State of the Market


Bumper Harvest

China’s summer grain output will see an increase after four years of decline, announced Minister of Agriculture Du Qinglin. According to surveys by the ministry’s Remote Sensing Application Center, it is estimated that a hectare is expected to yield at least an average of 150 kilograms more than last year, lifting total wheat output by 2.5 million tons, up about 3 percent over a year ago.

The harvesting of wheat has been surging all over the country. As of June 6, over 10 million hectares have been reaped, which is more than half of the country’s total acreage.

Du pointed out that since wheat accounts for nearly 90 percent of summer crops, this year’s wheat abundance is likely to lead to a bumper grain harvest. According to Du, there are three reasons.

The government has issued a chain of policies this year, introducing subsidies and slashing agricultural taxes, giving incentives to grain producers.

Science and technology has also played a very important role in maximizing yields. Local governments have informed farmers of preferred grain strains and better technology as well as provided them with training to make use of these new tools.

Redoubled efforts to control pests and disease have also helped reduce loses. More government funds, both locally and centrally allocated, had a part in staving off infestation this year. A favorable climate was also a factor. There was no serious draught or dry-hot wind.

The mid-year bumper harvest in sight has buoyed the Ministry of Agriculture’s confidence in producing 455 million tons of grain this year. This is seen as vital as China looks not only sustaining adequate grain production but also to avert a detrimental reverse in supply, according to an official in the ministry Wang Xiaobing.

News of renewed abundance is timely. China’s production of wheat, corn, rice and other grains dipped from a record high of 512 million tons in 1998 to 435 million tons in 2003.

Foreign Trade

From January to May, Chinese imports and exports reached $423.84 billion, growing 37.1 percent year on year, according to the General Administration of Customs. Of the total, exports hit $207.59 billion and imports reached $216.25 billion, up 33.4 percent and 41 percent, respectively. Trade deficits amounted to $8.66 billion.

In May, China saw a trade surplus after four successive months of deficits. That month, total imports and exports valued $87.63 billion, up 34.1 percent year on year. Of the total, exports reached $44.87 billion, growing 32.8 percent, while imports stood at $42.77 billion, increasing 35.4 percent, leading to a surplus of $2.1 billion in May.

During the first five months of the year, general trade and processing trade grew steadily. Overall trade increased 34.4 percent to $185.79 billion and processing trade grew 37.6 percent to $196.52 billion (see graphs 1 and 2).

During this period, China imported less soybeans and the increase of imported iron ore and steel products slowed. Imports of primary and industrial manufactured products reached $45.32 billion and $170.92 billion, a year-on-year increase of 62 percent and 36.3 percent, respectively (see graph 3).

After its May 1 expansion, the European Union went from China’s third to its largest trade partner. China is still Japan’s biggest importer while the United States is China’s largest export market (see graph 4). Bilateral trade volume with the EU accounted for 15.5 percent of China’s total foreign trade volume within the period. Moreover, bilateral trade growth with the Republic of Korea, Canada and Australia were 48.4 percent, 47.6 percent and 46.8 percent, respectively, over January-May.

FDI

From January to May, foreign direct investment (FDI) in China has maintained a steady momentum of growth. During the five-month period, China approved 17,359 foreign-invested enterprises (FIEs), up 14.39 percent year on year. Contractual foreign investment and paid-in capital reached $57.24 billion and $25.91 billion, increasing 49.76 percent and 11.34 percent, respectively, announced Vice Minister of Commerce Ma Xiuhong on June 16.

As of the end of May, there were 482,636 FIEs with total contractual foreign investment of over $1 trillion and paid-in capital of $527.38 billion.

According to Ma, the investment structure of FDI has been further improved. Investment in the hi-tech and service sectors, indeed, rose significantly. FIEs seem to be improving their performance in China, too. During the first quarter, FIEs amassed industrial added value of 314.27 billion yuan, increasing 21.1 percent over the same period last year and accounting for 27.8 percent of the nation’s total, or 3.4 percentage points higher than the national increase of 17.7 percent.

Import and export volumes of FIEs accounted for about 56 percent of the country’s total trade volume, reaching $240.64 billion during the first five months, up 43.7 percent, 6.6 percentage points higher than the national growth rate of 37.2 percent. Of this total, imports and exports equaled $121.6 billion and $119.04 billion, growing 45.7 percent and 41.8 percent, respectively.

According to preliminary statistics, the total revenue of FIEs in the first quarter hit 122.7 billion yuan with a net increase of 22.9 billion yuan, a year-on-year increase of 23 percent. Approximately 230,000 registered FIEs employ over 23.5 million people, which is 10 percent of China’s urban workforce.

Retail Sales

In May, retail sales of consumer goods reached 416.6 billion yuan, increasing 17.8 percent over the same period last year. January through May, retail sales totaled 2.1 trillion yuan, up 12.5 percent, according to the National Bureau of Statistics (NBS).

Consumption in urban areas was more than double that of rural areas, with retail sales of consumer goods registering 281.3 billion and 135.3 billion yuan, respectively, up 21.1 percent and 11.5 percent.

The wholesale and retail sectors had a combined sales volume of 350.2 billion yuan, a growth of 14.9 percent year on year. Catering outperformed the pack, with sales rising 47.2 percent to 53.9 billion yuan. All other sectors had aggregate sales of 12.4 billion yuan, growing 2 percent.

In May last year, SARS stifled buying. Still, this May Day’s spurt in consumption was higher than past holidays without an epidemic scaring away consumers. Tourist and tourism revenue this holiday week increased 19.6 percent and 17.8 percent over the same period in 2002, respectively, while sales revenue among 140 surveyed caters increased 32 percent compared to May Day 2002.

Some prices of major consumer goods continued to rise, which propelled steady growth of total retail sales. Communication appliances, garments, oil and oil products saw the highest growth, up 53.1 percent, 48.7 percent and 50.4 percent, respectively (see graph 5).

High nominal growth in May was largely due to low consumption in the same period last year, when there was no holiday week because of SARS. Taking into account both this and price increases, retail sales of consumer goods still grew moderately from two years ago.

Compiled by WANG JUN

$1=8.28 yuan