People attend Canton Fair, China's largest trade fair, which is held in spring and autumn seasons each year, in Guangzhou, to look for trade opportunities. Provided to China Daily

Province buckles up to face challenges with slew of policies to boost high-tech exports

Imports and exports from Guangdong province, which account for nearly one-quarters of the country's trade, will face more pressure this year after the southern economic powerhouse reported a sharp drop in trade numbers during the first quarter, say local government officials.

Guangdong's trade value fell 25.2 percent year-on-year to 1.36 trillion yuan ($218.6 billion; 158 billion euros) in the first three months, with exports falling by as much as 22.4 percent to 794.08 billion yuan, according to provincial customs data.

The customs authorities forecast a grim trade outlook for exporters in the province, especially in the booming Pearl River Delta, and said they would face more challenges due to an unstable global market and increased domestic labor and production costs.

In March, Guangdong's trade value dipped nearly 38.6 percent year-on-year to 470.57 billion yuan, according to customs.

Lin Jiang, head of the public finance and taxation department of Lingnan College at the Guangdong-based Sun Yat-sen University, says that the lower trade numbers are a grim reminder that the province needs to change its economic growth model by upgrading industries and boosting domestic consumption.

Prior to the big trade drop in the first quarter, local authorities had set a trade growth target of just 1 percent in 2014.

Guangzhou, the provincial capital, also expects a lower trade growth target of 3 percent this year as the city will give priority to transforming its economic structure to focus on large investment projects.

Last year, Guangzhou's exports grew by 6.6 percent from 2012 to $62.8 billion, with actual use of foreign investment reaching $4.8 billion, according to the local government.

"The lower growth target, together with the sharp trade drop in the first three months, signals that Guangdong will no longer rely heavily on trade to maintain economic growth," Lin says.

Setting a lower trade growth target, Lin says, means that Guangdong has to develop new growth engines to sustain its leading role in the country's economy.

Guangdong's economy has taken pole position in the country since the reform and opening-up process started. Last year, its GDP grew by 8.5 percent from 2012 to surpass $1 trillion.

In the past five years, Guangdong reported a negative trade growth only in 2009, a year after the global financial crisis of 2008. In 2013, Guangdong's import and export value increased by 10.9 percent from a year earlier to $1.09 trillion, according to a provincial government work report. The province's export value increased by 10.8 percent year-on-year to $636.5 billion last year, the report says.

According to the report, Guangdong will strive to increase domestic consumption by promoting Guangdong-made products across the country and will continue to optimize investment this year.

Citing the first quarter statistics, Lin says Guangdong's trade structure has changed a lot from heavily relying on processing trade in the past to high-tech and value-added exports.

"The trade structure is improving and a growing number of exporters have turned to innovation-driven trade," Lin says.

In sharp contrast to the processing trade, which reported a 22.6 percent decline year-on-year, Guangdong's general trade in the first three months increased 13.9 percent year-on-year to 549.51 billion yuan.

Manufacturers in the Pearl River Delta, a major manufacturing and trade hub in Guangdong, also expect a bleak trade outlook in the months ahead.

Zeng Zhaoyang, a manager at the trade department of Guangdong Hopeful Electric Co, says the company reported a loss both in export value and business profits in the first quarter of the year.

"The fast export growth in the 1990s is long gone. Now we are struggling," Zeng says.

The company, a home appliance maker based in Foshan, Guangdong province, reported a 10 percent year-on-year drop in exports last year, according to Zeng.

Stiff competition and increased labor and production costs have also squeezed business profits in recent years, Zeng says.

"We have to boost research and design investment and develop more product varieties for overseas markets so that we can stay profitable," he says.

A total of 2,000 Guangdong-based exporters surveyed in a recent report by the Shenzhen-based Onetouch Business Service Co reported an export increase of only 1.44 percent year-on-year in the first three months of 2014.

However, Zhu Xiaodan, governor of Guangdong, said during the annual local legislative meeting in January that the province would maintain a stable trade growth this year by introducing a series of measures to encourage local companies to better tap the international market.

"We will develop varieties of international markets, support local exporters to participate in overseas trade events, cultivate more overseas sales channels and carry out cross-border e-commerce for sustainable trade growth," Zhu says.

qiuquanlin@chinadaily.com.cn

(China Daily European Weekly 04/18/2014 page16)