Fading aura

The economic climate in most of the developed Western markets, especially the eurozone, is still unclear and thereby pushing China to forge closer linkages in other markets, experts say.

Li Jian, a researcher with the Chinese Academy of International Trade and Economic Cooperation, says it is an opportune time for the developing markets to enhance their share in China's foreign trade.

"The big question, obviously, is whether the EU can stop the debt crisis from deepening this year. Obviously, market demand from the EU will remain sluggish. Japan is also losing its position as China's third largest trading partner because of economic recession and the unstable Sino-Japanese ties," he says.

In 2012, bilateral trade between China and the EU dropped 3.7 percent year-on-year to $546.04 billion. Exports dropped 6.2 percent to $333.99 billion, while imports grew slightly by 0.4 percent to $212.05 billion.

Li says the trade declines may continue this year also.

"Trade with the EU will account for a lesser chunk of China's overall trade volume as the eurozone seems to be heading into a second round of post-crisis recession," he says.

In its October 2012 report, the International Monetary Fund had estimated that economic growth in the EU will be 0.2 percent in 2013, 0.5 percentage points lower than its July prediction, showing the multilateral agency's limited confidence in economic prospects for the region.

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The report also indicated that the eurozone crisis has deepened, citing pick-ups in the Spanish and Italian sovereign spreads.

Institutions inside the EU are also not that positive on the quick recovery of the economy in 2013.

In his speech on Jan 13 in Frankfurt, Mario Draghi, president of the European Central Bank, said, economic weakness in the eurozone is likely to continue in 2013.

"The risks surrounding the economic outlook for the eurozone remain on the downside. They are mainly related to slow implementation of structural reforms in the eurozone, geopolitical issues and imbalances in major industrialized countries. There are indications that the fragmentation is being gradually repaired, but it is yet to percolate down into the real economy," he said.

Most of the Chinese exporters are fully aware of this situation, and have instead chosen to focus on new destinations.

Zuo Boliang, general manager of Shunde Hong Qiao Furniture Co, says his company's exports to the European markets have nosedived in recent years.

"Our products are faring reasonably well in the Middle East, Southeast Asia, Russia and even South Korea. So there is no point in focusing on the European market when we have far better opportunities elsewhere," Zuo says.

Exports account for nearly 50 percent of the company's total sales revenue, Zuo says, without revealing any numbers. Incidentally Zuo's hometown of Shunde is the largest furniture-making center in China and was predominantly dependent on exports to the European markets.

Qian Jiang, executive president of Shunde Furniture Design Institute, says that the Middle East, South Africa and India were the new growth markets for the city's furniture trade last year.

"The loss of market share in Europe had a major impact on industry fortunes. Luckily, there are substitutes," he says.

According to the institute, the value of furniture exports from Shunde in 2012 was $1.5 million, a year-on-year growth of 2 percent. The average export growth rate during the past five years has been 6 percent.

Trade performance between China and Japan is even worse. Bilateral trade fell 3.9 percent to $329.45 billion, while imports dipped by 8.6 percent to $177.81 billion.

Li from the Chinese Academy of International Trade and Economic Cooperation says Sino-Japanese trade relationship partly depends on the overall relationship between the two countries. "With disputes over the Diaoyu Islands continuing, imports from Japan may see further declines this year," he says.

Although the US market might seem to be the only developed market that can expect a steady growth rate this year, experts still warn that the outlook might not be as bright as it looks.

In 2012, the US replaced the EU to become China's largest export destination, with $351.8 billion worth of exports, an increase of 8.4 percent year-on-year. Trade surplus between the two sides was $218.91 billion, growing by 8.2 percent from a year earlier.

Wei from the China Center for International Economic Exchanges says the ever-growing trade surplus against the US is pushing it to impose stricter rules on imports from China.

"It has become a common practice for the US to issue anti-dumping and anti-subsidy investigations on Chinese products, as the trade surplus is too large," he says.

In 2012, 41 percent of US' anti-dumping and anti-subsidy cases were against Chinese products. At the beginning of this year, the US Department of Commerce imposed anti-dumping duties of up to 154 percent on food additives from China. This resulted in Chinese exporters of xanthan gum to even consider quitting the US market.