Cargo ships in Qingdao Port in east China's Shandong Province (XINHUA)
According to figures released by the General Administration of Customs, in yuan-denominated terms, China's foreign trade decreased by 0.6 percent year on year to 2.05 trillion yuan ($300.15 billion) in October. Of the total, exports declined by 3.2 percent year on year to 1.19 trillion yuan ($174.23 billion), while imports rose by 3.2 percent year on year to 860.6 billion yuan ($126 billion). This has resulted in a 325.25-billion-yuan ($47.62 billion) trade surplus in October, which is 16.8 percent lower than the same period last year.
The sluggish foreign trade has not improved remarkably, especially since exports are still in decline. This indicates that the global economic recovery is still uncertain, and is unable to stimulate China's exports. This also demonstrates that China's exports do not meet the demand of the global market. Due to problems in both the domestic and international markets, China's exports are still in the doldrums.
However, sluggish foreign trade does not necessarily mean that the current economy is devoid of merit. Many positive signs of change can be observed from October's trade figures, such as growing imports, the increasing percentage of exports by private companies, as well as the improved product mix in terms of exports. All these factors are prerequisites for the economy to achieve stable growth.
Everyone has seen signals of stable growth from recent economic figures. Take for example the purchasing managers' index, which hit the highest level in 27 months. Also, the producer price index has reversed a decline which had lasted for 54 months, and has now resumed growth. Furthermore, private investment has rebounded for two consecutive months.
Imports have now also resumed growth at a rate of 3.2 percent, underpinning stable economic growth. More importantly, the expansion of import value has been achieved against the backdrop of declining prices of major imported commodities such as iron ore, crude oil, coal and refined oil, therefore it must be a result of increased import volume.
One must take into consideration that, under the principle of the balance of supply and demand, imports of bulk commodities increase only when domestic demand expands. This indicates that demand from Chinese firms is increasing. On the other hand, it also shows that companies are more confident in future economic growth and have more incentive to increase their inventory. This is obviously evidence that the economy is resuming stable growth, despite downward pressure.
Besides the growth of imports, we must not neglect the growth of value and percentage of imports and exports carried out by private companies. Under the current economic circumstances, private capital, companies, investment and exports are increasingly important to the efficiency and foundation of China's stable economic growth. This means that the Chinese economy can resume stable growth only when private capital and companies are active, and more products from private companies are sold to foreign markets.
Another factor worth examining in the export figures for October is that the percentage taken up by labor-intensive products is decreasing while that of high-end equipment, machinery and electronic products is rising. This suggests that the development of emerging industries is accelerating, and that momentum of high-end equipment manufacturing is strengthening.
This is undoubtedly the result of an optimized mix of products, industrial structure and improved efficiency in export products. Although the increase in exports by emerging industries is still not enough to offset the decrease of exports in labor-intensive products, the effects of the country's economic restructuring and upgrades are starting to bear fruit.
Under the complex circumstances of international economic development, improvement throughout a mere month or two—or good performance in some specific indexes—is not enough to prove that the Chinese economy has been on the track to achieving overall recovery.
In particular, one of the main obstacles to ensuring stable growth is that the country's macroeconomic data may look good while individual businesses are struggling.
Therefore, China must be aware of the difficulties and pressure it is facing in stabilizing growth. China must also analyze the situation from a problem-based approach by addressing concrete issues such as sluggish exports, an unstable market share of labor-intensive products and the weakening competitiveness of its exports. Only by addressing specific problems head-on can the country be on the right track to stable growth.
This article originally published in Economic Information Daily
Copyedited by Bryan Michael Galvan
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