BEIJING - China's foreign trade this year faces situations "far from optimistic" due to thwarted global demand, rising costs at home and a harsh trading environment, according to an official report released Friday.

After trade growth slowed for a second consecutive quarter in the January-March period, China's trade will continue to grow at a slow pace in the second quarter and the annual rate will drop from that of 2011, the Ministry of Commerce (MOC) said in an online statement.

In the first quarter, China's imports and exports expanded 7.3 percent from a year ago to reach 859.37 billion US dollars, according to the General Administration of Customs.

The growth rate was 22.3 percentage points lower than that of a year ago and marked the slowest pace since the fourth quarter of 2009.

THE ROSY SIDE

"Considering both the international and domestic environments, there are certain advantages and positive factors for maintaining steady trade growth, but 2012 is going to be an extremely challenging year for China's foreign trade," the statement said.

Since the beginning of this year, the global economy has shown some positive signs, said the ministry, citing examples such as better-than-expected economic growth in the United States and Japan, the European debt crisis being contained to some extent and strong measures taken by emerging economies to spur economic growth.

Domestically, China's economic situation is basically sound, as its economy expanded steadily in the first quarter and market confidence remained stable, the MOC said.

China's economy expanded 8.1 percent year on year in the first quarter, marking the fifth consecutive quarterly decline and the slowest growth pace since the third quarter of 2009, data from the National Bureau of Statistics (NBS) shows.

"The growth of the economy still has great potential and there is a relatively large amount of leeway for macroeconomic regulatory policies," according to the statement.

NO SMOOTH SAILING

However, China should clearly understand that trade development is facing mounting challenges and complicated constraints, and "the situations are far from optimistic," the ministry said.

A major problem is seriously withering global demand due to weak world economic growth, especially in the European economy that is on the verge of a recession, it said.

The International Monetary Fund forecast that the world economy will grow by 3.5 percent this year and total trade will expand by 4 percent, 0.4 and 1.8 percentage points lower than the previous year, respectively.

China's export companies have felt the strain, as they are receiving far fewer orders than in the same period last year, according to the MOC.

Adding to the woes, domestic companies are also experiencing higher costs of labor and raw materials, which is cutting into their profitability and increasing operating pressures.

Urban workers' incomes have risen by an average annual rate of 33 percent during the past three years, and minimum wage standards in most regions rose by more than 20 percent in the past two years.

"China's small and mid-sized enterprises still face prominent difficulties in getting loans, and those that can get loans said the costs are quite high," said the ministry.

The ministry also pointed out that the country is facing a relatively harsh trade environment, as "China has encountered the most trade frictions in the world for 17 consecutive years."

"In the first quarter, other countries launched 16 trade-remedy investigations for Chinese products involving a total value of 3 billion US dollars," the MOC said.
The number of such cases surged 80 percent over the same period last year, while the total value involved jumped 140 percent, it said.

SLOW BUT MORE BALANCED

The ministry predicted that China's foreign trade growth will remain at a low level in the second quarter and be slower than the growth registered last year. "The trade balance situations will further improve," it said.

China will strive to promote steady trade growth, adjust the structure and seek balanced trade this year, according to the ministry.

China should keep its trade policies stable to help companies overcome current difficulties and ensure steady export growth in the short term.

Over the long haul, it will intensify efforts in trade restructuring and upgrading, step up the transformation of the trade development pattern and reinforce the capability for sustained trade growth, the ministry said.

Meanwhile, China will further improve its import policies and set up more platforms for shoring up the country's imports in a bid to make positive contributions in promoting world trade growth and economic recovery.

The MOC on Thursday released a program for foreign trade development during the 12th Five-year Plan (2011-2015) period, saying that China will pursue balanced, progressive and mutually beneficial trade development during the five-year period.

This is the first time for the Chinese government to release a five-year program on foreign trade development.

The plan made seeking mutual benefit and a win-win situation one of its basic principles for trade growth, signaling the country's determination to make trade more balanced during the new era and bring more benefits to its trade partners.