TradePromotion

Concerted Efforts to Stabilize Foreign Trade

2020-5-18 9:39:37

On April 14, General Administration of Customs released China’s import and export data of the first quarter of this year. In Q1, China’s goods import and export totaled 6.57 trillion yuan, fell 6.4% from a year ago. Specifically, the exports were 3.33 trillion yuan, down 11.4%; imports 3.24 trillion yuan, down 0.7%; trade surplus totaled 98.33 billion yuan, down 80.6%. In March, China’s imports and exports totaled 2.45 trillion yuan, a decrease of 0.8% year-on-year, and the decrease was narrowed by 8.7 percentage points compared with the first two months. The exports of the month were 1.29 trillion yuan, down 3.5%; imports 1.16 trillion yuan, up 2.4%.

“Compared with January and February, the first quarter’s import and export figures greatly exceeded expectations." Zhao Jinping, former Director-General of the Research Department of Foreign Economic Relations, Development Research Center of the State Council (DRC), said in an interview with China Trade News. This means China has made considerable progress in epidemic prevention and control as well as economic and social development. On the one hand, significant results have been achieved in the containment of the epidemic; on the other hand, while maintaining efforts for the battle against the Covid-19, vigorous measures have been taken to ensure the sustained and sound development of the economy and society. Since March, China’s work and production resumption rate has been increasing, production has gradually returned to a normal state. This has played a supporting role to stabilize foreign trade to some degrees.

“It can be seen that the epidemic has affected China’s foreign trade in the first quarter, but the overall impact is still tolerable,” says Li Chunding, head and professor of the Institute of International Economics of China Agricultural University. In terms of exports, the growth rate showed a large decline under the influence of the epidemic and the Spring Festival. In terms of imports, as the epidemic in the first quarter was not yet obvious in overseas areas, there was a lag in the decline in domestic demand, the decrease in import growth is relatively small. As a result of this asymmetry, the trade surplus has decreased significantly.

Xu Hongcai, executive director of the China Association of Policy Science (CAPS), deputy director of the Economic Policy Committee of CAPS, proposed that imports in the first quarter were less affected, because most of the import orders were placed before the Spring Festival, so these were handled in the first quarter. In addition, import demand was also rising as domestic production and the lives gradually resumed and the strong domestic market potential was gradually unleashed. In terms of raw materials, the imports of coal, crude oil, metal ore and integrated circuits increased by 23.8%, 8.3%, 6.8% and 13.1% respectively. He said, given that the epidemic continues to spread worldwide, the imports could fall in the second quarter.

Li Kuiwen, spokesperson of the General Administration of Customs and director general of the Department of Statistics & Analysis, said at the press conference of the State Council Information Office (SCIO), currently the Covid-19 is still spreading at an accelerated pace in the world, causing a serious impact on the world economy. The shrinking demand in the international market will certainly have an impact on China’s exports, and challenges including decreased foreign trade orders have begun to emerge. Therefore, these difficulties should not be underestimated.

To help enterprises survive the coronavirus crisis, Zhao put forward five suggestions: first, the target market should be adjusted, and measures should be taken to develop low-epidemic-risk markets such as ASEAN and Central Asia; second, due to the impact of supply chain disruption, enterprises can consider import substitution, and look for new parts suppliers at home; third, the production structure should be adjusted, and, given the current enormous demands for medical protection supplies and daily consumer goods in the foreign markets, enterprises can seize the opportunity to increase the export of drugs, daily necessities and other epidemic prevention and control commodities; fourth, the vision must be placed beyond the epidemic, and preparations should be made to strengthen new products, new technology development, and training for employees after the epidemic; fifth, e-commerce and other online platforms and channels should be given full use.

Xu echoed that in light of the impact on the international supply chain, enterprises can consider import substitution, in order to avoid the disruption of the industrial chain and the division of labor system. In addition, import substitution can also promote China’s industrial transformation and upgrading to a certain extent. Chinese enterprises should therefore seize the opportunity to speed up research and development to achieve high-quality growth. “There are always more solutions than problems. Besides, China has the advantages of complete industrial support, labor, market,” he said.

Experts interviewed all agreed that, as China’s domestic demand gradually resumes, domestic sales of commodities originally produced for export is also an effective way for foreign trade enterprises to address the risks.

“To stabilize foreign trade requires the concerted efforts of enterprises, industry organizations and the government,” Li Chunding proposed that foreign trade enterprises should diversify and expand the export market; actively innovate export modes, transform from offline to online, and develop cross-border e-commerce; seek industrial transformation on a temporary basis and turn to the production of related products with greater demand during the epidemic outbreak. In addition, the government and industry associations should formulate support policies, reduce taxes and fees, expand financial support, strengthen the cooperation of enterprises in the industry so that they can survive together.

“In this special period, the government can scale up its policy support and relieve the enterprises’ difficulties with the ‘six secures’,” Zhao suggested that, the government should, first, secure the enterprises and increase the tax relief and reduce financing costs, in order to guarantee the normal operation of production activities; second, secure employees and reduce personal income tax; third, secure channels and provide enterprises with platforms to expand and develop new forms of business and new markets, such as the cross-border comprehensive pilot zones for e-commerce and comprehensive foreign trade service platforms; fourth, secure orders and reduce import and export transaction costs, expand government procurement, strengthen bilateral and multilateral cooperation, in order to provide enterprises with opportunities to obtain orders; fifth, secure funds, provide financing guarantees for SME loans, and expand the coverage of export credit insurance; sixth, secure research and development, which means, after the epidemic, market demands will rebound, and only enterprises with new products, new technologies, and new business models can get ahead in the fierce market competition, the government should therefore give more financial support for R&D and employee training during the production suspension. “The enterprise support policy already introduced in the first quarter of this year for production resumption should be extended from 3 - 6 months to 1 year, and its coverage further expanded,” added Zhao.

Talking about the future trend of China’s foreign trade, the experts are all agreed that the epidemic will continue to spread worldwide, and the downside risks of the world economy will increase, which leads to more uncertainty and instability factors and significantly impacts the China’s foreign trade. There still remains great challenges.

“But at the same time, we should also see that China’s foreign trade is highly resilient and competitive, and the innovation and market development capacity of the enterprises are also strong. With a powerful domestic market, we are confident of stabilizing the foreign trade and minimizing the impact of the epidemic on imports and exports,” Li Kuiwen said that various authorities across the country have taken a series of measures to stabilize foreign trade, help enterprises to overcome difficulties, gradually open up international transport channels and stabilize the supply chain and industry chain.