China Registers Sharp Drop inTrade

China’s imports and exports fell steeply for a second straight month in December, deepening an economic slump that has already led to widespread layoffs and factory closings.

The most precipitous drop was in imports, which slumped by 17.9 percent from a year earlier, according to data released by China’s customs agency. The drop has been attributed to the lower prices of oil and raw materials, coupled with reduced demand from Chinese consumers, a worrying development given that Beijing is hoping to reinvigorate the economy by boosting domestic consumption.

Exports declined by 2.8 percent in December – the sharpest drop since 1999, the Associated Press reported – following a 2.2 percent fall in November.

Thousands of Chinese companies have already been forced to close thanks to the downturn in trade, prompting a wave of layoffs.

In November, the Chinese government announced a stimulus package worth 4 trillion yuan (US$ 585 billion) that is intended to spur domestic demand and reduce the domestic economy’s reliance on exports. The package includes tax breaks for exporters, greater government investment in infrastructure, and larger farm subsidies.

Against that backdrop, the Organisation for Economic Cooperation and Development released a study last month assessing China’s progress in opening its markets to foreign trade.

“With its 2001 WTO accession, China has locked in much of its trade liberalisation commitments,” the study found. “The focus is now on ‘second-generation’ trade-related reforms – tackling border and domestic regulatory barriers.”

Chief among Beijing’s challenges, the study said, was to increase government transparency. To that end, the authors recommended that the government publish in full all trade- and investment-related laws and allow more time for public consultations on draft legislation.

The OECD also called on Beijing to abolish explicit restrictions that discriminate against foreign traders and investors, such as limitations on foreign ownership in certain sectors, and to continue working to harmonise domestic business standards with those established by international standards-setting institutions.

But China has already made huge strides in integrating its economy into the global market, the report noted. Indeed, the Asian Giant’s share in the international goods trade jumped from 1 percent in 1979 to almost 7.6 percent in 2006, and its economy averaged an annual growth rate of 9.7 percent over the same period.