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Although China's trade volume was rated the world's highest in 2011, China's foreign trade development remains unbalanced, according to Shi. Since 60 percent of Chinese exports are from the processing trade and lack independent brands and distribution networks, foreign companies and retailers are earning large profits. "Under this blanket of low profits, heavy losses will be inflicted upon Chinese enterprises when market demands decrease," said Shi.
The goal of export growth in 2012 set by the Chinese Government is 10 percent, which is hardly ambitious but still difficult to achieve.
Li Jian, a research fellow at the Chinese Academy of International Trade and Economic Cooperation (CAITEC) affiliated with the Ministry of Commerce (MOFCOM), said that at present trade-related policies, including those on tax rebates, credit and renminbi exchange rate, are all stable. The CPI growth has remained low, and so the cost pressure of China's export-oriented enterprises is somewhat alleviated.
"The biggest variable factor affecting China's exports is still external demand, and the external environment is still not optimistic," Li said.
Shi found that many Chinese export-oriented enterprises are changing their dependence on European, U.S. and Japanese markets and tapping into the potential of markets in Latin America, Africa and the Middle East. Many emerging industrial countries are developing rapidly and their purchasing power is rising. Compared with products made in Europe and the United States, Chinese products, with better cost-performance value, are more suitable. Some high-end products made in China, such as automobiles, are finding it difficult to enter the European and U.S. markets but are suitable for consumers in emerging countries. China's bulk commodities, such as mobile phones, computers and other electronic products, are also very popular in developing countries for their high cost-performance ratio.
"Therefore we should not simply shift to expanding domestic consumption just because exports recede. Domestic demand is of course important, but we should pay due attention to external markets," Shi said.
Shi also believes that it isn't easy for domestic enterprises to simply shift from the international market to domestic consumption. Being used to the processing trade, export-oriented enterprises are highly dependent on foreign enterprises in product design, brand establishment and distribution networks. To transfer to the domestic market, these enterprises need to build up their own distribution networks and design their own products suitable to Chinese consumers, both of which are huge challenges. Hence, many enterprises would ultimately return to an export-oriented focus.
"Exports should still be maintained because we still have advantages," Shi said, adding that although the United States and European countries have hopes of reviving their manufacturing sectors, few enterprises are willing to do so.
China's exports still face plenty of uncertainty. Chinese enterprises should therefore be more pro-active in making strategic adjustments, said Shi. Export-oriented enterprises have three choices: shifting focus to the domestic market, building up their own brands, and directly transfering to other industries. Each enterprise should choose the most favorable path based on its own strengths.
When visiting Guangdong Province, Premier Wen came chalk-full of suggestions to improve exports, including government plans to improve policies on stabilizing exports, accelerating the process of tax rebates and enlarging the scale of export credit insurance. Furthermore, China should improve financial services and guide financial institutions to introduce more products to evade exchange rate risks while paying close attention to market changes. Finally, China should encourage enterprises engaged in foreign trade to nurture intellectual property rights, develop independent brands and build up international distribution networks.
Industrial insiders believe that given the present circumstance, the government should take full advantage of financial institutions and raise the coverage of export credit insurance, cut insurance premiums and enlarge the scale of insurance payouts.
Zhang Lei, a macroeconomic analyst at Minsheng Securities Co. Ltd., said export credit insurance is an international practice adopted by a number of countries to support exports. The aim is to encourage enterprises to expand exports because the government assumes foreign exchange risks. To strengthen the support of export credit insurance is conducive to both expanding exports and reducing international anti-subsidy litigations against Chinese products and reducing trade frictions. Compared to international levels, China still has room to cut premiums to export credit insurance.
Mei Xinyu, a research fellow at the CAITEC, believes that China must adopt the following measures in order to revitalize its exports. First, the measure that helps its trade partners, such as the EU, to stabilize their economies, thus benefiting China from bailing out heavily indebted European nations. Second, the effort to carry out taxation and financial policies for stabilizing exports. Third, accelerated pace in implementing foreign aid plans to help drive up exports and overseas engineering contracts.
MOFCOM spokesman Shen Danyang said the ministry is considering adopting measures in two respects. First, it will implement government policies to support the steady growth in foreign trade, particularly helping enterprises to reduce export costs and improving the trade environment. Second, it will continue encouraging enterprises to transform their pattern of growth and upgrade their structures.
"We will strengthen efforts in developing a pluralistic market and try to realize the goal fixed at the outset of this year," Shen added.
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