Asian crisis to hit China's trade growth

Asian crisis to hit China's trade growth

BEIJING (Reuters): China's foreign trade minister, warning of the impact of the Asian financial crisis, was quoted yesterday as saying combined import and export growth this year would be slashed by half.

Chinese economists predicted exports could plunge as a result of currency collapse in some of China's most important export markets, including Thailand and Indonesia.

This, in turn, could further slow China's relatively sluggish economic growth.

Minister of Foreign Trade and Economic Cooperation Wu Yi said foreign trade in 1998 was targeted to reach $345 billion, an increase of 6.1 percent over last year, when growth reached 12.1 percent.

"We should not underestimate the negative effects of the financial crisis," the China Daily quoted Wu as saying.

Wu gave no breakdown of import and export value, or offer any prediction about the size of next year's trade surplus, but Chinese economists said the trade picture looked bleak.

"The trade surplus this year will definitely narrow," said an economist at the ministry.

Last year's surplus jumped to a record $40.34 billion, boosting foreign exchange reserves to $139.9 billion at the end of last year and underpinning the Chinese currency.

Exports in 1997 grew 20.9 percent to $182.7 billion and imports edged up by 2.5 percent to $142.36 billion, official figures showed.

One economist at the State Information Center under the State Planning Commission said exports in 1998 were likely to climb just three to five percent from last year.

"China's exports could be noticeably affected by the currency crisis after the second half of this year," the economist said.

"It will hinge on whether the currency crisis continues. There is a possibility that exports will grow zero percent or even at a negative rate."

Meanwhile, China's imports were expected to grow by 12 percent year-on-year in 1998 on the back of accelerated fixed asset investment and lower import tariffs, he said.

China's Gross Domestic Product growth slowed to 8.8 percent in 1997 from 9.7 percent in 1996 and is officially forecast to expand by 8.0 percent this year.

However, economists have warned that slower export growth on top of sluggish consumer demand and falling investment could put this year's growth target out of reach.

"Exports were the main driving force behind last year's overall growth," said the economist. "Growth could slow to six percent in 1998 if investment and consumption remain at last year's levels."

Growth of 8.0 percent, or even 6.0 percent, would be the envy of many shaky Asian economies this year, but China needs brisker expansion to soak up an estimated 20 million people hitting the job market each year.