By Shen Jianguang and Jiang Chuanyue | China Daily | Updated: 2023-03-20 09:12
Though struggling for the time being, exports had been a major highlight and a forceful driver of growth in the Chinese economy since the beginning of 2020 till the middle of last year.
In particular, China's exports maintained strong performance throughout the whole year of 2021, growing by 29.9 percent compared to the previous year. In combined figures for the first three quarters of 2022, exports still witnessed a 12.5 percent year-on-year increase.
Since the fourth quarter of last year, however, China's exports began to soften considerably. In October, exports fell 0.3 percent from the year before, followed by 9 percent and 9.9 percent drops in November and December, respectively — record lows not seen since March 2020.
As a number of containers have been lying idle in ports recently, compounded by the continuous decline in export freight rates, people's growing concerns about dim export prospects have been brought to the fore.
Given such factors as economic slowdowns in the US and Europe, the complex international landscape and diversification of industrial chains away from China, the country's export outlook for the whole year could be gloomy.
To begin with, the economies of the US and Europe have slipped into stagflation, a combination of recession accompanied by high and rising inflation, which is a key factor behind China's sharp decline in exports.
According to the World Economic Outlook released by the International Monetary Fund in January, it is expected that US economic growth rates will drop from 2.0 percent in 2022 to 1.4 percent in 2023, and the euro zone will plunge sharply from 3.5 percent in 2022 to 0.7 percent.
The US and Europe are heading for an economic downturn, which, as a result, will dampen demand and stifle global trade to a great extent.
The World Trade Organization projected in October that after expanding at a 3.5 percent pace in 2022, growth in the trade of goods this year will drop to just 1 percent. That's considerably below its previous estimate in April, which had trade expanding at a 3.4 percent clip this year.
Imports by North America and the EU will drop 1 percent and 0.7 percent, respectively, compared to last year.
All the aforementioned data bode ill for a significantly contracted overseas demand and pose serious challenges to China's exports.
On top of this, the US and other Western countries are promoting a move away from reliance on China in the global supply chain and core technology industries such as chips amid the growing complexities and uncertainties in the international landscape, which will also bring down the growth of China's exports.
Last year, the US government signed two bills into law — the CHIPS and Science Act and the Inflation Reduction Act — in a bid to relocate enterprises involving chips, automobiles and other industries to its own territory through massive subsidies.
The above-mentioned bills attempt to impose a technological blockade on China and hinder the production and exports of China's chip-related industries, which account for some 15 percent of China's total exports.
Beyond these two factors, cross-border relocations of large-scale labor-intensive industries — which are an important force behind China's exports — from China to ASEAN countries also pose mounting challenges to Chinese exporters.
Induced by deglobalization, trade disputes between China and the US and rising domestic labor costs, the outward migration of Chinese labor-intensive industries has to some extent mitigated risks inherent in some global industrial chains.
ASEAN member states such as Vietnam, Indonesia, the Philippines and Cambodia are well-positioned to accommodate China's labor-intensive firms with their low tariffs, abundant labor resources and low costs.
In the US luggage import market, for instance, China's share fell from 65 percent in 2015 to less than 30 percent in 2021, while ASEAN's share rose from 14 percent to nearly 33 percent over the same period, more than doubling in six years.
Going forward, deeper ties with ASEAN countries should serve as an important fulcrum to tackle the drop in China's exports. The role of ASEAN countries in underpinning the country's exports will be better leveraged, and coordination and complementarity of the industrial chains between China and ASEAN will be better enhanced.
Since 2010, ASEAN's share of China's exports has been picking up pace, from 8.8 percent in 2010 to 15.8 percent in 2022, and has now overshadowed the EU as the second-largest partner for China's exports, second only to the US.
China's two-way trade with ASEAN came to 6.52 trillion yuan ($947.8 billion) in 2022, a significant annual increase of 15 percent, significantly outpacing trade partners such as the US, Europe and Japan. ASEAN countries have become the leading force supporting China's exports.
As China and ASEAN members both signed the Regional Comprehensive Economic Partnership agreement, along with the more frequent local currency settlement and currency swaps with enhanced infrastructure connectivity, there is still broad room to tap the potential of China's exports to ASEAN.
Though ASEAN countries are taking over large-scale labor-intensive industries from China, such relocation will help China push ahead its trade structure upgrade and export more high value-added goods to the region.
China and ASEAN countries will gradually develop a mutually beneficial trade model where ASEAN exports primary goods to China, imports capital-intensive and technology-intensive goods from China, and exports consumer goods to China and elsewhere.
In a bid to boost its exports, China should further accelerate regional integration in the Asia-Pacific region, better harness the RCEP and the Belt and Road Initiative, and cultivate hubs for industrial integration.
The country should open up even wider, foster a more enabling business environment, slash restrictions on access to foreign enterprises and strengthen coordinated development of industrial chains.
Shen Jianguang is chief economist and Jiang Chuanyue is senior researcher at Chinese e-commerce platform JD.
