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China aims to reduce imports

Economic growth, Financial Events
By Paul Hodges on 18-Jun-2009
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China has been a major beneficiary of the globalisation movement in recent years.

In turn, it has become a tremendous importer of most chemicals. It accounts for up to 50% of total demand for many Asian chemical producers, and is a critical factor in most supply/demand balances.

This position was already changing, however, as China moved to expand its own production.

Now, the Wall Street Journal reports that the National Development and Reform Commission (NDRC)), one of China’s most important government bodies, has co-authored a directive that “appears to require that Chinese companies should receive contracts for government stimulus projects”. The only exceptions would be for “engineering goods or service that cannot be obtained under reasonable business conditions inside China”.

In many ways, this move towards protectionism mirrors the ‘buy American’ provision inserted into the recent US stimulus package (which has already upset the Canadian government). It also suggests that, with exports still down 26% last month versus 2008, and showing no signs of early recovery, that China is focusing more and more on stimulating its domestic economy.

Many in the chemical industry, and elsewhere, had hoped that China could help lead a recovery in the global economy. Unfortunately, it seems quite possible that China is instead slowly turning its back on world trade. The blog therefore fears that those exporters who are relying on Chinese growth to stimulate demand may well be disappointed.