¡¡¡¡Zhang Guoqing
¡¡¡¡Director of the Department of Policy Research of the Ministry of Commerce

¡¡¡¡International economic
¡¡¡¡growth slow down

¡¡¡¡The current international economic situation can be summed up as follows: slower growth, rising prices, steady foundations, increased risk.

¡¡¡¡To begin with, it is clear growth is slowing.The world economy continued to progress rapidly, predictably up by 3.7% in 2007; international trade and cross-border investment kept expanding in scale and is predicted to rise by 5.1%. In 2008, the world economy will maintain positive growth, but a noticeable drop should be expected. Most respected industry voices contend that there will be slower growth in the world economy during 2008, staying at 3.2%, 3.3% or 3.4%.

¡¡¡¡Secondly: rising prices. The prices of primary products such as oil, food and resource materials like iron ore have continued to rise, and in some areas inflation has been taking hold. On one hand, oil prices have fluctuated at a higher level. International oil prices soared more than 60% during 2007, once even approaching 100 US dollars / barrel. In the current trend, 2008 oil prices are hardly likely to descend. On the other hand, prices of agricultural products will also remain high. The FAO Food Price Index rose by 40% over 2007, world wheat prices more than doubled, corn prices rose over 30%, oil crops 40%, dairy products 80%, and it is still hard to ease the tension between supply and demand. Additionally, major raw material prices generally jumped. Active international trade has driven up international shipping prices, and raw material costs have jumped simultaneously. Thus it is almost an absolute rising trend in price of international raw materials.

¡¡¡¡Thirdly, the foundations will remain. Primarily, the volume of world trade will continue to accumulate. According to IMF¡¯s forecast: it will be up by 6.9% in 2008. Then, global Foreign Direct Investment (FDI) will hold the current momentum, at least not less than the US$1.47 trillion recorded during 2007, with transnational mergers and acquisitions becoming a driving force. Some authoritative global institutions predict that since international outsourcing of services has achieved US$1.2 trillion in 2007, its growth rate will possibly be 30% - 40% in the next few years. In addition, the ¡®Euro zone¡¯ is expecting a much brighter future, in spite of the shrinking US economy. And although Japan is slowing down in development, it has just had the longest period of sustained expansion since World War II. Finally, emerging new and developing economies have contributed tremendously to the world economy; their collective growth rate has been, for the past six consecutive years, higher than the world average.

¡¡¡¡Fourthly: increased risks. On top of it all, the US sub-prime mortgage crisis is poised to get much worse. Certain institutions even predict that, at best, the current crisis is just halfway done, as in the global financial system there exist some US$1.2 trillion assets under sub-prime mortgages. If not handled properly, the securities loss will mount to 10% - 20% of the total, equivalent to approximately US$120 to 240 billion. Next, the US dollar has been devaluing. Over the past year, its exchange rate against 16 major currencies fell on average, and by the end of November 2007, the EUR, GBP and Japanese Yen had appreciated respectively by 13%, 5.7% and 8.4% to the USD. Additionally, energy and commodity prices are soaring, and the price of gold has also accelerated upwards. What¡¯s more, investment and trade protectionism is warming up. Then, increasingly frequent regional conflicts, not only in the Middle East, Latin America, Africa, but also in some of China¡¯s neighbouring countries and regions, plus a US election in 2008, have suddenly added to the uncertainties.

¡¡¡¡Chinese economy to maintain rapid growth in 2008

¡¡¡¡To forecast 2008 China¡¯s economic situation: economic growth rate will stay rapid; the growth will be further strengthened based on restructuring and industrial upgrades; market prosperity will lift consumption levels to a new high.

¡¡¡¡Firstly, China¡¯s economy is demonstrating its vitality in these following ways: agricultural production has been continuously increasing; industrial enterprises have markedly improve their efficiency, and total profits in 2007 are estimated to reach RMB 2.5 trillion, up 37%; value added services have increased in importance among the GDP.

¡¡¡¡Secondly,  the trend that growth will be further strengthened based on restructuring and industrial upgrading stems from the following main features: the scale of foreign trade will likely rise by over 20% throughout 2008, compared with the US$2.17 trillion volume achieved in 2007, structural adjustments regarding export commodities has accelerated, 94.5% of which has been shared by manufacturers. Meanwhile, there is a higher degree of dependence on foreign trade, as nearly 1,000 categories out of China¡¯s more than 5,000 kinds of exported commodities have been ranked first around the world; in particular, automobile production will be close to 10 million, and other machinery and electronic products will remain the world¡¯s leading edge.

¡¡¡¡Thirdly, market prosperity will lift consumption levels to new highs because by the end of the third quarter in 2007 the total balance of RMB deposits had reached RMB 38.3 trillion. The uphill income level has accelerated consumption structure upgrading as well as demand for the commodity market. By the end of November 2007, sales of gold, silver and jewellry, furniture, automobiles, electronics and communication products all soared by 25%. And China has already accommodated over 4 million private cars. The 2007 total retail sales of social consumption reached RMB 8.8 trillion, a Y-O-Y 16% increase, and this indicator in 2008 is expected to exceed RMB 10 trillion.

¡¡¡¡A golden period for shipping industry is becoming apparent

¡¡¡¡Triggered by China¡¯s further opening up of tertiary industries, the shipping industry will have to tackle the series issues of opening up to the outside world, making structural adjustments and raising internal competitiveness. Therefore, 2008 is going to be a year full of opportunities and challenges, from which the shipping industry can take advantages in order to speed development.
¡¡¡¡The first priority is given to changes in the trade structure. At present, what accounts for an increasing proportion in China¡¯s exports is manufactured goods, while it is the raw materials as well as resources commodities that are in higher import demand. This requires shipping companies to adjust their ship capacity and routes promptly so as to provide more appropriate shipping services. Secondly, we should focus on changes in trade regions. With the development of multilateral and bilateral relationships, China is not only closely associated with developed economies but also getting closer with developing ones, especially with ASEAN, African, the Middle Eastern, Latin American and South Pacific countries, where China¡¯s trade volume is currently on the rise. In this way, shipping companies are supposed to follow the progress of national trade when arranging their global business layout, in order to operate in a more international manner. Thirdly, we must open up all relevant services. It is imperative to learn to both survive the competition and grow up with the cooperation, particularly to learn from advanced international shipping corporations in terms of their management and services. As a result, quality and competitiveness of Chinese enterprises will be enhanced. We are also to strengthen research and management concerning supply chains as well as logistics systems, actively join in the international trend, and strive to cultivate world-class shipping enterprises. Finally, we should focus on economic fluctuations, particularly the changes in currency hedging, to guard against the risk brought about by USD depreciation.