, small and medium-sized enterprises have tight liquidity. Affected by other adverse factors, China’s foreign trade accelerated structural adjustment and still achieved sustained and rapid growth. The main features are:

1. The export growth rate dropped, the import growth accelerated, and the foreign trade surplus decreased. The total value of merchandise import and export in the first three quarters was US$1.96713 billion, an increase of 25.2% over the same period last year. Among them, exports increased by 30.3% in the first quarter, and the growth rate fell back in the second and third quarters. The total exports in the first three quarters were US$1.07406 billion, an increase of 22.3%, and the growth rate was 4.8 percentage points lower than the same period last year. Import growth has accelerated since the beginning of the year, with total imports of US$893.07 billion, an increase of 29.0%, and the growth rate was 9.9 percentage points higher than the same period last year. The foreign trade surplus was US$180.99 billion, down 2.6% from the same period last year.

2. The export of mechanical and electrical products has grown rapidly, and the import volume of energy resources has increased. In the first three quarters, China’s exports of major categories of mechanical and electrical products were US$617.0 billion, an increase of 24.0% over the same period last year. Affected by rising operating costs and weak demand, exports of clothing and clothing accessories among traditional commodities only grew by 1.8%, a growth rate that was 21.2 percentage points lower than the same period last year. The growth rate of exports of other bulk commodities has slowed down. Among imported commodities, energy and resource commodities are still growing fastest. The import volume of crude oil increased by 8.8% over the same period last year, and the value increased by 85.5%; the import volume of iron ore increased by 22.0%, and the value increased by 116.0%; the import volume of soybeans increased by 32.3%, and the value increased by 137.4%.

3. General trade maintained strong growth, while the growth rate of processing trade continued to decline. China’s general trade continued to grow strongly in the first three quarters, with total import and export value reaching US$956.57 billion, an increase of 35.9%. Among them, exports were US$500.78 billion, an increase of 26.9%; imports were US$455.79 billion, a growth rate of 47.3%, 22.7 percentage points faster than the same period last year. The growth of processing trade further slowed down, with the total import and export value reaching US$803.40 billion, an increase of 13.8% over the same period last year. Among them, exports increased by 15.6%; imports increased by 10.7%.

4. The growth rate of exports to the United States has slowed down significantly, while exports to emerging markets have grown rapidly. China’s export growth to developed markets slowed down in the first three quarters. Exports to the EU were US$220.47 billion, an increase of 25.6%, exports to the United States were US$189.13 billion, an increase of 11.2%, and exports to Japan were US$85.85 billion, an increase of 16.0%. Bilateral trade with some emerging economies continues to grow rapidly. For example, exports to India increased by 43.1%, exports to South Korea increased by 28.4%, and exports to Brazil increased by 90.2%.

2. The annual export growth may be less than 20%

The current financial crisis is spreading to the real economy. Due to lower-than-expected growth in personal consumption expenditures and exports, the U.S. second-quarter GDP growth rate has been revised to 2.8% from the previous 3.3%. Some research institutions predict that personal consumption in the United States will experience negative growth in the third and fourth quarters, and accordingly, the U.S. economy will enter at least moderate negative growth. The Eurozone and Japan have already fallen into negative growth in the second quarter. Growth in developing countries and emerging economies has also begun to slow down. Imports from major developed countries are likely to shrink in the fourth quarter, and merchandise trade will also slow down significantly. Because of the financial crisis, some regions and companies have experienced payment difficulties. Chinese import and export companies have clearly felt the decrease in new export orders and the increase in payment risks.

Futures prices of major primary products in the international market began to fall in July. The recent chaos in financial markets and concerns about future economic downturns have further squeezed the falsely high component of futures prices. However, primary commodity prices in US dollars are still at historically high levels, and the possibility of significant fluctuations due to speculative factors is not ruled out. China’s domestic inflation rate is still not low, and the export industry will continue to be troubled by rising costs.

Since the reform of the exchange rate mechanism, the cumulative appreciation of the RMB against the US dollar has exceeded 20%, and the appreciation against the euro and the Japanese yen has also exceeded 8%. The RMB exchange rate has been basically stable recently, which is related to the fact that major developed economies such as the United States, Europe, and Japan have taken measures to stabilize the financial market, and the sharp exchange rate fluctuations have been restrained to a certain extent. This temporarily alleviates the difficulties caused by the rapid appreciation of the RMB to export enterprises.

Based on the above factors, it is expected that China’s export growth will further slow down in the fourth quarter, and the annual export growth rate may fall back to below 20%.

3. The foreign trade situation in 2019 is very pessimistic

The economy will fall into a downturn, and the possibility of deepening the crisis cannot be ruled out
Although governments of various countries are taking coordinated actions to build a Building breakwaters will prevent this financial tsunami from causing the Great Depression like in 1929, but the restoration of market confidence and the resolution of institutional and structural problems are expected to take a long time. Optimistic estimates suggest that the economies of developed countries will have to wait until at least the second half of 2019, or even later, to begin to recover. The extent to which developing countries and emerging economies will be affected by the financial crisis is difficult to determine. The entire economy will enter a prolonged downturn. The current U.S. real estate marketThere are no signs of an overall recovery yet, and the subprime loan problem is still likely to worsen, bringing more bad credit from financial institutions to the surface. Therefore, the possibility of deepening the financial crisis cannot be ruled out.

Second, primary product prices will continue to be high and oscillate violently
If primary product prices can fall back to a lower level, it will obviously be good news for reducing the cost burden of the majority of importing countries and stimulating economic recovery. However, the main factors that have led to the surge in prices of energy and resource commodities in recent years – huge demand from emerging markets and US bioenergy policies have not changed. The supply of energy and resource commodities is restricted by the increasing difficulty of extraction, insufficient investment by producing countries, and the reduction of cultivated land for agricultural production. The growth of supply is not easy. In order to maintain high prices, OPEC has recently been planning to reduce oil production. The large amounts of liquidity injected by various countries to save the financial market and concerns about the decline in the value of currencies such as the US dollar will make more international hot money use commodity futures as a hedging tool. These factors will intensify price fluctuations in the international commodity market.

Third, the prospects of the Doha Round are bleak and the threat of trade protectionism is increasing
Unlike the Asian financial crisis in 1997, which only affected some markets, this time developed economies such as the United States and Europe have fallen into a financial crisis, which has affected the stable operation of trade. . After the breakdown of the Doha Round negotiations in July, although many members, especially developing countries, hope to restart negotiations, some fundamental differences will be difficult to bridge in the short term. The outbreak of the financial crisis has made the prospects for a breakthrough in the Doha Round look even bleaker. Not only that, shrinking trade volume and rising unemployment will also cause some countries and regions to adopt more conservative trade policies, increasing the threat of wide-scale trade protectionism.

Overall, the economic decline of major trading partners caused by the international financial crisis, the sharp drop in import demand, the sharp fluctuations in international commodity market prices, and the possible depreciation of major currencies will further affect China. The foreign trade situation in 2019 is expected to be very pessimistic. Both import and export growth will fall back.

4. China has certain room to cope with the impact

China’s foreign trade has achieved rapid growth for seven consecutive years. In recent years, the government has significantly adjusted its foreign economic and trade policies, including the continued appreciation of the RMB exchange rate, which has allowed companies to adapt in advance to survive and develop in a tightening environment. Many localities and enterprises have actively transformed their growth patterns, optimized the structure of imported and exported commodities, accelerated technological progress and the transformation and upgrading of processing trade, and vigorously explored emerging markets, and have achieved positive results. A small number of companies that compete only on low prices have been eliminated, while companies with certain advantages in technology, brand and customer channels have achieved greater development. The selling prices of most export commodities have increased. It should be said that the overall competitiveness of China’s export industry is still relatively strong, and its low-cost advantage has not been lost. The financial crisis and economic downturn will give rise to a new round of international industrial adjustment. For Chinese import and export companies, they not only face great challenges, but they may also gain new development opportunities.

The inherent momentum for China’s economic development in 2019 is still sufficient. The fundamentals of the national economy and financial system are healthy. Deeply implementing the Scientific Outlook on Development, adjusting and optimizing the structure, and coordinating urban and rural development will bring huge and long-term investment and consumption needs. Relying on the solid material foundation formed since the reform and opening up, adopting flexible and prudent macroeconomic policies, and actively and effectively expanding domestic demand will support and promote the economy to continue to maintain steady and rapid growth.

The Chinese government has recently decided to increase the export tax rebate rate for labor-intensive products such as clothing and textiles, as well as high value-added electromechanical products. In the future, there is still considerable room for maneuver in supporting advantageous enterprises and product exports. All localities and departments will increase credit support for import and export enterprises, speed up the progress of export tax rebates, encourage and help enterprises to overcome difficulties, develop marketable products, and expand new markets. At the same time, China has sufficient foreign exchange reserves and will continue to actively expand imports and promote a basic balance of international payments. This will help improve relations with major trading partners and reduce the pressure of trade protectionism. China’s investment environment and infrastructure are constantly improving, and its growth potential is huge. So far, foreign businessmen’s enthusiasm for direct investment in China has not diminished. Therefore, in the medium to long term, China’s foreign trade development prospects are still very bright.

Disclaimer:

Disclaimer: Some of the texts, pictures, audios, and videos of some articles published on this site are from the Internet and do not represent the views of this site. The copyrights belong to the original authors. If you find that the information reproduced on this website infringes upon your rights, please contact us and we will change or delete it as soon as possible.

AA