China’s strong export is leading the reform

Low value added manufacture usually refers to China’s export. The whole world is betting this kind of export model will not thrive in the next decade since the labor cost in rising and China’s economy is doomed. Disappointed export data of China in the first quarter this year, especially for January and February, just convinced the market that China’s economy was cooling down faster than expected. However, China’s export is taking the biggest pie even though the whole world trade activities are decreasing. 14.6% taken of the whole export share last year made China the biggest export and also a strong momentum seems like to continue this year with the promising data on Thursday. From Vietnam to German, reform in China is working in the target to transfer China from a low cost exporter to the exporter driven by technology.

Yet even as its export share climbs globally, manufacturing’s slice of China’s economy is waning as services and consumption emerge as the new growth drivers. For the global economy, a slide in China’s exports this year isn’t proving any respite as an even sharper slump in its imports erodes a pillar of demand.

Those trends are likely to be replicated in August data due Thursday. Exports are estimated to fall 4 percent from a year earlier and imports are seen dropping 5.4 percent, leaving a trade surplus of $58.85 billion, according to a survey of economists by Bloomberg News as of late Tuesday.

While China’s advantage in low-end manufacturing has been seized upon by Donald Trump’s populist campaign for the U.S. presidency, the shift into higher value-added products from robots to computers is also pitting China against developed-market competitors from South Korea to Germany. A weaker yuan risks exacerbating global trade tensions, which became a hot button issue at the G-20 meeting in Hangzhou over cheap steel shipments.

The country decided devaluate Yuan in August of 2015. This action is deemed to help the country put more advantages on its export business. At that time, the whole world was concerning the serious problems that China’s economy faced. Global stocks selloff mixed with collapse of China’s domestic stock market pictured a concerning future. But the devaluation of Yuan is working. China’s export is taking the pies globally. More than this, global buyouts from Chinese companies are proving the manufacture industry is seeking for technology rather than solely relying on lower domestic labor cost. The movement to technology is serving its reform called “Made in China 2025” plan. More is to come as President Xi Jinping’s blueprint envisions global competitiveness within a decade in 10 industries from machine tools and robots to advanced railway equipment and medical devices.

The government is doing a terrific job on executing its reform plan and clearly export is the engine of this reform train. With a solid and increasing share of global export, the promising future of 2025 in China is really on the way.

 

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