According to data by China’s General Administration of Customs, China’s goods exports in US dollar terms increased by 0.5 percent in the first quarter of 2023 year-on-year, bouncing back from the 9.9 percent decline in December 2022. In March, China’s exports grew by 14.8 percent from last year, greatly exceeding market expectations. The figures indicate that China’s economy is gradually recovering and the export sector remains resilient.
In the past months, a mainstream consensus about China’s economic prospects in 2023 is that its export sector will face major challenges. As rising inflation and high interest rates, debt distress and geopolitical frictions have dampened consumption and investment around the world, global trade in goods will shrink by 0.2 percent in 2023, according to Oxford Economics. As the world’s largest trader in goods, it is inevitable that China’s export sector will come under pressure.
But these challenges can be transient and cyclical, and there are also structural opportunities for China to boost its export sector in the long term. Against the backdrop of overall declining demand from advanced economies which have resorted to “friend shoring” their supply chains, China’s exports to the US, the European Union and Japan in the first quarter of 2023 declined by 17 percent, 7.1 percent and 2.4 percent from last year.
By comparison, China’s exports to ASEAN countries and countries under the Belt and Road Initiative (BRI) increased by 28 percent and 25 percent in the first quarter. Trade with BRI countries, including the ASEAN region, accounted for 34.6 percent of China’s total foreign trade. In addition, China’s exports to Russia and Africa increased sharply by 47.1 percent and 19.3 percent.
As China continues to deepen cooperation with these regions under the Regional Comprehensive Economic Partnership, the BRI and other initiatives, China’s trade will continue to grow, which will not only offset the shrinking exports to Western countries but will serve as a new growth engine for its export sector.
Other than the regional shift in the trade landscape, there are signs that China is benefiting from major progress in the new energy automobile industry. China’s exports of automobiles and batteries in Chinese-yuan terms increased by 96.6 percent and 84.8 percent in the first quarter. Electric vehicle exports increased by 122.3 percent from last year, accounting for 43.9 percent of all automobile exports. Exports of lithium batteries and solar batteries also increased by 94.3 percent and 23.6 percent. The three categories now account for 4.7 percent of China’s total exports. It shows as China continues to upgrade its industries, there are still structural opportunities for finding new growth areas.
China’s efforts to climb up the value chain can also be seen in its service trade data. In 2022, China’s services exports increased by 12.9 percent from the previous year to reach 5.98 trillion yuan (US$869b), with exports of knowledge-intensive services increasing by 12.2 percent, according to the Ministry of Commerce. While services exports in the first two months of 2023 recorded a contraction of 11.8 percent from the same period last year, exports of knowledge-intensive services maintained growth momentum and increased by 11 percent, accounting for 60 percent of China’s total services exports. As China’s inbound tourism continues to recover in the coming months, it is expected that overall services exports will gradually climb back.
Despite short-term challenges, China’s export sector will remain resilient and the country will continue to be the world’s leading trade hub.
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