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Expectations Fulfilled in the External Sector
Predictions of a slowdown in exports and a turnaround in foreign
investment (FDI) were bolstered in July. Export growth dropped to 24
percent from a first-half performance of 38 percent. This is
primarily a function of a larger base in 1999 for year-on-year
comparison, as the absolute amount of exports was quite large. July
imports maintained a breakneck pace, jumping 40 percent. That sliced
40 percent off the monthly trade surplus but, for the year to date,
the surplus is up 27 percent to $14.3 billion.
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Actual FDI fell 6.6 percent in July but the rate of decrease has been
slowing throughout the year. And contracted FDI is up 24 percent thus
far in 2000, so odds are good that the growth rate for actual
investment will turn positive by the fourth quarter.
What is often missed by analysts is that exports, imports, and FDI
are tightly linked for China. More than half of FDI is devoted to
exports and more than half of exports come from the processing trade:
importing materials and turning them into finished products. FDI is
fuel for trade and, in the long term, exports and imports move in
tandem. As a result, a likely comeback for foreign investment and
strong imports are more important indicators for future export levels
than a decline in the monthly growth rate.
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China
E-Bytes
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| In a show of strength for domestic demand, consumer prices rose for
the third straight month in July, edging up 0.5 percent. Retail prices
fell 1.2 percent but this compares favorably to the 1.9 percent
decline over the first half of the year. |
| The South China Morning Post reports
Tsingtao is in talks with
Asimco to buy out the latter's controlling interest in two domestic
beer companies. |
| Intel plans a $200 million, five-year expansion of capacity at its
Shanghai flash-memory chip plant. Intel is currently competing with
NEC and faces a possible challenge from a large Motorola project. |
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| Keep
up with the fast changing business environment in
China, the world's biggest and fastest-growing emerging
economy. Sinomania! recommends Orbis
Publications, Experts in Emerging Markets, for
a full range of in-depth coverage on China including
daily/weekly/monthly reports and more. |
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