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2007-10-12 | All chapters

Chinese Exports Continue to Rise Despite Setbacks
David Barboza, New York Times, 12th October 2007

Despite a spate of product recalls and growing scrutiny over the quality and safety of its goods, the Chinese export boom continues to accelerate, according to trade statistics released today.

China said today that it had exported $878 billion in goods through the first nine months, up 27 percent from its record shipments a year ago.

Analysts said global worries about contaminated pet food, tainted seafood and toxic toys and toothpaste were hardly enough to slow down the powerful Chinese export engine, which has quickly come to dominate everything from electronics to textiles.

"You know, 40 million toys may be bad for dozens of toy makers in Dongguan," said Dong Tao, an economist at Credit Suisse, referring to a city in southern China. "But that’s small potatoes for China’s over $1 trillion a year of exports."

The trade surplus with the rest of the world ballooned to $187 billion through September, up from $177.5 billion for all of 2006, and much of the gains have come at the expense of the United States and the European Union, which are buying a deluge of Chinese goods.

The Chinese price advantage over Western manufacturers in everything from labor to land continues to draw new orders to this country, analysts say.

The trade statistics bear out the facts. Even in categories where China was hit by prominent recalls earlier this year, like food and toys, exports rose sharply, according to data compiled by the World Trade Atlas.

Chinese food and agriculture exports to the United States were up 27 percent through August, to about $2.7 billion.

Global exports of Chinese-made toys jumped 18 percent, to about $16 billion, in the same period, despite a series of recalls from Mattel, the world’s largest toy company, mostly because of toys painted with lead-based paint.

American imports of Chinese-made toys also rose steadily, though analysts warned there could be a lag before a slowdown is seen there.

The trade data, however, did offer some evidence of the safety concerns, particularly in some smaller food categories.

Chinese exports of eel to the United States, for instance, fell 94 percent after the United States Food and Drug Administration moved last summer to block the imports of certain types of seafood, including eel and shrimp, because of concerns about excess antibiotic use or the use of banned veterinary chemicals.

And Japan, a huge importer of Chinese seafood, followed suit by canceling large orders for eel, according to Chinese producers.

"The whole industry got badly hurt," said Zhou Shaorong, chairman of the Guangdong Eel Industry Association in southern China. "The main reason is the F.D.A. banned some of China’s seafood imports, including eel, and then the Japanese media reported it and magnified the problem."

Japanese eel imports through August dropped to about $59 million from $101 million compared with the same period in 2006.

Most companies that source from China, however, do not seem to be canceling orders. But to guard against recalls or product safety problems, more than 60 percent of Chinese companies who responded to a recent survey said they were heavily investing in new quality control systems, according to Global Sources, a Hong Kong company that helps suppliers find markets.

"As more and more companies in the U.S. are understanding their liability, they are investing or requiring their suppliers to invest in quality control," Merle Hinrichs, chairman and chief executive of Global Sources, said.

Things could be much worse. After a string of recalls earlier this year, analysts warned about the looming dangers to the Chinese trade boom if the recalls continued to mount and trading partners started rejecting large shipments because of worries that Chinese made products were defective.

With the euro rising sharply against the dollar and Chinese yuan in the last two years, economists say Chinese goods have begun to look even more attractive to European consumers.

European officials are now pressing China to allow the yuan to appreciate and warn that the growing Chinese trade imbalance with the European Union could spell danger.

"There is substantial resentment building up in Europe, and I think the Chinese don’t recognize that," said Joerg Wuttke, president of the European Union Chamber of Commerce in Beijing. The yuan "has gone south, and if you have a currency that depreciates you get more competitive in your selling propositions."

And so European imports of Chinese made good have boomed. But American imports of Chinese goods are also strong, up 17 percent this year.

The strength of Chinese exports is helping to stoke inflation in China, raising speculation that the central bank will raise interest rates again soon.

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