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China pledges to stabilize trade as ‘grim situation’ slows global growth

China pledges to stabilize trade as ‘grim situation’ slows global growth Source: www.bloomberg.com
Date: 14-01-2012
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China will take measure to stabilize its exports and imports as slowing global growth creates a “grim situation” for trade, said Zhang Xiaoqiang, a vice chairman at the nation’s top economic planning agency.

“Downward risks for the global economy are increasing,” the National Development and Reform Commission’s Zhang said at a forum in Beijing today. “The difficult situation will make competition for product exports among countries fiercer.” China will take steps to stabilize and improve trade policy, including the lowering of import taxes for some consumer goods, helping smaller businesses get financing and keeping its currency “basically stable,” he said.

Premier Wen Jiabao pledged earlier this month to preserve growth and said the nation wouldn’t “stand still” in the face of difficult conditions. China, which reported the slowest export growth in two years for December as the European debt crisis eroded overseas demand, introduced a 4 trillion yuan ($633 billion) stimulus and froze gains by the yuan to counter the effects of the 2008 financial crisis.

“Looking into 2012, the global economy will remain sluggish,” Zeng Peiyan, a former vice premier, said at the same forum today. “Western developed economies are encountering hardships never seen since World War II and the unstable elements and uncertainty that will be faced by developing nations and emerging economies is also increasing,” said Zeng, now chairman of the China Center for International Economic Exchanges, which hosted the event.

Export Difficulties

China’s exports will face a “grim situation” this year, particularly in the first half, the NDRC’s Zhang said. In addition to slowing global demand, the rising cost of energy, raw materials, labor and land are other challenges for Chinese exporters, he said.

Appreciation of the yuan is also adding pressure, Zhang said. China’s currency has risen more than 8 percent against the dollar since regulators allowed gains to continue in June 2010. Those gains will continue for “a certain period,” Zhang said without giving more detail.

The nation’s exports expanded 13.4 percent in December, the smallest increase since gains resumed in 2009 after the financial crisis, excluding holiday distortions. Import (CNFRIMPY) growth moderated to 11.8 percent, also the slowest pace in two years.

China will actively expand imports, Zhang said. The government will lower import taxes for some consumer goods and also for some raw materials, energy and imports of advanced equipment, he said, without giving details.

Company Financing

China will also help the nation’s small- and medium-sized companies obtain financing, Zhang said

Obtaining bank loans became more difficult this year for smaller companies, many of which are exporters, after the government instituted lending limits in a campaign to rein in inflation and property prices.

Zhang said that loan rates for smaller companies able to secure funds were 30 percent to 50 percent higher than the benchmark rate set by the central bank. The People’s Bank of China one-year benchmark lending rate is 6.56 percent. Smaller companies also have to pay additional charges such as guarantee fees, thereby boosting their borrowing costs to more than 12 percent, Zhang said, without giving a time period.

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