Ministry of Commerce official cites weak global market, rising costs

BEIJING / SHANGHAI - China's exports, a major engine of the country's economy, may slow further next year on weakening demand in developed economies and rising costs at home, Ministry of Commerce officials said on Wednesday.

"Foreign trade is facing a severe situation next year," Wang Shouwen, head of the foreign trade department of the ministry, said at a news conference in Beijing as the ministry released a white paper on China's foreign trade.

Demand will not improve in Europe and the United States - China's major export destinations - and costs such as wages and land prices are rising, he said.

Growth of China's overseas sales has seen a setback in recent months. Exports in October increased 15.9 percent year-on-year, the slowest growth in eight months.

Chong Quan, deputy representative for China's international trade talks, said export growth in November slowed even more. The November figures will be announced later this week.

Chong's remarks confirmed expectations that worsening external markets are dragging on the world's second-largest economy.

Zhang Liqun, a researcher at the Development Research Center of the State Council, said export growth will slow to 15 percent next year from an estimated 18 percent this year.

Wang Tao, an economist with financial company UBS AG, even expects China's exports will cease to grow in 2012 because of "significantly weakened external demand".

"We expect China's exports to Europe to decline sharply, which will only be partially offset by export growth to the US and elsewhere, as economies outside Europe will likely suffer as well," Wang said in a report.

Guangdong, the southern province that accounts for one-fourth of China's exports, is expecting the worst situation in foreign trade in the first half of next year, Zheng Jianrong, deputy director of the provincial foreign trade and economic cooperation department, said.

Externally, the possible long-term low growth of the world economy, exacerbated by recent turbulence in the financial market and rising trade protectionism, will continue to hit Guangdong, Zheng said.

Internally, the appreciation of the Chinese currency, rising costs of raw materials, difficulties in raising funds, plus the shortage of labor, land and power, will put pressure on exporters, he added.

Wang Shouwen with the Ministry of Commerce said the ministry will help exporters in terms of brand building, research and development, and sales networks.

Vice-Premier Wang Qishan said recently that the government plans to reduce taxes and provide more financial support to exporters.

The State Administration of Foreign Exchange will reform the management of foreign currencies involved in goods trade, the agency said on its website on Wednesday.

The reform includes measures such as building a real time platform so the agency can process the majority of companies' applications online. The process of applying for export tax rebates will also be simplified, it said.

China's export slowdown, however, will not significantly affect the country's economic growth next year, according to Pan Jiancheng, deputy director of the China Economic Monitoring Analysis Center at the National Bureau of Statistics.

"Among the three key drivers of China's economic growth - investment, consumption and exports - the first two are expected to remain strong next year," Pan said. "The contribution of exports to the overall economic growth will drop significantly," says a report released by the Chinese Academy of Social Sciences on Wednesday.

Compared with the weakening demand in developed economies, developing countries may boast more growth potential.

"China will put more attention on exports to emerging markets, as those countries performed well," Wang Shouwen said.

His remarks were echoed by Gui Ming, executive deputy general manager with motorcycle maker Qianjiang Import & Export, who expects exports to Europe and the US to remain sluggish next year, but sees rapid growth in emerging markets helping the company grow.

Overall, the Zhejiang-based company expects exports to grow 30 percent next year, though those to developed markets will continue to decline.

The company now has 70 percent of the motorcycle market in Venezuela, where exports will hit 250,000 next year, up from around 170,000 this year. In Brazil and Argentina, the company has set up joint ventures and is expecting "explosive growth".

Wang Shouwen said China will work particularly hard to increase its imports from the West next year.

China's trade surplus is expected to be $161 billion this year, with exports rising 20.4 percent and imports soaring 24.7 percent, according to the Chinese Academy of Social Sciences.

In the official white paper, the Chinese government reiterated that it does not deliberately pursue a trade surplus and that China is moving toward balancing exports and imports.

Chen Jia, Hu Yuanyuan in Beijing, Li Wenfang in Guangzhou and Reuters contributed to this story.