Data raise rebound doubts

By Li Jiabao in Beijing and Yu Ran in Shanghai (China Daily) Updated: 2012-12-11 08:58

The frequent depreciation of the dollar has driven down profits over the last month, as the company normally negotiates and changes the prices of orders with clients quarterly.

"Textile-export trading companies have been destroyed with the worsening economies in European countries, and we are struggling with a small number of clients making nearly zero profit in the past year," said Ye Fang, the manager of Michele Clothes Co Ltd.

The company expects negative growth in earnings for the past year and demands from European countries to continue to gradually decline.

Ye said she planned to shut down the company next year if the situation gets worse because she cannot afford to lose more money.

Chen from the Bank of Communications expects to see improved export conditions in 2013, while Wang warned that a 10 percent trade growth goal for 2013 will be very difficult to attain because of uncertainties in developed markets. Also, foreign trade can no longer be the driving force of China's economic growth, Wang said.

He said the foundation for an economic recovery is not steady, and the government needs to expand domestic demand with measures including structural tax reductions.

"Properly expanding budget deficits, along with enlarging bond sizes issued by local governments and extending the pilot project to replace the business tax for the services industry with a value-added tax, will be necessary for driving up economic growth in 2013," Chen said.

Arousing the vitality of private investment, which will lead to an inherent economic recovery rather than the current revival mainly driven by government-led investment, is even more important, Wang Jun said

Zhang Zhiwei and Wendy Chen, economists at Nomura Securities Co Ltd in Hong Kong, said in a research note that despite the slowdown in November's trade data, "we maintain our view that the economic recovery in China is on track as it is mostly driven by domestic demand".

"Infrastructure and housing investment will likely strengthen further in the coming months as the monetary policy remains loose. We continue to expect GDP growth to rebound sharply in Q4 to 8.4 percent from 7.4 percent in Q3," he said.

China's industrial output rose 10.1 percent in November from a year earlier, and retail sales climbed 14.9 percent, the fastest pace for both since March, according to data from the National Bureau of Statistics on Sunday.

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