Yes, they've averred, China will export fewer finished products to the West – but it will compensate by shipping more intermediate products to the Association of Southeast Asian Nations (ASEAN) and other developing countries, allowing China to focus on making more high-value products and thus bolster its position in global supply chains.
China's latest export figures, however, indicate the US“de-risking” strategy may actually be hitting its mark. China's exports to the US and EU dipped by 12.9% in May, 18.6% in June and 21.9% in July year on year.
The figures have also contracted month-on-month from March to July this year.
China's exports fell last month even though US consumer confidence has been rising since May. The Conference Board's monthly Consumer Confidence Index, which tracks US consumer markets, rose robustly to 117 in July from 110.1 in June. The index has been up for three consecutive months on the back of a strong labor market and easing inflation.
Meanwhile, the year-on-year contraction of China's exports widened to 15.4% in July from 13.9% in June, according to the country's General Administration of Customs.
China's exports fell 5% year-on-year to US$1.94 trillion in the first seven months of this year, surging from the 3.2% drop recorded in the first six months of 2023. During the period, China's shipments to the US, EU, ASEAN and Japan dropped 18.6%, 8.9%, 2% and 6.8%, respectively. Together they accounted for 39% of China's total exports.
China's exports to ASEAN grew in the first four months but plunged 15.9% in May, 16.9% in June and 21.4% in July from a year earlier.
Latest stories
japan flexes military muscles in australia
ai-powered valkyrie drone designed for swarming china
drug-related killings add to instability in syria's south
US Treasury Secretary Janet Yellen, who visited China between July 6-9, said on July 16 that the US would seek to ease tensions with China but continue to push forward its friend-shoring policy of reshaping global supply chains to reduce reliance on China.
The US considers both India and Vietnam as friend-shoring partners and Mexico as its top“near-shoring” destination. Yellen visited India and Vietnam to discuss friend-shoring on July 13-21.
Vietnam's total exports, largely to the US, grew month-on-month between April and July, though they declined 10.6% year-on-year to $194.4 billion over the wider January-July period in line with easing Western demand.
But Vietnam has seen growing manufacturing orders in recent months, narrowing its overall export decline from 16.5% in April to 5.2% in July.
A clothing boutique in downtown Hanoi. Photo: Asia Times Files / AFP / Hoang Dinh Nam
'Non-economic factors'
Chinese officials and government researchers have blamed“non-economic factors” for the country's recent flagging exports.
“In the context of an easing demand in the international market, some manufacturers in China are affected by non-economic factors, and they are forced to transfer orders and production capacity outward,” Cui Weijie, director of the Institute of Industry Development and Strategy, a research unit of the Ministry of Commerce, said on August 8.
“In addition, the previous 'one-off driving factors' such as the demand for anti-epidemic tools and 'stay-at-home economy' products have eased,” Cui said.“Stay-at-home economy” refers to a trend toward shopping online at home, which gathered steam during the pandemic.
Cui said China is seeking to boost exports of intermediate goods to members of the Regional Comprehensive Economic Partnership (RCEP), a new Asia trade grouping. He said that now that the RCEP agreement has taken effect for the Philippines (on June 2), the scheme will provide more room for Chinese exports over the long run.
He said more than half of China's exports to RCEP members are intermediate products such as auto and electrical parts, which amounted to 1.71 trillion yuan ($241 billion) during the first six months of this year.
The rcep is a free trade agreement signed in November 2020 by 15 Asia-Pacific nations including Australia, Brunei, Cambodia, China, Indonesia, Japan, South Korea, Laos, Malaysia, Myanmar, New Zealand, the Philippines, Singapore, Thailand and Vietnam. It took effect at the beginning of last year.
In a media briefing on July 19, Li Xingqian, head of the Department of Foreign Trade of the Ministry of Commerce, admitted that China's foreign trade was facing an“extremely severe” situation due to mounting“non-economic factors.”
Li said these factors included some countries'“decoupling” and“de-risking” strategies, which blocked normal commerce at China's expense. He said some nations' politicization of trade has forced orders and production to move out of China.
He said the commerce ministry will help Chinese firms to cope with the“unreasonable trade restrictions.”
China's exports to the West are falling. Photo: Twitter
Processing trade
Wang Jiguang, deputy secretary-general of the Chinese People's Political Consultative Conference in Chongqing, said in an article published on August 5 that to stabilize exports China should boost“processing trade”, which refers to the manufacturing of intermediate products from raw materials within free-trade areas and comprehensive bonded zones.
He suggests the government should provide more tax cuts and fee waivers to processing firms and ensure that they have enough workers, energy and financial credits.
Between the mid-1990s and 2008, China's processing trade accounted for more than half of the nation's exports. The ratio fell below 50% in 2011, dropped further to 33% in 2016 and plunged to 20% in 2020 as foreign firms shifted toward placing orders with Chinese manufacturers to make finished goods.
On July 24, a meeting of the Chinese Communist Party (CCP) Central Committee, chaired by General Secretary Xi Jinping, said multiple measures should be taken to stabilize China's foreign trade and investments.
The meeting called for supporting pilot free trade zones and ports that are aligned with high-standard international economic and trade rules and implementing more liberalizing measures.
read: china boosts consumption as services activity slows
Follow Jeff Pao on Twitter at
@jeffpao3
Like this:Like Loading... Related