Order volumes at the Canton Import and Export Fair, China’s biggest trade fair, exceeded forecast, sparking hope amidst exporters and producers for a recovery of the struggling textile sector. While orders fell 15.6 percent year-on-year in the first quarter of 2009, participants at the Canton Fair were fairly content about the results of the exhibition. The textile sector continues to suffer under low profit margins and weak demand in traditional export destinations like the U.S. and the EU. Government aid in the form of export tax rebates, together with stronger demand in emerging countries cushion the drop in China’s textile sector, but full-scale recovery is still not in sight.
Analysts believe China to increase its gold holdings in order to further diversify its vast foreign exchange reserves of nearly US$ 2 trillion. Gold reserves currently account for only 1.6 percent of China’s foreign FX holdings, compared with a global average of 10.5 percent. As the world’s largest gold producer, China is expected to source most of the increase from domestic production, which will keep the impact of its reserves diversification on the international gold market to a minimum.
China’s ports are expected to see another drop in business for April, with total throughput estimated at 500 million tons, down 1.9 percent from a year earlier. While daily throughput rose 3.2 percent from March and domestic trade throughput rose 0.1 percent year-on-year to 340 million tons, cargo throughput for international trade dropped 6 percent from April last year to 160 million tons. China’s Ministry of Trade attributed the growth in domestic trade to its stimulus measures to spur domestic demand, but it also had to acknowledge Beijing’s strong dependence on struggling international markets.
Although there are first positive signs of the government’s stimulus measures the People’s Bank of China, the country’s central bank, announced to continue its moderately loose monetary policy. With private capital still hesitant to invest in the currently fragile economic environment, the central bank feels obliged to continue its lending policy in order to guarantee sufficient credit for economic growth. China’s government needs to encourage private investment in order to avoid future inflation and over-dependence on the state banking sector for economic recovery.
