Chinese Commerce Minister Chen Deming said exports probably fell in January after foreign trade slowed in the second half of last year, as he pledged to maintain “stability” in the yuan’s exchange rate.
Overseas sales last month “cannot make us optimistic” and are “expected to have negative year-on-year growth due to Chinese New Year and other factors,” Chen said yesterday in a written response to Bloomberg News. “Chinese trading companies, particularly small and micro businesses, have come under growing pressure.” Hong Kong’s Hang Seng Index fell as much as 0.4 percent following the comments.
Slowing trade adds pressure for monetary loosening to support economic growth even with officials yet to claim victory over inflation. Consumer-price gains picked up for the first time in six months in January, pushed up by holiday spending, a government report showed yesterday. Export data are due today, with the median estimate of analysts showing a 1.4 percent decline from a year earlier.
“We will keep the overall stability of our export and import policies,” including tax rebates, and maintain the stability of the yuan’s exchange rate and “relevant policies of processing trade,” Chen said in an English translation from the Ministry of Commerce. Any policy “fine-tuning” will be supportive, not discouraging, he said.
Fourteen of 31 economists in the Bloomberg survey had estimated an increase in exports last month from a year earlier, with 16 predicting a decline and one forecasting no growth. Forecasts ranged from a drop of 10 percent to a rise of 8.4 percent. A fall would be the first in more than two years.
Imports may have fallen 3.6 percent from a year earlier, according to the median estimate. Economists estimate a trade surplus of $10.4 billion last month, down from $16.5 billion in December. Numbers are distorted by a Chinese New Year holiday.
The slowdown in exports reflects holiday effects and weakness in external demand, said Ding Shuang, an economist at Citigroup Inc. in Hong Kong.
Monetary policy easing “may be postponed, but only temporarily,” Ding said. Loosening, including a cut in required reserves for banks, may resume in late February or March as inflation slows, he said.
‘Integral’ to Economy
China, the world’s largest exporter, will also boost credit support and reduce tax burdens for smaller businesses, Chen said. Foreign trade is integral to the economy and “essential” for people’s lives and jobs, he said.
The commerce minister commented before the visit to the U.S. next week of Vice President Xi Jinping, who is seen by analysts including Chinese University of Hong Kong Adjunct Professor Willy Wo-Lap Lam as China’s likely next president.
“As the financial crisis is spreading and worsening, all countries are faced with the task of promoting economic growth and creating more jobs,” Chen said. Stronger cooperation between the U.S. and China is in the fundamental interest of each nation, he said.
China won’t force foreign companies to transfer technology to ventures with their local partners in order to gain access to its markets, Chen said.
“The Chinese government is committed to the policy of reform and opening up and welcomes and encourages, as always, foreign investment,” he said. “Technology transfer and technology cooperation shall be decided by businesses independently and will not be used by the Chinese government as a pre-condition for market access.”
The U.S. and other trading partners have increased criticism of the nation’s investment policies. President Barack Obama said in his State of the Union address last month that he will create a trade enforcement unit to investigate unfair trade practices in countries including China.
Restrictions and “interventionist policies” on issues such as intellectual property rights are a concern for American companies in China, Claire Reade, the U.S. trade official in charge of China affairs, told Congress in December.
Canada’s Prime Minister Stephen Harper, visiting Beijing this week, said he spoke to Premier Wen Jiabao about cases of Canadian investments being blocked.
Chen said that China reviewed all its laws governing foreign trade and economic issues shortly after joining the World Trade Organization in 2001 and “revised those not conforming to WTO rules and its accession commitments.”
— With assistance by Yanping Li, and John Liu