In recent times, discussions surrounding China's export capacity have markedly diminishedThis begs the question: has export become an inconsequential aspect of the nation’s economy?

Despite its historical role as a key driver of economic growth, the nuances of China's export performance are not frequently covered in the media, leaving the public largely unaware of the actual trends and figures at playIs the situation as bleak as it seems?

To understand the real picture, let's look at some historical dataBack in 2004, China boasted a GDP of approximately $1.93 trillion, with total exports amounting to $593.4 billion—a ratio of 30%. Fast forward to 2023, and the GDP has surged to $17.89 trillion, while exports have reached $3.4 trillion, resulting in a GDP-to-export ratio of around 19%.

At first glance, this decrease in the export ratio as compared to GDP might suggest a downturn in the relevance of exports

However, this perspective can be misleading.

In fact, when analyzing the global context, China’s share of total world exports has been on a consistent upward trajectoryFollowing its accession to the World Trade Organization (WTO) in 2001, which granted China access to global markets, the nation capitalized on low labor costs and rapidly grew into the world's manufacturing hubBetween 2001 and 2015, China's exports experienced an astronomical growth, seeing its global export share rise to an impressive 13.7%.

This period of explosive growth can be attributed both to external factors—where global demand for Chinese goods heightened—and internal circumstances, such as the burgeoning population and rapid urbanization within China itself, both of which fostered an environment ripe for economic expansion.

However, a turning point occurred post-2015, heralded by a stock market crash that constricted funding availability

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The implementation of the 'supply-side structural reform' policy led many inefficient small-to-medium enterprises to exit the market, forcing a shift in focus from mere volume to the quality of Chinese manufacturing.

As a consequence, lower-end manufacturing began to migrate overseas, resulting in a slight decline of China’s export share to the world, which fell from 13.7% in 2015 to 12.8% in 2017. This decline was further exacerbated by escalating trade tensions in 2018, leaving the nation’s export volumes in a stagnant state for the next few years.

An unexpected shift arose with the onset of the COVID-19 pandemicAs China was one of the first countries to resume production, it found itself in the fortunate position of being able to meet global demand, resulting in a surge in its export share, which rose to a historical high of 14.9% by 2021.

The narrative shaped by China's dual circulation economic strategy has led many to erroneously conclude that the country is solely concentrating on internal markets

Yet, this is a misunderstanding of the statistics and strategies at play.

In truth, the notion that China is neglecting international trade is unfoundedExports continue to account for approximately 20% of GDP, while the nation’s share of global exports has not only held steady but has risen.

Originally, the dual circulation policy aimed for a harmonious balance—where both international and domestic markets could coexist and contribute to economic prosperityBoth are essential, and one cannot thrive without the other.

Another misconception is the volume and significance of trade between China and the United States; despite rising tensions, trade volumes remain substantial.

As of 2023, the top five export markets for China include the ASEAN region, the European Union, the United States, Hong Kong, and Japan

Remarkably, ASEAN has overtaken the U.Sto become China’s largest export market for the first time.

Recent years have indeed shown a declining trend in trade volume between China and the U.S.; previously accounting for more than 20% of total exports, this figure dropped to 14.8% in 2023. Similarly, Japan's imports from China have decreased significantly since 2016 when it lifted preferential tariff treatments.

On the flip side, however, the trade volume between emerging economies, particularly those in ASEAN and China, has seen a notable increase, with China's exports to ASEAN rising by 3.3 percentage points compared to 2015. Part of this shift is attributable to industrial transfers—Vietnam, for instance, now manufacturers clothing for the U.S., yet increasingly relies on China for raw materials, illustrating the integrative nature of regional trade.

While ASEAN has become a viable alternative in sectors like garment exports, it simultaneously grows dependent on Chinese raw materials, underscoring the interconnectedness of trade in the global marketplace.

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Each region possesses competitive advantages within various industrial chains, further emphasizing the enduring nature of globalization despite existing political barriers that may impede direct trade.

In 2023, electromechanical equipment accounted for 41.6% of China’s export share, with textiles and apparel, furniture, and other goods constituting 22.4%. Contrary to common perception that clothing and footwear make up a dominant portion of exports, this reflects a significant evolution in China’s export profile.

Over the past two decades, electromechanical equipment has consistently represented more than 40% of China's exports, including crucial components such as integrated circuits, batteries, and semiconductor devicesIn 2023 alone, exports of integrated circuits, batteries, and semiconductor components reached an impressive value of $267.8 billion.

Despite this growth, a notable concern lies in China's capacity to compete in high-tech sectors, where the proportion of advanced and sophisticated industries remains relatively low

China continues to trail behind in segments like medical devices and precision instruments.

Such high-tech arenas are pivotal; when a core segment of the supply chain is solidified within China, surrounding industries will subsequently emerge and thrive, fostering economic resilience and generating increased foreign exchange revenue through exports.

Thus, the reassuring news is that while China’s export share may never return to the hyper-growth trajectory of yesteryears, the potential for structural adjustments in the types of goods they export exists, paving the way for renewed growth.

Low-barrier labor-intensive industries will likely be superseded by ASEAN countries, which have lower labor costs

However, success in advanced manufacturing will help ensure that China retains its competitive edge in the global market.

In conclusion, while many have speculated that China’s export prospects are dim, the truth is far more nuancedAlthough trade levels with the U.Sand Japan have dipped, China’s global export presence has not diminished—instead, it has grown stronger in various respects.

It is also important to recognize that while lower-end manufacturing might be shifting elsewhere, China's competitive edge lies in high-tech sectors where it still faces significant challengesTackling these issues will be integral to maintaining the viability and competitiveness of Chinese goods.

Furthermore, while the impact of exports on China’s economy may have been overshadowed by internal consumption and investment recently, they remain a crucial component of the economic narrative.

The essence of the dual circulation strategy is to create a self-sustaining economic loop internally while also maintaining a parallel loop with the international markets