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Reported By Lin Ling; Nu Ling; Edited by Song Wei
Recently, S&P is carrying on a grading on the corporate governance of Sinochem International who thusly becomes the first domestic listed company to have asked international independent rating agency to evaluate its corporate governance.
Since this is a great event, Luo Dongjiang, Vice President of Sinochem and President of Sinochem International personally came to Shanghai to wait for the result of the grading. Therefore, Journalists took this opportunity to have visited him. The interview began with the development trend of Chinese import and export trade, when Luo made surprising statement: "within several years, Chinese international trade will equate to the domestic GDP and even surpass it with further development."
Journalist: why do you think that Chinese international trade will equate to the domestic GDP?
Luo: first let's do a calculating. Last year, the domestic GDP was US$160 billion converted at official foreign exchange rate, while the aggregate volume of import and export is US$1150, over seven times of the former. This represents a trend. And the past three years since Chinese entrance into WTO has witnessed 2.3 times of increase of Chinese international trade, which entirely more than doubled. That is also a trend.
We can also take another perspective. During the past 27 years since the decision of reform and opening up to the outside world was made at the third session of the 11th Central Plenary Meeting, except a few years in late 1980s, the increase of the annual volume of domestic import and export was always above that of the GDP of the same year. Especially from the mid and late 1990s till now, the difference has kept staying at approximately 20% in average.
Along with the startling increase of the international trade, there was a also strange phenomenon. That is, in most years, the international trade showed favorable balance, which even caused the hundreds times of increase of the country's dollar reserve within 20 years. Therefore, according to my observation and judgment, this trend will still exist in quite a long period of time.
Journalist: Among all those people and agencies, both home and abroad, concerning about Chinese international trade, you are the first one to have made such optimistic statement, which we temporarily have no intention to prove. What we wonder is whether you have made any research to the history of international trade?
Luo: what I have done is not qualified to be called a research but actually a concern. First of all, I am a veteran in the field of international trade with almost 30 years of experiences since graduation. Sinochem was the earliest professional international trade company after the foundation of People's republic of China, when the country's economic system was still the planned economy. However, Sinochem staff have began to dress suits and ties, speak English and do foreign businesses. As China becomes more openly, the international franchise was canceled, making us the earliest Central enterprise to have suffered from market competition and almost come to the end. During recent years, though both Sinochem International and Sinochem were working hard to implement the strategic transition by means of the extension of business chain and the change of the image as a paper corporation, and have made certain progress, however, international business is still the main business of the company. So, how can I put aside the whole country's trend of the business we make a living on?
Abnormal factors will never control Chinese international trade
Journalist: to judge from normal sense, it is stable to strike a relative balance between the increase of import & export volume and GDP. Nowadays, There is a popular theory or shall we called "anxiety", saying that, it is unavoidable for a country, whose economy depends on international trade too much, to be influenced by others once there is a fluctuation of the globe economy. To compare domestic international trade volume with GDP, with their difference multiplying by years, always makes us feel uncomfortable. Aren't there some abnormal factors?
Luo: surely there are, some of which are much easy to find out, such as the inner price curbing and bad competition among brothers reflected from anti-dumping. Nevertheless, we must also take an objective view that, abnormal factors are not the main aspects of Chinese international trade but problems along with the progress. Although, it is undeniable that, many Chinese export products have been subjected to the anti-dumping investigation of foreign countries, some of which have also been sanctioned. However, the sum of money related like last year was just several billion US dollars, less than 1% of the import volume of the year, which is nearly US$600 billion. Likewise, there are some cases that import countries claim a compensation to China for the quality problems of Chinese export products, also with a small amount of money. So, what is main aspect? Great amount, I said. And I have no means to disguise and obscure by saying that. Of course, when it comes to abnormal factors, structure problems of export goods should also be taken into consideration. The problem, mainly projecting into the averagely low added value, is fundamentally restricted to the industrialization degree of a country.
The main reason of the sustainable growth of international trade
Journalist: You made your analysis mainly on the basis of status quo, which however not always represent the future trend. So, in our opinion, maybe there still should be something more persuading added to support your prediction.
Luo: let me continue what I said. According to my observations and thoughts, there are three major motivations boosting the sustainable growth of Chinese international trade.
Journalist: You might as well explain it more specifically.
Luo: the first one is the sustainable speedy growth of Chinese economy, providing a good macroeconomic environment and strong material foundation for international trade. Something should be pointed out that, since Chinese entrance into the new century and in particular WTO, it is under the context of economic globalization that this speedy growth, though starting from Chinese reform and opening up to the outside world, is realized. That is the receiving of average-favored- nation treatment, which brings unprecedented improvements to Chinese international trade especially the environment of export.
Secondly, as the post industrial age of Europe and America get close to the end, the transference of globe manufacture sectors begin to speed up. Then, the existed industrial basis and supporting infrastructure facilities as well as the price advantage of labor resources in coastal areas of East China make China the first destination of the capital from those international manufactures. In addition, FDI is another key variable for the speedy growth of Chinese import and export. Keeping introducing overseas capital for more than ten years successively, China ranks the top among developing countries and became the country with most overseas capital introduced in the world last year. Manufacturers accounts for 70% of the present foreign-funded enterprises. And last year, among the newly founded foreign-funded enterprises, 72% with 75% of their capital continue to embrace manufacturing. Further more, with the continuous enhancement of Chinese capability in introducing foreign capital including technical capital, the feature of overseas capital, which is to make collective investment, is more visible. The centralization of foreign investment on Chinese manufacture sectors makes "made in China" increasingly involved into the global division system of production and distribution, becoming a important link of world trade chain. In quite a long term of the following years, the trend of foreign investment going to Chinese manufactures won't change, products made by which is of course bound to be sold in the world market.
Moreover, international trade is always among the "three carriages" of Chinese economy. Governments at all level from central to local ones all encourage export and have persistently formulated positive and feasible policies. There is controlling involved which is not to curb but to boost the sound development of export-oriented economy. We should wait for the sustainable functioning of policies and not doubt the change of policies.
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