Foreign trade may hit US$1.1 trillion

China has become the world's third-largest trading nation, following the United States and Germany, thanks to its foreign trade value hitting a record high of US$1.0 trillion in the first 11 months of 2004, and the whole year's figure expected to reach US$1.1 trillion.

Figures from the General Administration of Customs (GAC) showed that the nation's foreign trade surplus reached US$21 billion, with exports soaring to US$529 billion.

This year's foreign trade is also expected to maintain a similar growth rate, according to experts.

Zhang Hanlin, a researcher with the WTO (World Trade Organization) Institute of the University of International Business and Economics in Beijing, said: "Exports will increase by 20 to 22 per cent, and imports will grow 25 per cent, increasing overall foreign trade by 20 per cent."

In an exclusive interview with China Daily, he said the global economy is likely to grow by 3.5 to 4 per cent this year.

China's major foreign trade partners are also expected to witness economic growth the European Union (EU) will expand by 1.8 per cent, Japan will increase by 1.5 to 1.8 per cent, and the United States and South Korea will grow by 3.5 per cent and 5 per cent respectively.

Further tariff cuts are the second factor set to boost China's foreign trade, he said.

"There is not much pressure for an appreciation in the US dollar, which will also stimulate China's exports in 2005."

IT (information technology) products, home appliances and textile products will remain the major driving forces of China's exports.

Zhang said the IT sector, which experienced over 50-per-cent growth in exports last year, has established a solid production base in China.

Fierce competition in the sector means that increasing numbers of foreign manufacturers will move their factories to China, which will stimulate trade growth.

And although the textile industry faces an average export tariff of 1.3 per cent, which was implemented by the GAC at the beginning of this year, its exports will keep growing this year, Zhang predicted.

But he pointed out that there will be no let-up in terms of trade disputes, despite the Chinese Government's efforts to try to ease them.

As for imports, automobiles will experience an increase due to the country's tariff cut last year from 34.2 to 37.6 per cent, and down to 30 per cent this year.

Automobile imports grew over 40 per cent in the recent years, with this trend set to continue in 2005, Zhang said.

Experts say China should not over-emphasize its trade volume, noting that the trade structure is a more important factor.

The processing trade volume reached US$600 billion last year, accounting for more than half of the total.

About 58 per cent of exports came from the processing trade, and it accounted for 50 per cent of imports.

Zhang said: "China does not benefit dramatically from large amount of such foreign trade.

"As more foreign firms moving their manufacturing bases to China, they also bring materials from abroad and sell processed products overseas.

"We need to find out who is making money from this trade. The answer is not China, but rather the multinationals," Zhang pointed out.

Zhao Jinping, an expert from the State Council Research and Development Centre, said China may be a large trading nation, it has yet to become a robust trading nation.

China Economic Times quoted him as saying that China's foreign trade remains weak in three respects: Its trade does not exercise a great influence on either the domestic or world economy; exporters are weak in terms of their research and development (R&D) capabilities and brand development; domestic firms do not hold the right to distribute profits in their hands.

Wang Linsheng, another expert from the University of International Business and Economics, agrees.

"China lacks core technology intellectual property rights, its own brands and a complete marketing network," Wang pointed out.

He suggests the country should add further value to its exports by increasing investment in R&D, acquiring core departments from foreign firms and establishing joint ventures.

China's exports remain rather low-tech, with the general trade in high-tech products accounting for very little of overall trade.

The government should establish a system to support those exporting firms. Zhang Yansheng, director of the Institute of International Economic Research under the National Development and Reform Commission, said a modern industrial economy needs to be established based on mature technology and innovation.

China should promote its advanced sectors and develop them into a driving force for foreign trade, he said.

China's foreign trade volume has been galloping in recent years, from joining the world's top 10 in 1997, to the top seven in 2000, and entering top four in 2003.

The EU replaced Japan last year as China's largest trading partner, after 10 more countries joined the bloc last May.

According to the GAC, the price of imported products grew by 10.4 per cent year-on-year in the first three quarters of 2004, becoming the highest figure in the past 10 years, while the volume rose by 25.2 per cent.

The two factors have lifted the first three quarters' trade value by 38.2 per cent.

Rapid global economic growth and rocketing oil prices are the reasons for this growth. Textile exports exceeded those of natural resources, such as oil, for the first time.

"It is a pleasant phenomenon to see a drop in the exports of natural resources," Zhang said.

Exports of high-value-added products, such as machinery and IT products, started to be the driving force of trade.

The country's macro-economic adjustment measures took effect in terms of foreign trade, turning the US$10 billion trade deficit into a surplus of US$10 billion by the end of last October.

Imports maintained a growth rate of over 40 per cent in the first four months of 2004.

The steel, cement, real estate and aluminium industries have all experienced a much-needed cooling down.

Meanwhile, sectors like coal, electricity, oil and transportation have received government support.

China imported 99.59 million tons of crude oil in the first 10 months of last year, up 34.3 per cent year-on-year.

Source: China Daily