China says external demand key to growth as exports sink for sixth month

China stressed Tuesday that stabilizing external demand was key to maintaining growth as new figures showed that foreign trade was still shrinking while fixed-asset investment was surging.

Exports fell 22.6 percent in April from a year earlier to 91.94billion U.S. dollars, steeper than the 17.1-percent decline in March. Imports were down 23 percent to 78.8 billion U.S. dollars, compared with a 25.1-percent decline in March, the General Administration of Customs said Tuesday.

The trade surplus was 13.14 billion U.S. dollars, smaller than the 18.56 billion U.S. dollars for March.

The Ministry of Commerce said on its website that sluggish external demand, which had a significant bearing on stabilizing exports and employment, could deter domestic investment and consumption for a long period.

The grim impact could affect "all sectors" of the economy, it said.

Allowing for working days, April exports rose 6.9 percent from March, the second month-on-month increase.

Although export declines had slowed when calculated on that basis, the figure didn't indicate an external demand rebound, Zhang Yansheng, director of the institute of foreign trade of the National Development and Reform Commission, told Xinhua.

For the first four months, urban fixed-asset investment rose 30.5 percent from the same period last year, as the massive government stimulus spending trickled down to local projects.

However, if consumption and exports didn't rise in tandem, the excess capacity produced by soaring investment would exacerbate economic imbalances, said the ministry.

GRIM FOREIGN TRADE

According to customs figures, total foreign trade in April was 170.73 billion U.S. dollars, down 22.8 percent year on year but up10.4 percent from March.

Exports in the first four months totaled 337.42 billion U.S. dollars, down 20.5 percent, and imports fell 28.7 percent to 261.99 billion U.S. dollars.

The Commerce Ministry said these grim figures reflected weak overseas demand, scarce trade financing, a resurgence of protectionism and the devaluation of some Asian currencies.

Net exports contributed 0.8 percentage points to gross domesticproduct growth last year. Falling external demand was the main reason behind the economic slowdown last year, said the ministry.

Although there were positive signs, there was little room for optimism on the export front, as foreign buyers had cut back orders everywhere.

Zhang said falling orders partly reflected the impact of several export rebate cuts in the past two years, which had been intended to boost trade.

Foreign buyers became accustomed to those export rebate cuts, and that gave them an advantage when bargaining with Chinese exporters, he said.

That was one reason why exporters did not feel a positive effect from the government trade policy, he said.

Export of labor-intensive products rose in April from March, shown by a 3.9 percent month-on-month increase in garment exports and an 18-percent rise for toy exports.

Although China was very competitive in exporting labor-intensive products, even that wasn't enough for many companies to make a profit during the depths of the economic downturn, said Zhang.

He said companies should continue trying to improve their structure and quality through innovation. To boost exports regardless of constraints on resources was not sustainable.

DOMESTIC DEMAND RECOVERS?

Although imports continued to fall in value, that did not necessarily mean a drop in volume, since commodity prices had plummeted from last year's highs.

On the contrary, it probably signaled a rebound in domestic demand as imports partly reflected that domestic demand, Zhang said.

For example, China imported 16.17 million tonnes of crude oil in April, up 13.6 percent year on year and 3.7 percent month on month. Iron ore imports jumped 33.2 percent year on year to 57 million tonnes last month.

Those rebounds showed that the policy to boost domestic demand had begun to bear fruit, he said.

As many trade policies were put into place, foreign trade had enjoyed better conditions such as tax incentives and financing, the Ministry of Commerce said. It added that better policies were needed in the areas of service trade and financing.

The government should conduct careful research and offer tangible help to small exporters, said Zhang.

Source: Xinhua