Wall Street turmoil tests China's foreign trade

The disillusionment of Wall Street myth has further endangered the already downward global economy, and posed a fresh threat to China's foreign trade, which is already on the verge of collapse.

'The year 2008 has thus far proved to be the most arduous year for China's foreign trade exports since its entry into the WTO,' predicted in the beginning of the year by international authorities. The latest statistics suggested that, from January through to August this year, China's foreign trade exports went up by 22.4 percent, while it was 27,7 percent the same period last year, showing a dim prospect for China's foreign trade.

One of the basic point used to judge the general tendency of China's foreign trade is nothing but the U.S economy. Currently, the sub-prime mortgage crisis is far from conclusion, and the U.S economy has been obviously on the decline. Even worse, the financial storms set up by Frannie Mae and Freddie Mac, both suffering severe bad debts, has been extending all the way from the financial institutions to the economic entities, leading to the weakness of the individual consumption growth, which accounts for 2/3 of the U.S GDP, and the shrinking demands for imports.

Meanwhile, China and the U.S. have been crucial trade partners to each other. But compare with last year, the bilateral trade volume dropped by 3.1 percentage points in the first eight months of the year. In particular, the orders placed for Chinese toys and garments, which used to enjoy a bulky share in the U.S market, turned to a sharp decline. Lehman Brothers, together with another four major investment banks, went bankrupt almost overnight. The 'Domino' effects induced by the precarious U.S economy have already sent many other major economic entities swaying and drifting. More over, the economic growth in the Euro Zone has so far produced no good results in sight.

The Japanese economy has been bogged down in stagnation, and the growth rate of emerging economies have suffered a severe setback, serving as an indication of an impending expansion of the financial crisis from the developed countries into the developing countries, which will unavoidably deliver a harsh blow to China's exports.

On top of that, the exacerbation of the global inflation and the untamed price hike in energy and resources have directly jacked up the production costs; besides, the international ocean freight has also gone up by more than 30 percent. Consequently, the costs gap between the developed countries and the emerging economies will have been narrowed, causing the possible return of international manufacturing industries to the developed countries and their neighboring regions. In a long run, the relative advantages of 'made-in-Chinas' would possibly be offset, and China's competitiveness in exports would be dulled. Additionally, the global geopolitics is getting increasingly complex, neo trade protectionism is looking up, and in future, the trade barriers against China would increase rather than decrease.

From the perspectives of China's domestic situation, with the rise in costs and the revaluation of RMB, as well as the monetary policies, many export-oriented and labor-intensive industries and enterprises cannot run profitably and efficiently in the country's bustling business areas lying along the Yangtze Delta and the Pearl Delta. But generally speaking, the challenges facing China's foreign trade are mostly from outside uncertainties instead of coming within China. At present, the difficulties from both outside and inside are interweaving and accumulating, and the foreign demands continue to shrink. It is expected that in the second half of the year the growth rate in China's exports would see no bounce-back, even though no cascading fall is predicted.

Fortunately, the turning point in China's foreign trade development does not loom ahead. Compared with others, China's present growth rate in exports still remains higher. The basic facets of China's economy stay intact, and its development quality and efficiency tend to look up. Moreover, the 'three carriages' for economic development run more steadily, and the fiscal revenues grow by leaps and bounds; priorities of the macro-economic policy have been shifted from 'two prevents', namely, prevent the economic development from overheating, and prevent the prices hike from evolving into the evident inflation, to 'one guarantee, one prevent', so to speak, besides the prevention of prices hike, the steady and smooth economic development must be guaranteed. As regards China's export economy, there is still enough room for manoeuvre.

Beyond doubt, foreign trade acts as a strong driving force for China's economic growth, and the global economic turbulence could also hit China. But as Chinese Premier Wen Jiabao was quoted as saying in his official visit to the U.S, 'in history, the world economy has gone through ups and downs, but it survived and gained the new momentum for development,' China's economy is now at the stage of restructuring and transformation, and thereby, being cautious and prudent is not only a matter of practical attitude, but more a chance for further development.

It is hard to take omens from Wall Street storm, as it could recur in future, but it is by no means the calamity of exterminating the world. The linchpin for recovery is the ability to convert 'risks' into 'opportunities,' and the confidence, which is considered more valuable than gold when crisis breaks out. It is convincing that China's foreign trade will scale new heights by braving the U.S born financial storms.

By People's Daily Online