Agenda
The 12th Five-Year Plan (FYP) released by the Ministry of Commerce and State Council of China aims at an annual growth of trade by 10 percent during 2011-2015 and a total of US$4.8 trillion by 2015. Moreover, China will pursue balanced, progressive and mutually beneficial foreign trade development from now until the end of 2015 in light of the above plan.
The plan targets promotion of the sound and rapid development of domestic trade. The Plan summarizes the current status of domestic trade development in China as well as sets out the key development objectives and main tasks for the 12th Five-Year Plan period (2011-2015).
Institutional Structure
MOFCOM (The Ministry of Commerce) was established in March 2003, consolidating responsibility for foreign and domestic trade in one body. The new office combines the former Ministry of Foreign Trade and Economic Cooperation (MOFTEC) with parts of the former State Economic and Trade Commission (SETC) and former State Development Planning Commission (SDPC) in a move intended to streamline bureaucratic approval requirements. MOFCOM personnel total roughly 700 people.
In terms of organisation, MOFCOM is composed of about two dozen departments, most of which were transferred intact from MOFTEC. MOFCOM absorbed four offices from SETC. From the former SDPC, the Economic and Trade Circulation Department and Utilization of Funds Abroad Department were incorporated into MOFCOM. And two new offices were created within MOFCOM--the Market Circulation Coordination Department and the Commercial Reform Development Office.
Challenges
China's foreign trade is suffering from deteriorating external demand and rising internal costs. In other words, there are two reasons behind the slowing export growth: externally, overseas demand decreased due to tepid internal economic growth and the sluggish economy in China's major trading partners like Japan and the European Union; internally, the exporting sector bears the brunt of rising environmental costs and costs of labour, raw materials and resources.
Trade Protectionism
China is the country most severely affected by trade protectionism. According to the WTO, China in 2008 faced investigations by the world trade body into 73 anti-dumping cases and 10 countervailing duty cases. During the first half of 2008, China faced 58 trade remedy cases involving products worth $8 billion. Some trade protection measures are targeted solely at China.
RMB Exchange Rate Risk
RMB exchange rates risks are identified particularly for the country's more export-led manufacturing enterprises. Risk-avoiding plans should be carried out by these firms. Enterprises have certain costs in making arrangements to guard against risks. Only after they get adapted, could the yuan's price reflect true market conditions. To keep the exchange rate stable, China has set a more restrictive rule on the yuan's trading against the U.S. dollar compared with other currencies.
Increasing Cost Pressure
For a long time, the cheap and abundant labour resources have been China’s absolute advantages in international trade. China’s export largely depends on its cheap labour cost and product prices. But with the development of technology and science, the advantage of China’s cheap labour is missing. Chinese labour, however, is no longer as cheap as it once was due to competition for both skilled and unskilled labour, a trend towards increasing unionization, the weakening dollar, and other factors.
Current Situation
In the first half of 2012, China’s trade current-account surplus with the rest of the world has largely disappeared. In 2007 it amounted to more than 10 percent of the entire Chinese economy. By last year it had shrunk to about 2.8 percent. The IMF estimates it is very likely to decline to 2.3 percent of the nation’s output in 2012, the smallest since 2001. Moreover, both imports and exports in China recorded negative month-over-month increase, while their year-over-year growth also narrowed significantly.
Prospect
Trade Prospect
The export is likely to grow more slowly over the next decade, as demand in rich economies remains subdued, but its market share will probably continue to creep up. Projections in the IMF's World Economic Outlook imply that China's exports will account for 12% of world trade by 2014. A 2009 IMF working paper calculated that if China remained as dependent on exports as in recent years, then to sustain annual GDP growth of 8% its share of world exports would rise to about 17% by 2020.
Key Policies
Since 2010, the central goals of the Chinese government have been maintaining strong, sustainable and balanced growth, transforming economic development pattern, expanding domestic demand, structural adjustment, accelerating the development of high-technology industries and continued deepening the reform and expanding opening up. China is willing to carry out practical cooperation with all countries and regions to bring into play each other's respective advantages in a bid to achieve mutual benefits and win-win results.
Promoting Balanced and Sustainable Development of Trade and Investment
China has entered a new stage of opening up in which the status and role in the national economy of import and export as well as inward and outbound investment have profoundly changed. In the face of the new situation, the Chinese Government pays more attention to the balanced, coordinated and sustainable development of trade and investment.
Optimizing the Utilization of Foreign Investment through Further Opening up
Utilizing foreign investment is an important part of China's basic state policy of opening up to the outside world. Foreign-invested enterprises have promoted market competition, industry upgrading and technology advance in China, contributing a lot to China's economic and social development.
Key Figures
Basic Indicators
(Some fundamental trade indicators of China, 2009-2011)
a. Current account balance (million US$, 2010) - 305,370
b. Trade to GDP ratio (2009-2011) - 53.2
c. Exports of goods and services (trade volume in 2011, 2005=100) - 209
d. Imports of goods and services (trade volume in 2011, 2005=100) - 192
Merchandise Trade
(Share in China’s total exports and imports by main commodity group, 2011, in percentages)
1. Agricultural products – 3.4 – 8.3
2. Fuels and mining products – 3.1 – 29.6
3. Manufactures – 93.3 – 59.2
(Share in China’s total exports by main destination, 2011, in percentages)
1. European Union (27) – 18.8
2. United States – 17.1
3. Hong Kong, China – 14.1
4. Japan – 7.8
5. Korea, Republic of – 4.4
(Share in China’s total imports by main origin, 2011, in percentages)
1. European Union (27) – 12.1
2. Japan – 11.2
3. Korea, Republic of – 9.3
4. Taipei, Chinese – 7.2
5. United States – 7.1
Commercial Services Trade
(Share in China’s total exports and imports by principal services item, 2011)
1. Transportation – 19.5 – 34.0
2. Travel – 26.6 – 30.6
3. Other commercial services – 53.9 – 35.3
China’s Outward Investment
(Percentages of China’s outward investment to different regions of the world, 2005-2010)
1. Americas - 19.5
2. Other Asia - 17.1
3. Middle East & North Africa - 16.5
4. Sub-Saharan Africa - 13.8
5. Europe - 13.4
Transition to Globalisation
The RMB and Chinese Exchange Rate Policy
China probably missed a good opportunity to exit from the soft peg exchange rate policy in late 2009, when growth accelerated, trade recovered, inflation returned. But it is not too late to do it now. After all, greater exchange rate flexibility could help stem budding inflationary pressure, improve economic efficiency, balance the economy and reduce unnecessarily external tensions.
The RMB exchange rate issue will not disappear, as long as the US still has an unemployment problem, the global economy remains imbalanced and RMB exchange rate stays short of free float, the argument between the two largest economies of the world, the US and China, will likely continue.
Globalisation » Economy » Finance » Markets » Foreign Exchange
Transition to Political Tools
In Victory for the West, the WTO Orders China to Stop Export Taxes on Minerals
The appeals panel of the WTO ruled that China must dismantle its system of export taxes and quotas for nine widely used industrial materials. The legal setback for Beijing could set a precedent for the West to challenge China’s export restrictions on other natural resources, including rare earth metals that are crucial to many modern technologies.
Tools » Institutions » Global » WTO
Transition to Political Actors
Trade and Business Opportunities in China
There are a multitude of trade and investment opportunities for exporters in the China market. Some of the major sectors currently experiencing rapid growth are: processed food and beverages, gambling, transport, IT and telecommunications, minerals and energy, environment protection, building construction products and services. Three of the major growth industries though are the exporting of education, processed food and wine products.
Actors » Sector » Business
