To Support The Export Industry Is Not A Trade Surplus

The Ministry of Commerce has submitted a report to the State Council to slow down the pace of appreciation of the RMB exchange rate, and adjust export tax rebates in industries such as clothing, toys and footwear, so as to relieve the current difficulties of export enterprises. The Reuters report has aroused strong concern at home and abroad.

In fact, at the beginning of July, when the State Council conducted intensive research on Jiangsu, Zhejiang, Shanghai and Shandong, and frequently visited foreign trade enterprises, many difficulties faced by export enterprises began to be concerned.

Since last year, the state has adopted a tight trade policy in order to alleviate the many problems caused by the huge surplus.

This year, thanks to the appreciation of the renminbi, slowing external demand and rising international raw materials and energy prices, export enterprises, especially small and medium-sized export enterprises, have met with great difficulties.

The newly released trade figures also confirm to some extent that the total exports in June were 121 billion 530 million US dollars, up 17.6% from the same period last year, and the growth rate was much lower than 28.1% in May.

In June, the trade surplus was 21 billion 350 million US dollars, down 20.6% from the same period last year.

Among them, the most serious decline is the textile and garment industry.

Data show that: in the first half of this year, the export volume of clothing increased by only 3.4% over the same period last year, and the growth rate was much lower than that in the first half of 2007. 21.7%

There is no doubt that although changing the mode of economic growth and promoting economic growth to rely more on domestic demand rather than over reliance on external demand is our long-term goal, but in the foreseeable future, exports will still be one of the main forces that drive China's economic growth, and the excessive appreciation of RMB and the deterioration of the international economic environment may lead to a sharp stall in China's export trade, which will have a serious negative effect on the whole macro-economy and even social stability.

Moreover, as time goes on, the side effects of tight monetary policy are also rising, and the side effects have risen to a certain extent, and the period of adjustment has also arrived.

Under such circumstances, we should make preparations for policy readiness according to the actual situation. Once the current international financial crisis is further infected and deepened to a certain extent, it is necessary to adjust the entire macroeconomic policy orientation, including trade policy in time.

On Monday, Vice Minister of Commerce Gao Hucheng said that the support policy would be launched at the right time to help textile industries such as export problems.

However, in spite of the necessity of moderate relief to the export sector, it does not mean that the government departments should issue blank checks in terms of strength and scope for export departments to fill in.

First of all, the huge trade surplus is still a manifestation of the macroeconomic external imbalance. Foreign exchange is not only the main channel for China's basic currency input and inflation pressure input, but inflation is a long-term challenge we must face. The decline in the CPI book numbers in June is largely the result of price control measures.

Fannie Mae and Freddie Mac, the two largest US mortgage companies, are almost at the end of the day, causing hundreds of billions of dollars in China's bonds to be on the rocks.

Therefore, from the perspective of macroeconomic balance, as long as our actual exports are still growing steadily, as long as our import growth is not "slaughtered", the reduction of trade surplus is good rather than bad.

Therefore, our goal should be to save the export industry and corresponding employment that conform to the industrial policy orientation, rather than save the trade surplus.

Secondly, the slowdown of export growth in some industries is due to the high share of China's products in the international market. For example, toys and so on, the share of "made in China" in the world market has reached 80% to 90%.

In any case, it will be very difficult to increase the intensity of export incentives and expect that the export volume of such industries will continue to maintain the two digit growth rate. The focus of our rescue measures for such industries should be on the increase of the volume of export volume and create convenience for them.

The key to improve the export volume of these industries is to cut into the circulation and brand of high yield.

Therefore, it is more important to take measures to help cross-border mergers and acquisitions in these industries than to increase export volume through export incentives.

In terms of exchange rate, by intervening in the foreign exchange market, the government can really slow down the appreciation of the RMB exchange rate, but more importantly, it will fully expose the pressure of RMB exchange rate reversals and accelerate the reversal of the market exchange rate.

More importantly, the expansionary aggregate policy will often sacrifice the goal of upgrading the structure, and the structure has always been a major problem in China's foreign trade and economic development as well as the whole economy.

The term "impoverished growth in foreign trade" originally stems from the deterioration of the terms of trade of developing countries with primary products export leading industries, resulting in the increase of their export volume and the decrease of their income. China's exports are mainly made up of finished products, but their profits are very small and most of their profits belong to foreign-funded enterprises. Therefore, the risk of increasing trade scale but reducing contribution to the whole economic development has become a new form of "impoverished growth in foreign trade", and reversing this painful situation is our unshakable goal.

To this end, even if we relax trade policy, we should not sacrifice the goal of upgrading our structure.

Export enterprises should not place all their hopes on the support of government policies. Instead, they should take the initiative to carry out industrial upgrading and adapt to changes in the market.

(the writer is Associate Research Fellow of the international trade and Economic Cooperation Research Institute of the Ministry of Commerce)