Special Report: Global Financial Crisis
BEIJING, Dec. 10 (Xinhua) -- China's exports totaled 115 billion U.S. dollars last month, down 2.2 percent year-on-year in the first monthly decline since June 2001, the General Administration of Customs (GAC) said on Wednesday.
The previous decline, a much smaller 0.6 percent, reflected slumping U.S. demand after the tech bubble burst.
November's exports also fell 10.4 percent month-on-month. In October, exports were up 19.2 percent year-on-year.
Sharp declines were recorded on the import front last month. Imports were worth 75 billion U.S. dollars, down 17.9 percent year-on-year and down 19.5 percent month-on-month.
"It means the financial crisis is not only weakening the economies of the United States and European Union but also weighing on China's economy," said Zhuang Jian, senior economist with the Asian Development Bank's China Resident Mission.
November's total trade volume stood at 189.89 billion U.S. dollars, down 9 percent year-on-year, GAC said.
The monthly trade surplus hit a record high for this year at 40billion U.S. dollars, up 52 percent from last November, when it was 26.28 billion U.S. dollars. The trade surplus was 35.24 billion U.S. dollars in October and 29.3 billion U.S. dollars in September.
Zhuang attributed the record-high trade surplus to a drop in exports and an even sharper decrease in imports, which widened the trade gap.
"When exports fall due to weak external demand, imports will drop more drastically because most of the country's export industry is processing with supplied or imported materials," he said.
According to Zhuang, the decline in orders at the latest Canton Fair, an important barometer of China's trade, was a gloomy portent.
At the most recent fair, where foreign buyers traditionally come to order, trade fell about 10 percent year-on-year. Orders from the United States posted the biggest drop -- about one third last year's volume, to 1.63 billion U.S. dollars.
Zhuang expected the grim situation to persist through December and into the first half of 2009.
Zhao Jinping, an economist with the State Council's Development Research Center, shared similar ideas with Zhuang, but he was more concerned about the export situation.
According to a report released by the International Monetary Fund, world growth was projected to slow from 5 percent in 2007 to3.75 percent in 2008 and to just more than 2 percent in 2009. The downturn would be led by advanced economies.
Slowing global economic activities would lead to slumping external demand further deteriorating China's exports, Zhao said.
The government has already introduced several measures to support the export sector, including raising tax rebate rates three times since late July.
"This will help cut export costs but cannot offset weak external demand," he said. However, "we should still keep our confidence", Zhao added.
With the global financial crisis weighing down economies, consumers were more likely to tighten their belts and turn to less expensive commodities.
Most of China's exports were medium and low-grade products, which might become best-selling commodities on the global market, Zhao said.
He was more optimistic about the country's imports ruling out the possibility of a sharp decline next year.
"The economic stimulus package will boost domestic demand and help spur imports," Zhao said, adding the trade surplus was likely to shrink in 2009.
From January to November, foreign trade was 2.38 trillion U.S. dollars, jumping 20.9 percent year-on-year. The total comprised 1.32 trillion U.S. dollars in exports, up 19.3 percent, and 1.06 trillion U.S. dollars in imports, an increase of 22.8 percent, GAC figures showed.
That created a cumulative trade surplus of 255.95 billion U.S. dollars in the first 11 months, up 6.9 percent or 16.39 billion U.S. dollars from a year earlier, GAC said.
According to GAC, the EU remained China's top trading partner, with bilateral trade totaling 392.94 billion U.S. dollars in the first 11 months, jumping 22 percent over the same period last year. Trade between China and the United States, the second-biggest trade partner, rose 11.6 percent to 307.82 billion U.S. dollars.
Japan remained China's No. 3 trade partner with bilateral trade totaling 246.23 billion U.S. dollars, up 15.2 percent.
Recent talk of China depreciating the yuan, its currency, to boost exports, Zhao said, was just "guesswork".
A weaker yuan could help increase the competitiveness of Chinese-made products, but it would also cause a range of negative impacts, including increasing capital outflow and deteriorating trade friction and protectionism.
The government should stick to a relatively stable foreign currency policy, he said.
"There is only one problem with the above assumption, however, which is that it is completely wrong," Jonathan Anderson, UBS economist on emerging markets, said in a note provided to clients.
According to Anderson, as the dollar strengthened over the past few quarters, the yuan "should" have fallen back to around 7.6 to the dollar in order to maintain basket parity. Instead, it stayed at 6.8 to the dollar, which means the yuan has actually appreciated significantly in effective terms since the middle of the year.
"This would hardly be a signal that China has changed its broader currency stance at all, much less institute a 'weak renminbi' policy", he said.
Chinese currency has gained nearly 20 percent against the U.S. dollar since July of 2005.