The complicated international situation has cast a shadow over the Yangtze River Delta economy, which relies heavily on exports.
In Jiangsu's export product clusters, IT, photovoltaic and shipbuilding have always been the three pillar industries of new export products. IT product exports account for one third of Jiangsu Province's total exports, while marine equipment led by ships and photovoltaic products account for more than 10% of the total export volume. Currently, these three pillars are all experiencing a harsh winter.
The Shanghai Free Trade Zone's import and export share exceeds 5% of the national total. As China's smallest domestic trade port, Shanghai can once again sense the taste of the financial crisis at the end of 2008.
A recent research report by China International Capital Corporation (CICC) on medium-sized enterprises in Hangzhou and Shaoxing stated: "The order status of export-oriented medium-sized enterprises is similar to the most difficult fourth quarter of history in 2008, but the trend of declining orders has not yet hit bottom."
Nanjing Customs data shows that from January to October, Jiangsu's foreign trade imports and exports showed weak growth. Although it increased by 17.5% compared to the same period last year, the growth rate was lower than the national import and export growth rate during the same period. In October, Jiangsu's foreign trade imports and exports amounted to $43.17 billion, an increase of 8.6% year-on-year, but a decrease of 9.8% month-on-month.
The shipbuilding industry is no exception. Entering October, Jiangsu's ship exports showed negative growth for the first time since February. A person from Jiangsu Yangtze River Shipbuilding Group Co., Ltd. revealed that since the sharp decline in the ship market in 2009, it has been very difficult to get new orders. By the end of October, the number of orders in hand at the shipyard had generally decreased by 25% compared to the beginning of the year, and prices had plummeted significantly. The selling prices of bulk carriers and container ships have fallen below cost.
Similarly as an export province, data from Zhejiang Province’s “Zhejiang Foreign Economic and Trade Operation Monitoring System” shows that in October, the proportion of key contact enterprises with unchanged or decreased export orders was 70.3%, up 3 percentage points from September. The monthly declining trend since the second quarter was evident, and in October, the proportion of export orders decreasing or remaining stable fell by 10.1 percentage points compared to April, hitting the lowest point since 2010, gradually approaching the dividing line between prosperity and depression.
He believed that the reduction in domestic market demand led to the continuous weakness of the shipping market, with low shipping volumes and low investment returns. For example, the rent for a 170,000-ton bulk carrier used to reach over $200,000 per day, but recently it dropped to just over $4,000, not even enough to cover the sailors' wages. Affected by this, the demand for ships has significantly decreased.
Other industrial exports were also severely affected by the general downward trend. For instance, due to European countries adjusting their photovoltaic electricity policies, controlling the total amount of installed machines, and reducing subsidies for grid-connected electricity prices, Nanjing Customs data shows that solar cell exports have shown high declines, with overall price drops directly resulting in three consecutive months of negative year-on-year growth in Jiangsu's solar cell exports. In October, solar cell exports amounted to $800 million, a decrease of 38.5% year-on-year.
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Shanghai and Zhejiang provinces once again smelled the taste of the 2008 financial crisis.
The sluggishness of Jiangsu's foreign trade
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Data analysis related to the "Zhejiang Foreign Economic and Trade Operation Monitoring System" indicates that while exports are weak, corporate export profits are also not optimistic. In October, only 27.4% of companies saw profit increases year-on-year, down 0.2 percentage points from the previous month; whereas 41.3% of companies saw profit decreases year-on-year, up 1.5 percentage points from the previous month.
Shanghai Customs data shows that due to reduced trade with major markets, both total imports and exports in the Shanghai Customs area in November declined to recent lows. Exports in November amounted to $44.11 billion, with year-on-year growth dropping from 16.2% last month to 9.5%, the lowest point since December 2009, slightly higher than the level in February this year. Imports in November amounted to $26.91 billion, with year-on-year growth sharply declining from 25.9% last month to 13.3%, the lowest point since November 2009.
Zhejiang's outlook is also not optimistic. Statistics from Hangzhou Customs show that in October, Zhejiang completed exports of $16.69 billion, a drop of 16.1% month-on-month. This marks the second decline in Zhejiang's export trade since September, with the month-on-month decline accelerating. Due to weak growth in foreign trade by foreign-invested enterprises, the current share of processing trade in Zhejiang's foreign trade has dropped to its lowest level in 20 years.
Additionally, the floods in Thailand have also impacted some IT enterprises' exports in Jiangsu Province. Suzhou statistics show that the disaster resulted in floppy disks being unable to enter and products unable to leave, causing losses of over 4 billion yuan in one month.
An informed person from the Suzhou Industrial Park revealed that there are two main reasons for the reduced quantity and price of portable computer exports through Jiangsu ports: one is that the global computer market is being invaded by tablets, and the second is that production capacity is shifting. Since the second half of last year, eastern regions represented by Chongqing have emerged as new bases for notebook computer manufacturing, encroaching on Suzhou's exports.
One significant reason for the decline in trade with important trading partners is that in November, Shanghai Customs area's exports to the EU, USA, and Japan fell by 6%, 12.4%, and 9.4% respectively, with slower growth rates compared to last month by 7.7%, 11.2%, and 7.6% respectively. The bustling Christmas season this year is quietly absent.
IT, photovoltaic, and shipbuilding, the three leading export industries, are facing severe challenges.
Nanjing Customs analysis indicates that from January to October this year, the characteristics of Jiangsu's foreign trade imports and exports are: low growth in processing trade imports and exports, weak exports to Europe and America; both mechanical and electrical products and high-tech product export growth rates are lower than the overall product growth rate.
From December 18-19, when Premier Wen Jiabao conducted a research visit in Changshu, Kunshan, and Suzhou Industrial Park in Jiangsu Province, he pointed out four key areas of concern regarding the current national situation. Among them, the monthly increase in export declines was mentioned first by Premier Wen Jiabao. The outward-oriented Su-Nan region is gradually showing signs of export pressure.
The IT industry has always been a pillar industry in southern Jiangsu. According to data published by Nanjing Customs, from January to October, Jiangsu ports cumulatively exported 49.07 million portable home computers, worth $24.17 billion, representing decreases of 3.3% and 9.6% respectively compared to the same period last year. The average export price per unit was $492.7, also a 6.6% decrease from the same period last year.
For another economic heavyweight in the Yangtze River Delta - Shanghai - exports also show signs of fatigue. The latest statistics from Shanghai Customs show that due to the sluggish EU market, Shanghai Customs area's exports to the EU in November were only $9.33 billion, showing rare negative growth, dragging the entire customs area's export growth rate to a two-year low.
Zhang Hanxi, director of the Zhejiang International Economic and Trade Research Center, said that the trend of high export growth at the beginning of the year followed by a decline later in the year has basically become fixed. He predicted that Zhejiang's foreign trade will grow by about 15% year-on-year in 2011, and the growth rate in the coming few years may further decline.