Low-gear trade growth

The official recognition that China may miss its target for trade growth this year is crucial to a correct understanding of the new role that foreign trade will play in China's economic transformation.

As a turbocharged growth engine that expanded by 15.9 percent annually between 1978 and 2013, China's trade sector contributed tremendously to the country's surge to be the world's second-largest economy and biggest trade power.

Yet, as domestic labor costs rise and global demand has weakened in recent years, it has become more than obvious that trade growth will play a less important role in boosting economic growth as China strives to release the huge potential of its 1.3 billion consumers.

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Less growth in exports and imports will make the trade sector no longer a main growth engine for the Chinese economy. But, ideally, a stabilized trade sector will still provide millions of jobs while facilitating domestic consumption with an improved mix of imports.

Total foreign trade contracted 3.1 percent year-on-year to 8.1 trillion yuan ($1.3 trillion) in the first four months of 2014, according to the General Administration of Customs. Such unexpected negative trade growth not only means difficulties for Chinese exporters, it has also alerted Chinese policymakers who are rather worried about the overall economic growth that just slowed to an 18-month low of 7.4 percent in the first quarter.

Under such circumstances, it is one thing to quickly roll out a raft of supportive measures to give more tax breaks, credit insurance and currency hedging options to provide immediate help to troubled exporters, as the Chinese government did last week. But it is quite another to insist on the annual trade growth target of 7.5 percent to help save the country from missing its overall growth goal.

Fortunately, a senior commerce ministry official admitted on Tuesday, "it's a very arduous task to achieve the annual target of 7.5 percent".

If the Chinese government keeps pursuing that target, combined exports and imports would have to grow by an average annual rate of 11.3 percent each month from May to December.

A pickup in trade starting this month may be possible, but double-digit trade growth for the rest of the year sounds far-fetched as the global recovery remains fragile.

So, the official message is that the country will not pursue trade growth at any cost. Instead, economic transformation toward consumption-led growth will take center stage.