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Business
Print Edition> Business
UPDATED: December 29, 2012 NO. 1 JANUARY 3, 2013
MARKET WATCH NO. 1, 2013
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OPINION

Imports Can Be a Growth Engine

Developing countries are apt to adopt an export-oriented trade policy, which may easily result in emphasizing exports and ignoring imports. Most developed countries, on the other hand, have insisted on free trade policies since World War II, which allows the market to adjust imports and exports without government intervention.

As a matter of fact, imports are conducive to structural adjustment of a country's foreign trade. Since the 2008 financial crisis, the Chinese Government has changed the export-oriented trade policy to a new strategy that emphasizes both exports and imports.

The country adopted an array of pro-import measures that led to $1.7 trillion in imports in 2011, making China the second largest importer in the world.

Imports can help optimize a country's trade structure. They can make up for the shortfalls in the country's resources and products. Importing what is lacked can better support its economic growth. Imports can better facilitate technological progress and industrial upgrading in a country and improve the country's industrial structure. They can also add vigor to a country. While importing goods, the country introduces competition from outside, which can activate the domestic economy and enhance the competitiveness of the country's exports. Therefore, developed countries often import to improve their trade structure and increase their competitiveness in the global market.

China registered $1.65 trillion in imports during the January-November period in 2012, up 4.1 percent year on year, much slower than the same period in 2011. The slowdown is caused by dwindling domestic demand and the shrinking of imports in China's processing sector.

The slowdown is also a reflection of challenges. Imports of hi-tech products are restricted by developed countries, such as the United States. China lacks professional and influential platforms to promote imports, such as import exhibitions and online websites. Chinese companies, especially small and medium-sized ones, have difficulties in understanding foreign products. The government doesn't have adequate policies to make importing goods more convenient.

The appreciation of the yuan and a sluggish global economy offer a strategic opportunity for China to expand imports. The Chinese Government should accelerate the formulation of a comprehensive and long-term strategy for supporting imports, improve collaborations between government departments and give more guidance to local governments and enterprises. These will enable imports to become a new momentum for economic growth.

Four main aspects should be heeded as the government shapes a pro-import strategy.

First, the government should give more flexibility to the import of resource products by handling importing procedures in advance. In that way, whenever there is a plunge in the price of major international commodities, Chinese enterprises can seize the opportunity to import those products at a lower price.

Second, incentive policies which encourage enterprises to import hi-tech products should be made. The key to technological progress in enterprises lies in accelerating depreciation of machines and equipment and more input for technology innovation. Expanding technology imports is an effective way to achieve this.

Third, the government should pay more attention to the import of technologies and equipment related to strategic emerging sectors, especially in terms of energy-saving and environmentally friendly equipment.

Finally, the tariff of the high-end consumer products that China lacks should be appropriately lowered to expand domestic consumption. China has a high savings rate, and high-income earners and seniors are more likely to put their money in deposits. By expanding the import of luxury products and healthcare products, the consumption potential can be tapped.

This is an edited excerpt of an article by Zhang Li, Deputy Director of the Foreign Trade Strategy Research Department of the Chinese Academy of International Trade and Economic Cooperation, published on Securities Daily  

THE MARKETS

Shale Gas Exploration

Sinopec Exploration Southern Co., a subsidiary of Sinopec Group, signed an agreement with ConocoPhillips China focusing on shale gas exploration and production research for the Qijiang block in the Sichuan Basin, said the Sinopec Group on December 25.

The Qijiang block is located in the southeast area of Sichuan Province. Exploration of the block is challenged by complex geological conditions, and the fact that the main target layer is buried deeply.

The research project will cover an area of 3,917 square km, with the cooperation period scheduled to last 24 months.

The project will evaluate the potential of shale gas exploration in the area, and enhance the engineering technology level of shale gas exploration at Sinopec.

Winning a Foreign Bid

The State Grid Corp. of China (SGCC), the country's biggest power transmission company, has won a bid for a power transmission project in Brazil, said the company on December 26.

The SGCC, together with Brazil's Copel and Furnas, made a successful bid for the G section of the No. 007/2012 power transmission project concession with an allowed first-year operational income of about $49.57 million.

The three companies plan to invest a total of about $450 million in the project.

The project involves a 967-km, 500-kv transmission line and expansion programs for four 500 kv transformer substations.

Upon the project's completion, the SGCC will operate a total of 9,931 km of transmission lines in Brazil.

NUMBERS

154

The number of Chinese companies that completed initial public offerings (IPO) in the mainland market in 2012

74

The number of Chinese companies that completed IPOs in ChiNext, the country's growth enterprise board, in 2012

$5.85 bln

The amount of capital raised in ChiNext by Chinese companies' IPOs in 2012

Email us at: yushujun@bjreview.com



 
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