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Report on the Foreign Trade Situation of China
2004/03/09
1. Current Situation of Development of Foreign Trade in China

Since the beginning of this year, the speed of the growth of world economy and trade has gained noticeable momentum, and an important tuming point has appeared in the development of the Chinese national economy.  China's foreign trade has basically shaken off the negative influences from the Asian Financial Crisis, and regained a highspeed growth seldom seen for years.  According to statistics, China's total volume of imports and exports in the first three quarters of this year reached US$345.42 billion, a 35.7 per cent increase over the same period of last year.  Of this, exports hit US$182.31 billion and imports stood at US$163.  Il billion, 33.1 and 38.7 per cent up respectively from a year ago and bringing China's accumulative trade surplus to US$19.2 billion.  'Me high-speed growth of foreign trade is attributable to both the various kinds of policy measures taken by the Central Government to promote the development of foreign trade, and to the comparatively favourable environments of the domestic and international markets.  It is the result of the joint action of various kinds of factors.
Development of China’s foreign trade in the first three quarters of this year has been characterized mainly by the following:

1.Simultaneous fast-speed growth of imports and exports and setting of record highs on both fronts

The momentum of growth of exports starting from the latter half of last year was maintained in the first three months of this year.  By the end of September, such growth had lasted for 14 consécutive years, a comparatively long period of growth of exports recorded in the 9th Five-Year Plan period.  From January to September, the smallest monthly growth of exports was 23.7 per cent, while the biggest monthly growth hit 47.6 per cent.  Viewed from the volume of exports, the monthly amount exceeded US$20 billion for seven consécutive months starting from March, with August seeing a record monthly high of US$23.33 billion.  Although the speed of growth of exports slowed down somewhat in the third quarter of this year due to influences of the base figures of last year that grew gradually from the beginning to the end of the year, it still maintained a monthly rate of more than 20 per cent.

As for imports, speed of growth bas quickened since the fourth quarter of 1998 and gained even new momentum since this year.  The smallest monthly growth has been 23.9 per cent, and biggest monthly growth hit 54.6 per cent.  In June this year, the volume of imports surpassed US$20 billion for the first time in history, and in August, it further grew to a record high of US$20.79 billion.  Such a high-speed growth of imports, based on the comparatively big base figure of the previous year, marked a continuons heating up of demand of imports.

2. All-round pick-up of speed of exports to traditional markets and all-round growth of importe from major markets
Asia, Europe and America have remained the traditional markets of Chinese exports.  A pick-up of speed of exports to the Asian market has been a most noticeable mark of the basic shake-off of China's foreign trade from the influences of the Asian Financial Crisis.  In the first three months of this year, Chinese exports to Japan, the ASEAN countries and the Republic of Korea grew by 32.6, 44.3 and 52.9 per cent respectively, 23.2, 33.2 and 28 percentage points bigger than the respectively figures of last year as a whole.  Exports to Hong Kong of China grew by 25.9 per cent during this period, reversing the situation of a decline in 1999.  Exports to the European Union and the US markets have continued to gain speed, growing by 33.5 and 28 per cent respectively.  Exports to Russia, which declined substantially in 1999, have begun to grow enon-nously and saw a 68.7 per cent increase in the first three months of this year.

China's Imports from major markets have also grown on all fronts, with volumes of imports from Japan, European Union, Taiwan Province of China, the Republic of Korea, the USA, the ASEAN countries, China's Hong Kong and Russia climbing up by 27.5, 19.7, 33.7, 41.1, 14.6, 52.4, 36.4, and 35.4 per cent respectively.

3.Enormous growth of exports from non-State enterpdses and obvious pick-up of speed of imports by foreign-funded enterprises

Exports by non-State enterprises (excluding foreign-funded enterprises) grew by as much as 79.3 per cent in the first three quarters of this year, creating a new spot of growth of exports.  During this period of time, exports by State-owned enterprises stood at US$87.22 billion, a rise of 26.4 per cent above the figures of the same period of last year; and those by foreign-funded enterprises reached US$85.67 billion, 36.6 per cent up.  The proportion of exports by State-owned enterprises and foreign-funded enterprises against the total exports of the country was quite sinùlar to each other, standing at 47.8 and 46.9 per cent respectively.
Imports by foreign-funded enterprises grew by 41 per cent from January to September.  A major factor leading to such a big rate of growth was the rapid growth of imports for processing trade: Imports by foreignfunded enterprises for processing businesses accounted for 60 per cent of the total imports they made during this period of time.  Another factor was the resurging growth of the import of equipment and articles by foreignfunded enterprises as investment.  Such imports rose by 14.9 percent.

4.Regaining of fast-speed of growth of exports from the western region, with declines reported by some provinces and autonomous regions, though

Since the beginning of 2000, the average growth rate of exports from the western region as a whole was 38.6 per cent, standing above the average 32.4 per cent growth achieved in the eastern coastal region.  A major reason for the development of such a situation is the comparatively big declinc of exporte front the westem region in 1999.  As a result, the resurging growth recorded in this region bas become more eye-catching.  At the saine time, increase in the export of some bulk commodities of a resource character bas spurred the growth of exports from this region.  Among the eastem coastal areas, Zhejiang Province achieved a 57.6 per cent increase to rank first in the country in terrns of growth of exports.  Under a circumstance of fast-speed growth of exports of the country as a whole, some provinces and autonomous regions in the western region including Sichuan Province, Shaanxi Province, Guangxi Zhuang Autonomous Region, Yunnan Province, and Tibet Autonomous Region saw a comparative decline in their exports.

5. Further improvement of composition of foreign trade and noticeably improved

The composition of import and export commodities was further optimized from Januarv to September this year.  The proportions of exports of electro-mechanical and hi-tech products against the total exports of the country stood at 41.8 and 14.3 per cent during ibis period of time, 2.3 and 1.6 percentage points bigger than the yearly figures of 1999.  As a major force spurring the growth of exports, electro-mechanical products eamed US$76.15 billion from exports in the first nine months of this year, 41.1 per cent more than a year ago and 8 percentage points bigger than the overall rate of growth of exports of the country as a whole.  As a new spot of growth with the biggest vitality, hi-tech products brought in US$25.98 billion through exports, 52.2 per cent up from the saine period of last year and 19.1 percentage points bigger than the overall rate of growth of exports of the country as a whole.  On the other hand, imports of commodities of a resource character and industriel products of a raw material character in short supply at home grew at a comparatively fast speed, with imports of machinery and transportation equipment accounting for 40 per cent of the total imports of the country during these nine months.
Exports of a general trade character, a major source of foreign exchange revenues from exports, grew rapidly to US$77.1 billion, 40.5 per cent above the figure of the saine period of last year and 7.4 percentage points bigger than the national growth rate of exports.
Foreign exchanges earned from foreign trade have become a major source and guaranteed the steady growth of China's foreign exchange reserves.  By the end of September, China's foreign exchange reserves hit US$160.09 billion, US$5.42 billion more than the year-end figure of last year.

Import-related taxes have become a major source of growth of the tax revenues in China.  In the first three quarters of this year, import-link taxes of the country as a whole reached RMB 105.85 billion, 42.6 per cent up growth of taxes, and the increased amount made up 20.8 per cent of the increased amount of tax revenues of the country as a whole during this period of time.

Il. Prospects for Foreign Trade Development in China

1.Basic environments for China's trade of imports and exports At present and for some time in the future, both the domestic and the international environments as a whole will be favourable for the development of foreign trade in China.  At the saine time, however, some uncertainties and striking difficulties lie ahead.

First, continuation of growth of the world economy.  According to the latest forecasts announced by the International Monetary Fund in September, the world economy will see a growth rate of 4.7 per cent this year after achieving a 3.4 per cent growth in 1999, the fastest growth ever seen in the past 10 years.  Although the growth of the global economy will slow down somewhat in the year 2001, it will continue to stay the comparatively high level of 4.2 pet cent.  The steep increase in international oil price in the recent year will produce certain negative influences on economic growths.  This will not, however, pose any serious retardation to the sustained growth of the global economy.

Second, briskness of demand at the international market.  From January to September of this year, US exports rose by 14.2 per cent from a year ago, while its imports climbed up by 20.4 per cent, falling into a record deficit in foreign trade once again.  The growth rates of the imports and exports of ail the member countries of the European Union went up during the first half of this year compared to figures during the saine Cent and iMportS W,nt up by 29 per cent in the first nine period of last year. in Japan, exports rose by 21 Per ear.  Exports and imports of the months of this year when compared with figures of the sarne period last y ines all niaintained a two-digit
Republic of Korea, Indonesia, Singapore, Thailand, Malaysia, and the PhilipP odity prices at the growth in the first three quarters of this year.  Such mounting of dernand has helped conim ars, and international market to turn around from a downhill slide that had lasted for several consécutive ye brought about a trend of stabilization or even pick-up of the prices of most prirnary and finished products.  By this September, world oil prices floated upward by more than 30 per cent (in terins of the US dollar, the same below) . Compared with those of last Decernber, the prices of cotton and some oil-related chernical raw materials rose by over 20 per cent, the prices of copper, pulp, general-purpose plastics, and rolled steel climbed up by over 10 per cent, and the piices of cletro-rnechanical, wool, cotton yarn, and other products all went up by différent margins.  According to the IMF forecasts, the growth rate of world trade will hit as much as 10.4 per cent this recorded in 1999.  A 7.7 per cent growth is also expected for the year2001

Third, development of a major turn for the better of the domestic economy.  Thanks to the implementation of an active financial policy and a steady monetary policy, and vigorous promotion of strategic readjustment of economic structures, growth of the Chinese economy has started to pick up once again since the beginning of this year.  According to figures published by the State Bureau of Statistics, China's GDP grew by 8.2 per cent in the first three quarters of this year, a speed 0.8 percentage point faster than that of the same period last year.  According to forecasts made by the Econoinic Situation Analysis and Forecast Group of the Chinese Academy of Social Sciences, the Chinese economy will grow by 8.0 per cent this year, a speed obviously faster than that of last year.  Next year, a growth rate of 8.1 per cent will bc maintained.  With the start of implementation of the new five-year plan, both investment and demand are expected to heat up further.  All these will provide excellent preconditions for the continuons growth of China's irnports and exports.

Fourth, maintenance of stability of the State policy encouraging foreign trade development.  The State has reformed and perfected its policies and measures to encourage the development of foreign trade in recent years, and these policies and measures will remain unchanged in the future.  At the sarne tirne, the State will continue to investigate, punish, and crack down upon behaviours including illegal remittance of foreign exchanges, exchange arbitrage, smuggling, and obtaining of export rebates by déception for the purpose of maintaining the normal order of foreign trade.  All these have created a favourable external environrnent for the development of foreign trade and given a vigorous push to the growth of imports and exports.

Fifth, further acceleration of the pace of reform and opening-up.  Negotiations over China's membership in the WTO have entered their final stage.  China's admission into the WTO will usher in a new era of the country's opening-up drive, facilitate improvement of the country's environments for the utilisation of foreign investment, strengthened the confidence of foreign investors, and lead to further improvement of the quality of the country's utilisation of foreign investment.  With the acceleration of the pace of reform and opening-up and the continuons advancement of efforts in structural readjustment and regrouping and transformation of enterprises at home, enterprises other than those owned by the State will gradually develop and grow into an important force participating in international competition.
There are also some problems, however, that can not be ignored because they will affect foreign trade development in China at present and for some time in the future.  First of all, the possibilité of development of regional financial upheavals can not be excluded because some factors of uncertainty still exist in the growth of the world economy and the in-depth problems haunting the financial industries of some regions have not yet been fully solved; theworld oil prices will remain at a high level for some time to come; and the unevenlygeared pace of development of the econonùes of different countries will lead to the continuons weakening of the Eurodollar and further increase of the trade deficits of the United States.  Secondly, protectionism of every description still haunts international trade, and protectionist practices against China tends to gain new ground.  In the third place, China's tasks in the field of purification of foreign trade environments are still extremely arduous.  The illegal behaviours of a small number of enterprises such as smuggling,exchange arbitrage, and obtaining of export rebates by déception have seriously affected the country's normal order of business opérations; clumping at low prices hag h@ed China's national interests as a whole and stained the reputation of China-made products; and no effective solution has been found yet for die random imposition of charges and fees at various links during the process of conduction of imports or export.

2. Forecast of China's situation of imports and exports in 2000 and 2001

Provided that no undesirable changes take place in the current environments of the international economy and trade, that the domestic macro policies remain stable, and that its national economy continues to grow, China will achieve this year such a high-speed growth in both imports and exports it has seldom achieved during the years since its initiation of reform and opening-up policy.  China's growth of imports and exports will fall back somewhat next year from the figures of this year, but will still maintain its momentum of growth at a fairly fast speed.
By taking various kinds of factors into considération, we have made the following forecasts: China's total volume of imports and exports this year will grow by about 26 per cent from last year to stand at US$455 billion.  Of this, exports will grow by about 23 per cent from 1999 to reach US$240 billion.  If this is achieved, it will greatly outgrow the target set in the 9th Five-year Plan for bringing the country's total volume of imports and exports to US$400 billion including US$200 billion worth of exports by the year 2000.  In the year 2001, China's total volume of imports and exports will increase by about 8 per cent.
Listed in the table below are the growth of China's imports and exports in recent years and forecasts of the country's situation of imports and exports in 2000 and 2001.


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