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Trade surplus rise shows less demand for major commodities

Zhong Nan and Shi Jing
Updated: Jun 9,2015 7:22 AM     China Daily

China’s foreign trade surplus rose notably last month, indicating a continued reduced appetite in the economy for commodities such as coal, oil and iron ore.

The country’s exports dropped by 2.8 percent year-on-year to 1.17 trillion yuan ($191 billion) in May. This was a slight improvement from April but still placed pressure on the economy, according to the General Administration of Customs on June 8.

Imports fell by 18.1 percent from a year ago to 803 billion yuan, taking the trade surplus to 366 billion yuan-up by 65 percent. The country’s foreign trade slipped by 9.7 percent from a year earlier to 1.97 trillion yuan.

Niu Li, director of the Macroeconomic Studies Department at the State Information Center in Beijing, said that even though the oil price has rebounded since April, this hasn’t been helpful in increasing China’s imports, which means both domestic and foreign markets remain weak.

“China’s foreign trade data reflect a still-tepid recovery in global demand,” Niu said.

Lin Guijun, vice-president of the University of International Business and Economics in Beijing, said lower international commodity prices, including for iron ore, coal and crude oil, had not raised demand in China, as it is still readjusting its industrial structure and tackling pollution by shutting down some factories.

“The trade data in May to a certain extent have put extra pressure on the country’s goals of maintaining GDP growth at 7 percent this year,” Lin said.

China’s coal imports dropped by 38.2 percent year-on-year to 83.2 million metric tons in the first five months of the year, and the average import price fell by 20.2 percent from the same period a year earlier to 392 yuan per metric ton.

The volume of the nation’s iron ore imports fell by 1.1 percent to 378 million metric tons, while imports of refined oil rose by 1.8 percent to 12.69 million tons.

Yanji Dongyang Import and Export Co, based in Jilin province, used to consider iron ore imports its major business. But the company has switched its focus to importing tin ore. “It is totally impossible to still live only on iron ore imports right now”, said Cui Taihua, assistant general manager of the company’s International Business Department.

“The price of iron ore is only one-third of what it was several years ago. Many Chinese trading companies like us have had such high inventories that the market will be unable to absorb them for years to come,” he said.

“As the price has declined so dramatically, it is impossible for them to sell imported iron ore, as there would be no profit in this.”

China’s trade with the European Union, its biggest trading partner, fell by 7.1 percent between January and May, but trade with the United States, the country’s second-largest partner, rose by 2.8 percent. Trade with the Association of Southeast Asian Nations fell by 0.5 percent, while Sino-Japanese trade dropped by 11.2 percent during this period.

Deshi Leather Co in Guangzhou, Guangdong province, said its business declined a lot in the first five months due to reduced orders from regular Russian buyers.

Wu Zhe, the general manager, said, “These buyers placed fewer orders with us, possibly because of the economic downturn in Russia.”

The company, which produces and sells leather products to major emerging markets including Russia and South America, saw exports fall by more than 20 percent in the first five months.