Forecast for foreign trade appears grim

Canton Fair, China's largest trade fair, is held every spring and autumn in Guangzhou. Guangdong's trade value dipped sharply in March. Provided to China Daily

Imports and exports in Guangdong province, which account for nearly a quarters of the country's trade, will face more pressure this year after the southern economic powerhouse reported a sharp drop in trade numbers during the first three months, local government officials say.

Guangdong's trade value fell by 25.2 percent year-on-year to 1.36 trillion yuan ($217 billion) in the first quarter, with exports falling by 22.4 percent to 794 billion yuan, according to provincial customs data.

The customs authorities forecast a grim trade outlook for exporters in the province, especially in the booming Pearl River Delta, and say they will face more challenges due to an unstable global market and increased domestic labor and production costs.

In March, Guangdong's trade value dipped by nearly 38.6 percent year-on-year to 471 billion yuan, according to customs officials.

Lin Jiang, head of the public finance and taxation department of Lingnan College at Sun Yat-sen University in Guangdong, says that the lower trade numbers are a grim reminder that the province needs to change its economic growth model by upgrading industries and boosting domestic consumption.

Before the big trade drop in the first quarter, local authorities had set a trade growth target of just 1 percent in 2014.

Guangzhou, the provincial capital, also expects a lower trade growth target of 3 percent this year as the city will give priority to transforming its economic structure to focus on large investment projects.

Last year, Guangzhou's exports grew by 6.6 percent from 2012 to $62.8 billion, with actual use of foreign investment reaching $4.8 billion, according to the local government.

"The lower growth target, together with the sharp trade drop in the first three months, signals that Guangdong will no longer rely heavily on trade to maintain economic growth," Lin says.

Setting a lower trade growth target means that Guangdong has to develop new growth engines to sustain its leading role in the country's economy, Lin adds.

Guangdong's economy has taken pole position nationally in the country since the reform and opening-up process started. Last year, its GDP grew by 8.5 percent from 2012 to surpass $1 trillion.

In the past five years, Guangdong reported negative trade growth only in 2009, a year after the global financial crisis.

In 2013, Guangdong's import and export value increased by 10.9 percent from a year earlier to $1.09 trillion, according to a provincial government work report.

The province's export value increased by 10.8 percent year-on-year to $636.5 billion last year, the report says.

Guangdong will strive to increase domestic consumption by promoting Guangdong-made products across the country and will continue to optimize investment structure this year, according to the report.

Citing the first quarter statistics, Lin says Guangdong's trade structure has changed a lot, from heavily relying on processing trade in the past to high-tech and value-added exports.

"The trade structure is improving and a growing number of exporters have turned to innovation-driven trade," Lin says.

In sharp contrast to the processing trade, which reported a 22.6 percent decline year-on-year, Guangdong's general trade in the first three months increased by 13.9 percent year-on-year to 550 billion yuan.

Manufacturers in the Pearl River Delta, a major manufacturing and trade hub in Guangdong, also expect a bleak trade outlook in the months ahead.

Zeng Zhaoyang, a manager at the trade department at Guangdong Hopeful Electric Co, says the company reported a loss both in export value and business profits in the first quarter of the year.

"The fast export growth in the 1990s is long gone. Now we are struggling," Zeng says.

The company, a home appliance maker based in Foshan, Guangdong, reported a 10 percent year-on-year drop in exports last year, according to Zeng.

Stiff competition and increased labor and production costs have also squeezed business profits in recent years, Zeng says.

"We have to boost research and design investment and develop more product varieties for overseas markets so that we can stay profitable," he says.

A total of 2,000 exporters in Guangdong surveyed in a recent report by the Shenzhen-based Onetouch Business Service Co reported an export increase of only 1.44 percent year-on-year in the first three months of 2014.

However, Zhu Xiaodan, governor of Guangdong, said during the annual local legislative meeting in January that the province would maintain stable trade growth this year by introducing a series of measures to encourage local companies to better tap the international market.

"We will develop varieties of international markets, support local exporters to participate in overseas trade events, cultivate more overseas sales channels and carry out cross-border e-commerce for sustainable trade growth," Zhu says.