China’s monthly surplus is expected to “widen” in the coming months though export growth will “decelerate”, probably causing some factories to close, said the Ministry of Commerce on Thursday.

As domestic and global business conditions deteriorate, some manufacturers and exporters might struggle in the months ahead, with even some going bankrupt, said Zhang Ji, director-general of the ministry’s department of mechanical, electronic and high-technology industries.

According to the General Administration of Customs, first-half exports increased by 24 percent year-on-year to $874.3 billion, compared with 35.2 percent growth during the same period of 2010.

Overall foreign trade expanded by 25.8 percent to $1.7 trillion.

Year-on-year export growth rates declined as the months passed during the first half, dropping to 17.9 percent in June from 37.7 percent in January.

“The export situation is getting worse, although there is still double-digit growth. The slowdown will continue in the second half,” said Zhang.

“Factors like rising costs for labor and raw materials, yuan appreciation and tighter monetary policy are and will be hurting Chinese exports.”

Yao Jian, spokesman for the ministry, said at a recent press briefing that the government will take steps to stabilize exports, including tax rebates, financing and credit insurance, in the belief that exports will slow during the rest of the year.

Media reports have said that some textile factories closed recently as operating pressures intensified.

The strains will squeeze their profits and “some of them will probably die out, but the majority will survive”, said Zhang.

“It is time for them to enhance their competitiveness.”

Surplus seen widening

Despite decelerating exports, Zhang predicted China’s surplus would “expand month by month” during the second half. He didn’t elaborate.

China’s first-half trade surplus narrowed 18.2 percent year-on-year to $44.93 billion.

However, the trade account showed a varied performance during the period. In February, China registered a trade deficit of $7.31 billion, but the figure turned positive in March and then gradually widened, reaching $22.27 billion in June.

“The surplus for the second half will highly likely surpass that of the first half, as overseas orders for the coming Christmas season will grow rapidly, especially in the last quarter, and prices of some import commodities will decline,” said Wang Tao, head of China Economic Research at UBS Securities.

In June, China’s import growth dropped to 19.3 percent, compared with 51 percent in January.
A possible volume decrease in China’s imports is also a concern. A report by the International Monetary Fund released on Thursday said China’s large trading partners worry that the nation’s rapid economic growth cannot be sustained, and it could be challenged by a “hard landing”.

Article extracted from China Daily

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