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China says domestic demand can't fill export hole

Published 05/14/2009, 11:48 PM
Updated 05/15/2009, 12:16 AM

BEIJING, May 15 (Reuters) - China is trying to help its exporters, but global trade will shrink further and domestic demand cannot fully pick up the slack, the Ministry of Commerce said on Friday.

Chinese exports will remain subdued in coming months, though there are some positive signs, such as rising export orders, according to manufacturing sector surveys, ministry spokesman Yao Jian told a regular media briefing.

China said earlier this week that exports fell 22.6 percent in April from a year earlier, marking their sixth straight monthly decline.

"The priority now is to slow the decline in exports," Yao said. "We cannot compensate for a fall in external demand by simply expanding domestic demand."

When China's economy was expanding at a double-digit rate in recent years, analysts estimated that net exports contributed nearly one-third to GDP growth.

Growth is expected to slow to about 8 percent this year, with nearly all momentum coming from domestic consumption and massive government spending in the face of the economic crisis.

Yao said China would provide more insurance to exporters and try to ease the flow of goods through customs.

Since the onset of the slowdown in world trade last year, China has on multiple occasions increased tax refunds for exporters of goods from textiles to steel.

Yao said the average export-tax rebate stood at 12.4 percent now, compared with 9.8 percent before the crisis.

He added that there were indications that the deterioration in exports was tapering off, with a slower fall in exports from the Chinese trading hub of Guangdong.

But the overall picture remained bleak, he said.

"Exports will hover around a low level for a while," Yao said. (Reporting by Zhou Xin and Simon Rabinovitch; Editing by Ken Wills)

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