China Exports in the 21st Century

Ehsan Soltani

Top 10 Merchandise Exports Markets of China

China's merchandise exports increased from $266B to $3,594B with a compound annual growth rate (CAGR) of 13.2% (compared to 6.6% for global exports) in the 21st Century. The annual growth rate of China’s goods exports dropped from 27.2% in 2001–2008 to 8.6% in 2008–2014, and then to 1.3% in 2014–2019. China’s goods exports surged by 30% on easing COVID curbs in 2021.

In 2022, top 10 exports markets for Chinese goods were the U.S. ($582B), European Union ($562B), Hong Kong ($298B), Japan ($173B), South Korea ($163), Vietnam ($147B), India ($119B), Malaysia ($94B, Taiwan ($82B) and United Kingdom ($82B). At the same time, China exported $1,294B of goods to the rest of the world.
China's exports to Asia were $1,701B (with a 47% share), Europe $745B (21%), North America $636 billion (18%), Latin America $253B (7%), Africa $164B (4.6%) and Oceana $94B (2.6%) in 2022.

China's export growth to countries such as India, Vietnam and Malaysia were more than the world in the period of 2001-2022. At the same time, growth of exports to Taiwan, UK, EU, South Korea, and the U.S. was around the world, whereas growth of export to Hong Kong and Japan was below the world. Interestingly, the share of exports to the U.S. and Japan fell from 37% in 2001 to 21% in 2022. After conquering developed markets, China has been targeting markets in developing countries. China's export growth to developing countries was 30% more than the rest of the world in the last two decades. During this time, the growth of exports to Africa and Latin America was more than twice that of the rest of the world

China is the world’s factory

According to the World Bank data, in 2021, China accounted for 30% of world manufacturing value added with a value of $4,866B. This means that less than 25% of Chinese manufacturing products have been exported abroad. In 2021, the manufacturing value added of China surpassed that of the U.S. and EU combined.

Manufacturing sector played a key role in China's export growth with a dominant share (> 90%) and to the whole economy (~30% of GDP). WTO removed export quotas on China’ textile and clothing exports since 2005. Textile and clothing were the engines of China’s exports development in the early and middle phases of exports growth.

China benefited from various drivers to fuel its exports growth including cheap costs, abundance of workforce, government’s economic reforms and plans, broad government grants, extensive credits and incentives, high investment (national and foreign) to GDP ratio, investment in industrial production capacities, and education of its workforce, supports from Hong Kong and Taiwan, coastal development strategy, privatization of productive assets, opening businesses and markets, and joining to the world market (and WTO).

Challenges ahead China

From a long-term point of view, China's goods exports increased more than 1,000 times (CAGR 17%) between 1970 and 2014, 17 times more than the rest of the world. China experienced a high annual economic growth rate of 9% (compared to 3.2% for the world) during this period. China’s exports and also trade surplus soared to its highest level on record in 2021. Manufacturing industry in China benefited from a shift around the world from services to goods consumption after the coronavirus pandemic era.

China's goods export-to-GDP ratio rose continuously from 2.8% in the 1960s to 35% in 2006, and then declined to 18% in 2017–2020. Meanwhile, the manufacturing-to-GDP ratio declined from 32% in the 2000s to 27% in 2021. In 2021, total exports of China reached $3,756B of which $392B belongs to services exports with a share of 10% from total (compared to 21% for the world).

China will likely experience a substantial long-term growth slowdown due to demographic decline, the limits of capital-intensive growth, and a gradual deceleration in productivity growth. The economy is slowly rebalancing from industry to services. Reliance on exports is reducing. To continue its economic success, China must become less reliant on its export-led model of growth gradually. The export-to GDP ratio has fallen by half between 2006 and 2017, indicating that China has become significantly more self-sufficient.

Government plans and actions to maintain China exports growth include the goal of becoming a dominant player in global high-tech manufacturing, One Belt-One Road initiative, investment projects in abroad, and founding trade blocks such as RCEP. Chinese companies trying hard in some key issues such as transforming from an OEM (original equipment manufacturer) to ODM (original design manufacturer) and then OBM (original brand manufacturer) ––from copying to innovating and going from low-tech to high-tech exports.

However, China manufacturing exports faces some key challenges, including:

- Rapid development of robotic and automation technologies in developed economies
- The emergence of new manufacturing powers such as India, Vietnam and Bangladesh
- Cheap labor competitors in the rest of Asia
- Shrinking workforce and domestic market
- Trade wars with the U.S. and restrictive measures from some trade partners.
- Growth of service sector

These factors could potentially indicate a slowing of growth in China’s export. Nonetheless, although the future for China may not be certain, currently, global trade and production could not function without it.