This post is to encapsulate a recent speech by Huang Jifan on the evolution of China’s foreign trade. Huang, now retired, was the mayor of Chongqing from 2010 to 2016. Before that he was the vice-mayor of Shanghai. A scholarly official who exposits Chinese economy in speeches.
1. Weight of foreign trade in GDP:
a. Chinese government brought forward the idea of circulation in 2017.
When foreign trade is over 60% of GDP, it is external circulation accented.
When foreign trade is below 40% of GDP, it is internal circulation accented.
b. 1950 to 1980 China’s foreign trade accounted for <10% of GDP
After 1980, with reform and opening, this percentage reached over 60%.
After entry to WTO, this weight increased impressively, reaching 71% in 2006.
Due to western economic recession from 2008 and China’s $586 billion stimulus package, China turned to internal trade and investment for growth. The weight had fallen to ~38% in 2016. This percentage was maintained up to 2023. During this period, GDP increased at a higher rate than foreign trade.
c. For comparison, U.S. foreign trade weight is about 25% in the past 50 years. Japan had undergone similar changes after WWII. Up to 1975 the average weight was >70%, afterwards it went down to about 35%.
2. There is no close-the-door, but more opening with new perspective:
a. Promote imports, such as the Shanghai Import Expo since 2018.
b. Reduce import tariff: Average tariff rate in 2010 – 26%; 2005 – 15% and in 2003 – 6%.
c. Encourage outward Foreign Direct Investment.
d. Open interior regions to foreign trade.
e. Opening used to be for products, now to cover service, cultural, health, financial etc.
f. Improve foreign trade environment.
3. Upgrade products and production:
a. Upgrade the products:
In 2010, China exported USD1,500 billion, of which 70% was labor intensive items.
In 2022, China exported USD3,300 billion, of which 90% was in the category of electronic, machinery etc.
b. From 2019 to 2023, China’s trade with southern neighbors increased over 50%, as labor intensive industries moved from China to this region.
c. Now, 50% of the world's ships are built in China, 10 years, they were built in South Korea and 30 years ago, they were built in Japan.
d. Before 2010, processed products took 40-50% of export, only 30% was manufactured in China.
In 2023, processed products only took 20%, 70% are manufactured in China.
e. Despite Trump’s and Biden’s war, China’s Foreign Direct Investment increased remarkably:
1980s – US$4-50 billion per year.
1990s – USD8-90 billion per year.
2000s – US$120 billion per year.
2012-2022-US$140 billion per year.
f. Foreign Direct Investors not only came to produce for export, but also for the huge domestic market as well.
COMMENTS:
China has achieved spectacular results by actively managing its economy. This enables her to withstand external shock from U.S. recession and trade war. This has increased China’s confidence and standing in global affairs.
The only thing that Huang did not mention is the 2008 stimulus package (amounting to almost a quarter of the annual GDP) led to the over-built housing crisis in the 2020s.
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