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Home » Opinion » Chinese Views
China keeps weather eye to ride out this storm
By Lin Jianyang Chen Yinan and Wang Pan |
February 5, 2009, Thursday
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Print Edition
Print Edition
TO people in China's export bases like Guangdong Province, the celebration of the Year of the Ox was not without some bitterness as exports plunged.
Yao Zhongwo's Sunrise Housewares, which produces non-stick cookware, was one of the small companies whose export orders virtually dried up.
In the second half of 2008, plummeting demand from the United States and Europe, Yao's major markets, forced him to suspend work on a new factory and lay off workers.
In November and December, Guangdong's exports fell 5.1 percent and 6.8 percent respectively year-on-year. The last monthly drop for Guangdong's exports was in March 2002.
Liang Yaowen, director-general of the Guangdong Foreign Trade and Economic Cooperation Department, acknowledged that the financial crisis was having a severe impact on Guangdong. "Last year, Guangdong received 30 percent to 40 percent fewer export orders than the previous year," he said.
That decline indicates an even worse year for Guangdong's exports in 2009, given the timing difference between orders and deliveries. Liang forecast Guangdong's exports might grow as little as 0.1 percent in 2009.
Since Guangdong's exports accounted for more than one fourth of the country's total US$1.43 trillion last year, the provincial decline had a significant impact on national figures.
In November, China's exports fell 2.4 percent year-on-year, the first monthly decline since June 2001. In December, the decline was 2.8 percent.
The declines took some of the sizzle out of economic growth since exports, along with investment and consumption, was one of the three major factors driving the economy.
Economists have estimated that foreign trade normally accounts for about 40 percent and investment for about 35 percent of China's GDP.
In the fourth quarter of 2008, economic growth slid to 6.8 percent year-on-year, sharply down from 9 percent in the previous quarter, the National Bureau of Statistics reported.
That was the slowest pace since the fourth quarter of 1999, when the economy grew only 6.1 percent as a result of the Asian financial crisis. On a full-year basis, GDP grew 9 percent year-on-year, the lowest since 2001, when an annual rate of 8.3 percent was recorded.
Tang Min, deputy secretary of the China Development Research Foundation, a think tank linked to the State Council (cabinet), said the financial crisis had struck hard at exports and export-related industries, which led to some ugly figures.
In mid-January, the NBS revised China's 2007 GDP to 25.73 trillion yuan (US$3.76 trillion), which enabled China to overtake Germany as the world's third-largest economy, after the United States and Japan. But China has too much stake in exports.
Consumption picks up
Despite slumping exports, domestic consumption has picked up somehow. Government figures show that retail sales jumped 21.6 percent last year to 10.8 trillion yuan, 4.8 percentage points higher than a year earlier.
Urban disposable incomes averaged 15,781 yuan in 2008, up 14.5 percent year-on-year.
Yuan Gangming, a senior economist at the Chinese Academy of Social Sciences (CASS), saw the 6.8-percent rate as a strong sign that the economy had touched bottom.
"Since many factories reduced production during the Lunar New Year holidays, economic growth in the first and second quarter this year is likely to bounce around the bottom, but we probably won't see uglier figures hereafter," he told Xinhua.
In September, the government made a macroeconomic U-turn as it shifted from fighting overheating to actively stimulating the economy.
Unlike some emerging market economies, China is in a relatively strong position in terms of foreign debt. As of September 30, outstanding foreign debt was about US$442 billion, up about 18 percent from the end of 2007.
Short-term debt accounted for about two-thirds of the total. At end-September, foreign reserves totaled about US$1.9 trillion.
China's central government finances also provide it with some degree of flexibility: Last year's budget deficit was about 111 billion yuan, but that was less than 1 percent of GDP.
Another significant factor, Yuan said, was that many inland and northern regions were less affected by the financial crisis and its impact on exports.
In an interview with the Financial Times published over the weekend, Premier Wen Jiabao said China might take "new, timely and decisive" stimulus measures.
According to Tang Min, China was likely to announce more measures, including industry-specific support plans, to support growth and the economy was expected to rebound in the second or third quarter.
Tang said China had three advantages in achieving an early recovery.
First, the financial system was somewhat insulated from global turmoil; second, the economy had become more flexible after years of continuous reform and third, the government had a strong role in driving economic development.
(The authors are senior writers at Xinhua news agency.)
Yao Zhongwo's Sunrise Housewares, which produces non-stick cookware, was one of the small companies whose export orders virtually dried up.
In the second half of 2008, plummeting demand from the United States and Europe, Yao's major markets, forced him to suspend work on a new factory and lay off workers.
In November and December, Guangdong's exports fell 5.1 percent and 6.8 percent respectively year-on-year. The last monthly drop for Guangdong's exports was in March 2002.
Liang Yaowen, director-general of the Guangdong Foreign Trade and Economic Cooperation Department, acknowledged that the financial crisis was having a severe impact on Guangdong. "Last year, Guangdong received 30 percent to 40 percent fewer export orders than the previous year," he said.
That decline indicates an even worse year for Guangdong's exports in 2009, given the timing difference between orders and deliveries. Liang forecast Guangdong's exports might grow as little as 0.1 percent in 2009.
Since Guangdong's exports accounted for more than one fourth of the country's total US$1.43 trillion last year, the provincial decline had a significant impact on national figures.
In November, China's exports fell 2.4 percent year-on-year, the first monthly decline since June 2001. In December, the decline was 2.8 percent.
The declines took some of the sizzle out of economic growth since exports, along with investment and consumption, was one of the three major factors driving the economy.
Economists have estimated that foreign trade normally accounts for about 40 percent and investment for about 35 percent of China's GDP.
In the fourth quarter of 2008, economic growth slid to 6.8 percent year-on-year, sharply down from 9 percent in the previous quarter, the National Bureau of Statistics reported.
That was the slowest pace since the fourth quarter of 1999, when the economy grew only 6.1 percent as a result of the Asian financial crisis. On a full-year basis, GDP grew 9 percent year-on-year, the lowest since 2001, when an annual rate of 8.3 percent was recorded.
Tang Min, deputy secretary of the China Development Research Foundation, a think tank linked to the State Council (cabinet), said the financial crisis had struck hard at exports and export-related industries, which led to some ugly figures.
In mid-January, the NBS revised China's 2007 GDP to 25.73 trillion yuan (US$3.76 trillion), which enabled China to overtake Germany as the world's third-largest economy, after the United States and Japan. But China has too much stake in exports.
Consumption picks up
Despite slumping exports, domestic consumption has picked up somehow. Government figures show that retail sales jumped 21.6 percent last year to 10.8 trillion yuan, 4.8 percentage points higher than a year earlier.
Urban disposable incomes averaged 15,781 yuan in 2008, up 14.5 percent year-on-year.
Yuan Gangming, a senior economist at the Chinese Academy of Social Sciences (CASS), saw the 6.8-percent rate as a strong sign that the economy had touched bottom.
"Since many factories reduced production during the Lunar New Year holidays, economic growth in the first and second quarter this year is likely to bounce around the bottom, but we probably won't see uglier figures hereafter," he told Xinhua.
In September, the government made a macroeconomic U-turn as it shifted from fighting overheating to actively stimulating the economy.
Unlike some emerging market economies, China is in a relatively strong position in terms of foreign debt. As of September 30, outstanding foreign debt was about US$442 billion, up about 18 percent from the end of 2007.
Short-term debt accounted for about two-thirds of the total. At end-September, foreign reserves totaled about US$1.9 trillion.
China's central government finances also provide it with some degree of flexibility: Last year's budget deficit was about 111 billion yuan, but that was less than 1 percent of GDP.
Another significant factor, Yuan said, was that many inland and northern regions were less affected by the financial crisis and its impact on exports.
In an interview with the Financial Times published over the weekend, Premier Wen Jiabao said China might take "new, timely and decisive" stimulus measures.
According to Tang Min, China was likely to announce more measures, including industry-specific support plans, to support growth and the economy was expected to rebound in the second or third quarter.
Tang said China had three advantages in achieving an early recovery.
First, the financial system was somewhat insulated from global turmoil; second, the economy had become more flexible after years of continuous reform and third, the government had a strong role in driving economic development.
(The authors are senior writers at Xinhua news agency.)
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