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China falling victim to trade protectionism
Updated: 2005-10-31 09:18

China became one of the major victims of trade protectionism in the past nine months or so, suffering from a wide range of trade barriers including anti-dumping, safeguard measures, subsidies and countervailing measures and special safeguard measures.

According to the China's Foreign Trade Report (fall, 2005) released on Friday by the Ministry of Commerce, in the first three quarters of this year, China incurred trade frictions involving 8.9 billion US dollars, a growth of more than 700 percent over the year-earlier level.

"The situation will likely remain unchanged in 2006, as China'strade surplus will hit 90 billion US dollars for the whole year and some major economies continued to pursue trade protectionism policy, using 'high unemployment ratio' as an excuse," said Li Rongcan, deputy head of the planning and finance department of thecommerce ministry.

Other experts noted that amid the rampant increment in trade frictions, focus of conflicts shifted gradually from trade in goods to China's exchange rate and taxation policies and economic structure.

"Though domestic demand waned and imports somehow slackened accordingly, due largely to macro economic control, in the first half of the year, it is totally wrong to consider the Chinese Government stepped in foreign trade with administrative instruments," said Li Yushi, vice president of the Research Institute of International Trade and Economic Cooperation.

He held, "China is not in pursuit of trade surplus, nor implementing the so-called 'mercantilism'. On the contrary, the continuous growth in trade surplus has become one of major concerns of the Chinese Government, as it helped increase the nation's foreign exchange reserve to 760 billion US dollars, whichhas begun to affect the national economy."

Many economists attributed the fast growth in China's external trade mainly to rapid global economic growth and robust demand on the world market.

"By contrast, China's domestic market was oversupplied generally, compelling traders to turn to international markets andthus boosting export," Li Yushi said.

Another factor behind the fast growth in exports lied in manufacturing capabilities accumulated by more foreign direct investment over the past few years, Li pointed out.

Take the textile sector. Latest survey showed that some US textile businesses pumped scores of millions US dollars into China,and most of their products were sold to international markets, according to Cao Xinyu, vice chairman of China chamber of commercefor textile import and export.

"Though the prospect of Sino-US textile trade remains unclear, there is no evidence that these businesses will stop expanding production," Cao said.

In sharp contrast with fast export growth, import suffered an unusual drastic decline in China.

Li said, "This was largely because of decreasing arrivals of raw materials and equipment, particularly equipment imported by foreign investors as form of investment, which went down 11.7 percent year-on-year in the first nine months."

Nonetheless, China's macro economic control measures have been gradually absorbed by the domestic market, demand at home will likely gain ground.

Customs sources said that in September China's import volume rose 23.5 percent over the same month of last year to 62.6 billionUS dollars, while the export volume climbed up 25.9 percent to 70.2 billion US dollars, slower than the 32.1 percent growth in August. The trade surplus adjusted downward from the 10 billion dollars in August and 10.5 billion dollars in July to 7.6 billion dollars in September.

"Currently, import is totally businesses' activity. There has been almost no room for the Government to intervene by administrative means after China entered the World Trade Organization. Along with a recovery in investment at home, China'strade surplus in 2006 will probably be lower than the estimated 90billion US dollars for the current year," Li Yushi said. Enditem

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