Wednesday, May 8, 2013

2013 Trade Balance Target

We, Mr China, declare that our own 2013 China global trade balance (GTB) target shall reach USD$219.7 billion.

PRC (People's Republic of China) global trade balance, by definition, is the difference between what goods PRC produces and how many goods it buys from abroad. A basic understanding is that a positive trade balance is usually called a trade surplus if a country has imports less than its exports, while a negative trade balance is called a trade deficit if imports exceed exports. In general, global trade balance (GTB) contributes a portion of a country's current account, which also includes other portions such as incomes from international investment as well as international aids. If current account is in surplus, the country's net international asset position should also increases accordingly. For the same judgment, a deficit current account should then lower the net international asset position of the country.

In China, imports and exports data, and hence the global trade balance (GTB), is published to the public by the Information Centre of China Customs (ICCC). All imports and exports data have the units of quantity and values in USD, of which exports are valued on a FOB (Free On Board) basis while imports are on a CIF (Cost, Insurance and Freight) basis. The data elements for compiling trade statistics are extracted from declarations submitted to the China Customs by importers or exporters. Statistical data elements extracted from declarations include commodity code and description, quantity, value, partner country (origin, final destination, or consignment), type of customs regimes, individual exporter or importer, type of enterprises, production places for exports, domestic destination for imports, customs district of clearance, and also mode of transport. China imports and exports data are then consolidated and classified by their trading type, in three categories, i.e.: the general trade, processing trade, and other trades.

Nowadays China exports to the world a large variety of products which include toys, office machines, electrical appliances, electrical machinery, IT equipment, telecommunications equipment, rare-earth elements, apparel, clothing and many others. China imports include iron, steel, crude oil, mineral fuels, plastics, automotives, organic chemicals, advanced machinery and medical equipment etc.

In 2012, China global trade balance (GTB) increased sharply to USD$231.1 billion, up by +49% YoY, more than the GTB target amount of USD$120.2 billion which we initially predicted.

Our independent Chinese economic expert team has done calculations on fair values of PRC (People's Republic of China) exports and imports for every month in 2013. Upon adding-up all these calculated fair values for 2013 (whole year), we estimate our own PRC global trade balance (GTB) target shall be worth USD$219.7 billion, dropped slightly by -4.9% YoY.

Global Trade balance 2013 Chart

Current PRC Global Trade Balance (GTB) Chart

For our above calculated target, we have the below assumptions:

(1) The net PRC global trade balance (GTB) will still remain positive in 2013 (i.e.: more PRC exports than imports, hence an annual global trade surplus).

(2) Amount of PRC global trade surplus will decrease as the growth rate of PRC imports should be higher than exports.

(3) It is our estimation that global economy should be slowing down in 2013.

(4) There are recent concerns that the accuracy of China exports data is questionable and suspicious, as Chinese exporters may have inflated their data by over-invoicing or overstating their business so that they can sneak funds into PRC for escaping from capital restriction policies of the country. However, China SAFE (State Administration of Foreign Exchange) already launched new tightening rules on May 2013 to crack down against hot money inflows that disguised previously as trade transactions or international payments. SAFE regulators would begin reinforcing its scrutiny on export invoices against illegal capital inflows and would be imposing tougher penalties on exporters that provided false data. We therefore expect that Chinese GTB will trend to drop as export figures will start reflecting real trading demands from external countries more accurately afterwards in coming months soon.

Same to the last year, we must let you know that our PRC global trade balance (GTB) target is still a preliminary forecast. It is because U.S. Federal Reserve has already started running QE4 (Quantitative Easing Policy) that promotes U.S. Dollar (USD) depreciation and also can hurt PRC exports. Similarly in Japan, recent aggressive monetary easing plan against domestic deflation does encourage Japanese Yen (JPY) depreciation and can hurt PRC exports as well In Europe, economic performance remains weak on European government fiscal deficits and sovereign-debt crisis, thus lowering demands for PRC exports. The value of USD$219.7 billion is therefore only our preliminary 2013 net GTB target, our Chinese economic expert team may consider to increase or decrease this target value in coming month(s) if economic factors affecting 2013 net GTB are about to change.

More PRC Economic Target(s):
Table Summary of All Our PRC Economic Targets


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