Imports are as crucial as exports to China's economy

China's international trading volume in terms of both exports and imports has plunged since the global financial crisis.

Much attention has been given to falling exports. We also need to take note of the imports as strategic to economic recovery.

The General Administration of Customs reported that the country's imports and exports totaled $1.56 trillion from January to September - down 20.9 percent compared with the same period last year.

Imports dropped 20.4 percent from a year earlier to $711.917 billion, while exports declined 21.3 percent to $846.65 billion.

The trade surplus stood at $135.48 billion in the first nine months, representing a decrease of 26 percent over the same period last year.

The growth of imports was faster than that of exports in 2008. Since last November, both exports and imports have started a sharp downturn.

Comparatively, the drop in imports was faster than exports during the first eight months. Imports now face a serious challenge.

Many factors have contributed to the drop in imports such as falling prices of raw materials (including iron ore) in the international market, low domestic demand and adjustments in storage. Falling prices contributed to a 62.2 percent drop in imports.

In addition, the current export-oriented policy is incapable of expanding imports.

For quite some time, China's foreign trade policy has been focused on exports, and so is public attention.

A mechanism to promote and adjust exports has been established, while an import adjustment mechanism lags far behind, resulting in an export-oriented policy.

Strategic importance

Imports are closely correlated with major economic indicators. Imports have become a major indicator of economic growth. Falling import prices are a signal of lower domestic demand.

China's economy has become increasingly globalized and dependent on imports. In the past 30 years, imports would grow 0.22 units for every one unit of GDP growth.

China is undergoing industrialization and rapid economic development, which requires huge amounts of imported products to optimize its industrial structure and satisfy the need for international resources.

Second, fixed asset investments and imports are each other's cause and effect.

The growth of fixed asset investments is often accompanied by the growth of imports. Statistics show that one percentage point growth of imports will affect 0.2 percentage points of growth of domestic fixed asset investments, if other factors remain unchanged.

Through importing producer goods, capital is utilized to generate production capacity, which will strengthen competitiveness and domestic investments. Moreover, the introduction of advanced technology and equipment will improve productivity and technical levels.

Third, imports will add value to industries. China's imports fall into three categories. Fifty percent are mechanical and electrical products, 30 percent are high technology products and about 20 percent are bulk commodities.

Exports create a nation's wealth directly, while imports breed long-term interest and will fuel industrialization and urbanization.

Fourth, import volumes also affect exports of Chinese manufacturers. Imports and exports are interdependent.

The majority of Chinese exporters import raw materials and semi-manufactured goods first and then produce them for overseas markets.

If the manufacturers are optimistic about overseas markets, they will place import orders in advance. Therefore, a decrease in imports means a pessimistic economic outlook and a decline of exports in the near future.

Imports as a priority

Imports are just as important as exports. To curb the influence of the financial crisis, we also need to put imports high on the agenda. We should take advantage of improved international trading terms to expand imports and improve trade unbalances.

As the international commodity markets linger at low levels, we should encourage imports of bulk commodities, as well as high technology products and parts.

In the meantime, we can import more consumer products to satisfy the domestic market.

By doing so, China will not only speed up economic recovery but also improve trade imbalances and reduce trade frictions.

The author is an expert with the National Bureau of Statistics. The opinions expressed in the article are his own.

(China Daily 11/02/2009 page5)