2008 Exports Are Dim. China'S Manufacturing Is Unbearable RMB Appreciation.

The latest figures show that China's export surplus has declined for fourth consecutive months.

The pessimism permeated among export enterprises has attracted the attention of the State Council.

The Ministry of Commerce has just completed the survey commissioned by the State Council, which shows that the appreciation of RMB has become an unbearable burden for Chinese export enterprises.

The latest figures released by the General Administration of Customs in March 10th showed that China's trade surplus was $8 billion 555 million in February 2008, less than half of that in January ($19 billion 490 million).

This is the fourth consecutive month of decline.

On that day, the exchange rate of RMB against the US dollar continued to run at the highest level since the reform. At 4 p.m., the value of the renminbi against the US dollar was 7.1069 to 1.

Although there are still optimists who believe that the decline in export growth in February is affected by special factors such as Spring Festival and snow disaster in China, the export growth rate in March is expected to rebound sharply.

However, many export enterprises interviewed by this newspaper are very pessimistic about the export situation in 2008.

The textile industry is considered to be the most influential industry.

Xu Wenying, President of China Cotton Textile Industry Association, told the newspaper that in 2007, the main textile export products all had negative growth, and the reduction of exports caused a large number of products to be sold domestically, resulting in intensified domestic competition.

In 2007, the capacity growth of textile industry dropped from 21% in January to less than 15% in December.

The decrease in export and production capacity has eroded profits.

Sun Huaibin, director of the China Textile Economic Research Center, told the newspaper: "in the first half of last year, the textile industry in the Pearl River Delta has almost no profit."

Xu Wenying believes that the export situation in 2008 will be even worse. "This (2008) may become a year of domestic sales war in the textile industry."

Unlike the textile industry, China's mechanical and electrical products are supported by the government's export industry. In the list of export tax rebates that were drastically adjusted in July last year, the impact on mechanical and electrical products was not great.

Even so, exports of mechanical and electrical products have not been spared.

According to the data provided by Bai Xuefeng, deputy director of the import and Export Department of the import and Export Chamber of China's mechanical and electrical products import and export department, the export growth rate of mechanical and electrical products in 2007 was 27%, but the average 1~2 increase this year is only 20.5%.

Although Bai Xuefeng thinks that the data of these two months do not see the trend of the whole year, he predicts that the export growth of mechanical and electrical products in 2008 will drop by 5 percentage points.

Li Weidou, general manager of FAW Group, predicted that China's auto imports and exports will continue to grow this year, but "there will be many uncertainties as to whether the growth momentum will be as strong as last year".

The prediction of Ha Jiming, chief economist of CICC, is very clear and pessimistic.

He believes that the weakening of external demand in the US and Europe will slow the growth of China's exports and may even increase negatively in the coming months.

Such a pessimistic export situation and prospects have attracted the attention of the State Council.

In late 2, the Ministry of Commerce was commissioned by the State Council to investigate the major export provinces of Guangdong, Zhejiang and Shandong to understand the impact of RMB appreciation, international market changes, higher raw material prices, higher wage costs, and export tax rebates on export enterprises.

According to the official investigation by the Ministry of Commerce, the results of the survey show that "the export tax rebate has dropped, the RMB exchange rate has changed too much, the bank credit has been tightened and the labor costs have risen.

Enterprises have encountered more or less the problem of reduced profits and backlog.

The commerce ministry officials said that the main reason for the difficulties encountered by export enterprises was related to the appreciation of the renminbi.

Sun Huaibin, director of the China Textile Economic Research Center, also believes that "the rapid appreciation of the RMB is the main reason for the decline in the export growth of the textile industry".

According to the data provided, in the 2003-2004 years, that is, before the RMB exchange rate reform was implemented in 2005, the surplus growth of the textile industry was 2.5 to 2.6 times the increase of the national trade surplus.

By the end of last year, it had only reached 60% of the growth rate of the national total surplus.

Guo Tianyong, director of the China banking research center of China University of Finance and economics, also believes that the fall of the trade surplus in February is mainly affected by the accelerated appreciation of the RMB.

The total appreciation of RMB has exceeded 2% since the new year's day.

The quicker pace of appreciation has increased the cost of production and impede exports.

Xia Bin, director of the Financial Research Institute of the development research center of the State Council, suggested that: "let every department calculate the impact of RMB appreciation on employment, output value and GDP in all walks of life, and then summarize it as the bottom line for the government to adjust the policy."

But the Commerce Department officials did not disclose whether the central government would adjust the relevant policies.

It is said that the Ministry of Commerce has already presented the research report to the State Council, and whether the specific foreign trade policy needs to be adjusted will depend on the data in March.

Morgan Stanley chief currency analyst Ren Yongli predicted: "because of external shocks, China will slow down the pace of RMB appreciation is very possible."

SR