China's imports and exports maintained steady and rapid growth last year. That was achieved against the odds - a global economic slowdown, increasing trade protectionism, the rise in domestic production costs, accelerating appreciation of the yuan and other unfavorable factors.

The trade framework continued to be improved and the foreign trade surplus continued to fall. But the trade environment worsened, and export growth fell markedly. The growth in imports and exports has fallen significantly, particularly since September, no doubt the result of the European debt crisis and weakening external demand.

Foreign trade last year had three main features.

First, the rise in imports was higher than the rise in exports, which means the government strategy of boosting domestic consumption and increasing imports has achieved some results. Last year, China's foreign trade reached a record of $3.64 trillion (2.87 trillion euros), a year-on-year increase of 22.5 percent. The trade surplus totaled $155.14 billion, a net decrease of $26.37 billion, or 14.5 percent, from last year. Under the guidance of the policy that calls for the "expansion of imports", China's import growth was 4.6 percentage points higher than export growth over the same period.

Second, the growth of general trade was higher than that of processing trade, and there were improvements in the trade framework. General trade grew 29.2 percent, accounting for 52.8 percent of China's imports and exports. The proportion increased 2.7 percentage points compared with that of 2010. The processing trade grew 12.7 percent.

Third, trade growth with developed countries decreased, but trade growth with emerging markets expanded rapidly. The growth in trade with China's traditional markets - Europe, the US and Japan - was slow, but growth with emerging countries was strong. China's bilateral trade with Europe, the US and Japan grew 18.3 percent, 15.9 percent and 15.1 percent respectively. The growth rates were 4.2 percentage points, 6.6 percentage points, and 7.4 percentage points lower than China's overall trade growth rate over the same period.

Trade with ASEAN, Brazil, Russia and South Africa increased 23.9 percent, 34.5 percent, 42.7 percent and 76.7 percent respectively, much higher than China's overall trade growth rate, which shows that Chinese companies have made strides in expanding businesses into emerging markets.

The risks to the global economy this year are still considerable. The International Monetary Fund has downgraded its outlook on world economic and trade growth to 4 percent and 5.8 percent. It forecast economic growth of 1.9 percent for developed countries and 6.1 percent for emerging economies.

Developed countries' economies will remain weak, unemployment will remain high and trade protectionism will continue to strengthen. Emerging economies will face more intense competition within themselves, and China is facing increasing protectionism measures from both developed countries and emerging economies.

In the domestic market, the rise of wages, raw material prices and costs of other elements will further hurt exports. Meanwhile, tight credit, the increasing cost of financing and the appreciation of the yuan will add more difficulties to a number of export-oriented businesses, especially small- and medium-sized ones.

As a result of weakening external demand, increasing trade protectionism, rising international competition and other unfavorable factors, China's exports will face difficulties this year. However, it should be noted that the core competitiveness of China's exports will be maintained, and exports to emerging markets are expected to expand further.

As China's economy maintains rapid growth, demand for crude oil, iron ore, copper, aluminum and other energy sources and raw materials will continue to grow. With international bulk commodity prices expected to remain high and the government's game plan of boosting imports, China's imports are likely to be lower than they were last year, but the pace of growth will still be relatively rapid.

Taking all factors into account, China's foreign trade is expected to reach $4.2 trillion to $4.32 trillion, an increase of 14-17.5 percent. Exports will be $2.18 trillion to $2.24 trillion, an increase of 13-15 percent, and imports $2.02 trillion to $2.09 trillion, an increase of 15-19 percent. The trade surplus is expected to shrink further, to about $150 billion.

This year China needs to focus on the adverse effects of the international economic environment, especially the trend of the European debt crisis and the harm it can do. China should speed up the development of foreign trade, adjust the foreign trade structure, consolidate the international market share, expand the emerging markets, solve the practical problems foreign trade companies have to face, expand imports, and promote balanced development of imports and exports.

First, the government should maintain a relatively stable export policy. With continued deterioration in the export environment, companies' lack of purchasing orders and tight credit, the government should continue implementing measures to support the financing of export-oriented companies, and increasing export credit guarantees especially to small- and medium-sized enterprises. In light of the upward pressure on costs in foreign trading companies, China should stabilize the export tax rebate policy. These companies need to be assured of stable costs.

Second, accelerate the development of the new competitive export advantage. The government should encourage export-oriented companies to build their own brands, set up marketing networks and strengthen their research and development by adjusting fiscal policies and supporting them to increase investment in research and development.

The government should also increase support for the export of electromechanical products, trying to build a couple of big brands in two to three years, to transform foreign trade.

Third, expand imports. Increase the support of imports of discount, import credit, import credit insurance to reduce tariff levels, to simplify procedures for imports. According to movements in international bulk commodity prices, timely expansion of relevant product imports will help increase the national strategic reserves. Fourth, continue to expand in emerging markets. Because of the uncertain prospect of developed markets, China should increase trade and economic cooperation with Asia, Latin America, Russia, Eastern Europe, Africa and other emerging markets, particularly the ASEAN and the BRIC countries, and play an active role among countries who have signed free trade agreements.

Zhang Jianping is a researcher at the Institute for International Economics Research under the National Development and Reform Commission, and Zhang Yi is an assistant researcher at the institute. The views expressed do not necessarily reflect those of China Daily.

(China Daily 01/20/2012 page8)