Textile Industry: When will the “freezing point” of foreign trade melt?
While many foreign trade companies had not yet been able to take a breather last year, the calendar has turned to this year. Many uncertain factors still exist, but it is certain that the European and American economies are still in recession.
Foreign trade data released by the General Administration of Customs a few weeks ago showed that imports and exports fell by 17.9% and 2.2% respectively in November last year, the first negative growth since February 2005 and June 2001 respectively. The “cold winter” of China’s foreign trade has really arrived.
At present, six major factors directly affect this year’s foreign trade: the continued deterioration of the European and American economies has led to a decrease in China’s export orders; the risk of US dollar depreciation has made Chinese companies afraid to accept large or long-term orders; trade protectionism has intensified and trade barriers have increased; The collapse of foreign financial institutions or companies has led to increased foreign exchange collection risks for domestic companies; fluctuations in raw material prices are difficult to predict; and domestic small and medium-sized enterprises have difficulty in financing.
The solution to the two major suspense issues of how “cold” the foreign trade “winter” will be and when the “freezing point” of foreign trade will melt still depends on the demand of the international market. If the economic recession in Europe and the United States intensifies, or even the demand in emerging markets decreases at an accelerated pace, then China’s import and export this year will still be difficult to say optimistic.
Pessimism
From the Ministry of Commerce’s report to the analysis of major investment banks, from research institutions to foreign trade companies, it is still difficult to find optimistic and positive forecasts for China’s foreign trade this year.
In November last year, the Ministry of Commerce released China’s Foreign Trade Situation Report (Autumn 2008), which believed that judging from the situation at that time, the impact of the deterioration of the international economic situation on China’s imports and exports may be further deepened.
Last year’s foreign trade data has not yet been released. The National Development and Reform Commission predicted last month that the total import and export volume last year exceeded 2.5 trillion US dollars, an increase of more than 15%, and the surplus exceeded 280 billion US dollars, a year-on-year increase of more than 18 billion US dollars.
In the eyes of the outside world, this situation of high surplus and high exports will come to an end with the passing of last year.
This year’s economic forecast report released by international investment bank Merrill Lynch last month stated that as the financial crisis intensifies and growth slows, exports will weaken this year and next, and the export boom of more than 10 years will come to an end.
This can’t help but remind people of China’s last negative export growth. In the first five months of 2001, exports grew by 11%, which was far lower than the 27.8% growth rate in 2000. In the following month, there was even negative growth. At that time, through a series of reforms to the foreign trade system and the recovery of the U.S. economy, China’s exports gradually entered an upward path. Importantly, China joined the WTO at the end of 2001.
Some experts pointed out that the severity of China’s export situation is close to that of the 1997 Asian financial crisis, and the external environment is even worse.
The rating report released by the international rating agency Moody’s last month predicted that China’s real GDP (gross domestic product) growth will slow down to 7% to 8% this year, because the export of goods and services is expected to shrink by 2% this year. The impact will exceed the effects of fiscal stimulus measures to boost investment. The current financial crisis seems to have a greater negative impact on China’s foreign trade than the 1997 Asian financial crisis or the 2001 U.S. economic recession.
When will things pick up?
It seems that every time the external environment is bad, it is also the time for changes in China’s foreign trade system or the introduction of intensive policies. In 2001, the then Ministry of Foreign Trade and Economic Cooperation issued a notice that China would expand the opening of trade rights to foreign-invested enterprises; cancel the export approval system that had been in place for many years, and implement an import and export operation rights registration and approval system for enterprises of all types of ownership.
In response to the impact of the financial crisis on China’s exports, the export tax rebate rate was adjusted four times in the second half of last year: the first time was mainly for some textiles and clothing; the second time was for some textiles, clothing, and toys; the third time was to increase some The export tax rebate rate for labor-intensive products, mechanical and electrical products and other products that are greatly affected; the fourth time directly targets mechanical and electrical products. In addition, the policy of suspending the “actual transfer” of deposit accounts for processing trade restrictions, policies for adjusting the catalog of processing trade restrictions and prohibited categories, and financing policies for small and medium-sized enterprises have been introduced. Foreign trade companies have fully felt the “spring” of the domestic policy environment.
How effective can the policy be? When will exports pick up?
It is expected that the policy will take effect as early as the first quarter of this year. However, if the external environment continues to deteriorate, the effectiveness of the policy will be compromised. Some giant mechanical and electrical companies said that policy adjustments will help export companies reduce export costs and improve international competitiveness. Companies can use this to further optimize the industrial structure and transform the economic development model.
JPMorgan Chase stated in its first-quarter forecast report that foreign trade policy adjustments can only help companies maintain moderate growth. Economic growth will also decelerate in the first half of the year, which will cause China’s exports to continue to decline. This year’s exports may only grow by 3% year-on-year.
Good imports
Amid the suspense of foreign trade, the price factor has weakened, the inflation situation at the beginning of last year has improved, and raw material prices have entered a downward channel.
The General Administration of Customs recently released a review of the early warning commodities in November last year. Iron ore imports rebounded slightly to 32.52 million tons that month. Although it fell year-on-year, marking the first negative growth last year, the average import price continued to fall to $122.7/ton, a year-on-year increase of 8.6% and a month-on-month decrease of 11.7%. The average monthly import price of soybeans has continued to decline, with the import price that month being US$509.3/ton, lower than at the beginning of last year.
Last month, the policy measures for stabilizing foreign trade established at the State Council executive meeting mentioned the expansion of imports of products in domestic demand. Key additions�Advanced technology, key equipment and components, important energy raw materials and other products are imported.
In fact, under the background of boosting domestic demand, imports are bound to increase, especially imports of raw materials, machinery and manufacturing will increase to a certain extent.
In this “cold winter” of foreign trade, we can expect that Chinese companies will seize the favorable opportunity of falling international raw material prices to promote the recovery of China’s import growth. AAFSGRETEGSDFW
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