China’s commerce ministry has stated that its export-led economy faces troubled times ahead because of economic difficulties in important Western markets.
The “severe challenges” China faces are connected to a slowdown in its economic growth.
November’s official growth figures, set to be released on Saturday, will show a sharp decline in export growth.
40% of China’s total exports head to Europe and the US, making the Asian economic giant fear that growth will not recover next year. Nearly all Western economies have had their growth forecasts for 2012 slashed as the eurozone crisis and rising unemployment take their toll.
Instead, the commerce ministry says that China will focus on developing markets in Asia and Latin America. While the West has slowed its demand for goods, developing countries like Brazil boomed in recent months, with a newly-formed middle class spurring demand for imported goods.
China will also look to balance out its own trade surplus by boosting its imports of Western goods. This will also serve to help the economies that China’s export sector is so dependent upon.
In a year-on-year comparison, European Union exports fell 9% in October. Exports in the US fell 5% compared to last year.
In comparison, China’s exports were still up 15.9% because of intense demand from Latin America. The warnings from the commerce ministry come from the fact that this is the weakest annual growth rate in two years.
The figure of 15.9% is also down sharply compared with one month earlier.
In addition, imports were down, but this is in large part due to a smaller need for materials to assemble and pass onward to exports.
In addition to a lack of demand from the West, China is blaming rising wages for Chinese workers for hurting its export sector. These higher wages curb China’s competitiveness, the commerce ministry says.
Foreign Trade Director Wang Shouwen said that since there looks to be no fundamental improvement for Europe or the US in the next year, “the foreign trade situation will be severe next year.”
The Chinese plan to focus on developing markets may not be as easy as the ministry makes it sound, however. Brazil’s economic growth has also recently entered a downturn, and the country blames weak Western currencies for its export problems as well.
In India, another developing market ripe for the Chinese export industry, the mood seems to be turning away from allowing in foreign competition. The Indian government has recently retracted its plan to let global supermarkets enter the country.