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4 Key Takeaways Emerging From China’s Trade Data

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4 Key Takeaways Emerging From China’s Trade Data

Amid tensions with the U.S., China is recalibrating its approach to international trade – a strategic shift now visible in the trade data.

4 Key Takeaways Emerging From China’s Trade Data
Credit: Depositphotos

“Economic globalization represents the trend of history. Like the world’s great rivers, the Yangtze, the Nile, the Amazon and the Danube – they all surge forward in relentless flow, and nothing can stop their mighty movement, not the current of undertows or hidden shoals or rocks beneath the water,” Chinese President Xi Jinping said in his keynote speech, delivered at the opening ceremony of the second China International Import Expo in 2019. In his address, Xi emphasized the irreversible nature of economic globalization, despite the rise of trade protectionism and anti-globalization sentiments.  

Almost five years later, amid escalating tensions with the United States and other Western nations, China continues to stress the significance of fostering economic integration and embracing free trade and open markets. However, it does so in its own way. With Washington and its allies adopting a wary approach and implementing measures to limit Chinese global economic and political influence, Beijing has felt the growing need to construct an alternative system that better aligns with its interests. This recalibration requires a departure from conventional trade practices, entailing a pivot in export-import dynamics and a strategic reorientation toward nations more aligned to what Beijing terms as “win-win” partnerships. 

The manifestations of these strategic shifts are palpable in China’s trade data. Four salient takeaways provide insights into the trajectory of its evolving economic pattern.   

FTAs Are a Top Priority for China  

To develop an independent trade architecture from the United States and the European Union, signing bilateral and regional free trade agreements (FTAs) is a top priority for Xi Jinping’s China. Currently, Beijing has bilateral or multilateral FTAs covering 29 countries, notably not including the U.S. or any EU member countries. According to Financial Times calculations, in the 12 months leading up to October 2023, this network covered almost 40 percent of China’s exports and trade between China and FTA partners was worth approximately $1.3 trillion. 

Made with Flourish

Historically, FTAs have always been politically sensitive and Chinese leadership has signed more agreements with countries sharing its political values or interests. This can also be seen today: China is giving priority to trade deals with the countries that are part of the Belt and Road Initiative (BRI) – the gigantic economic and geopolitical project that now includes 154 countries, mainly from Asia, Africa, and Latin America. China is progressively trying to shift its exports to BRI partners – and away from traditional markets like the United States and EU. 

China’s flagship FTA is the Regional Comprehensive Economic Partnership (RCEP), which comprises 15 Asia-Pacific countries: the 10 member states of the Association of Southeast Asian Nations (ASEAN), as well as Australia, China, Japan, New Zealand, and South Korea. All but Japan and Australia have signed on to the BRI. RCEP, with member countries accounting for roughly one-third of the world’s GDP, went into effect in 2022. In 2023, the trade between China and the other 14 RCEP member countries amounted to $1.77 trillion, an increase of 5.3 percent compared to the period before the agreement came into effect in 2021. 

However, Beijing is not stopping with RCEP and is currently negotiating 10 FTAs, not including upgrades to the existing ones. As Chinese Vice Commerce Minister Wang Shouwen pointed out, “We have a full agenda for FTA negotiations this year.”  

Emphasis on Developing Countries First

While there is an ongoing debate about whether Beijing is succeeding in winning “the hearts and minds” of the Global South, it is widely acknowledged that China has become a crucial economic partner for many emerging economies around the world. Recent trade data indicates that Beijing’s exports are increasingly focused on the developing world, with the BRI being the main vehicle. According to China’s customs data released in January, trade with BRI countries experienced solid growth in 2023, accounting for 46.6 percent of the total and amounting to $2.74 trillion. 

Among the BRI members are all 10 countries in ASEAN, which became China’s top export market in 2023, surpassing the EU and the United States. Trade between China and ASEAN grew by 8.1 percent in the first two months of 2024, making up 15 percent of China’s overall trade. The shift can be largely attributed to RCEP, the world’s largest free-trade bloc, but it also reflects China’s broader strategy of turning toward the developing world to replace increasingly hostile Western partners. 

Despite its huge economic weight, Beijing still regards itself as the “largest developing country in the world” and leverages this narrative to strengthen its ties with emerging economies, which are more interested in the potential economic benefits of partnering with China than concerned about its geopolitical aspirations.   

Accelerating Technological Self-sufficiency 

During the 20th National Congress of the Communist Party, Beijing made it a top priority to pursue technological self-sufficiency, part of the CCP’s plan for “the nation’s advancement through science, technology, and education.” With the United States increasing efforts to restrict China’s access to semiconductors, which are crucial components for technological development, the need for self-reliance has become even more pressing for China. 

Trade data shows that China is taking steps forward in building up its semiconductor capacities, with a decline in both the volume and value of semiconductor imports observed in 2023. According to official data, China imported a total of 479.5 billion integrated circuits units worth $349.4 billion last year – a decrease of 10.8 percent by volume and 15.4 percent by value from the previous year. While the declining demand for semiconductors can be partly attributed to the economic challenges faced by the nation, including domestic issues and increasing pressure from the United States to restrict Chinese access to advanced technologies, it is also clear evidence of how the country is pushing to reduce its dependence on Taiwan and other Western allies for one of the most critical inputs. 

If on one side China imported fewer microchips, on the other its imports of semiconductor manufacturing equipment increased by 14 percent in the same year, reaching almost $40 billion. Chinese enterprises rushed to purchase lithography machines for microchip production from the Dutch company ASML, which has now agreed to comply with U.S. constraints that limit Beijing’s ability to access cutting-edge semiconductors. These same restrictions have pushed China to invest heavily in producing chips locally, and now it can import fewer of them.  

China Is Still the King of Manufacturing

Despite being a period of great transformation, with new patterns under development in the trade realm and beyond, there are still some certainties. Among these is China’s continued status as the world’s leading exporter of manufactured goods, despite facing domestic and international upheavals. Still, Beijing’s manufacturing surplus remained largely unchanged in 2023. It now accounts for approximately 2 percent of the global GDP, showcasing sustained export strength across various crucial sectors.

China’s unparalleled dominance in clean technology remains untouchable. China manufactures 80 percent of the world’s solar panels, a significant portion of solar wafers, and the majority of inputs essential for solar panel production. China not only surpasses all others in wind turbine production but also supplies the majority of components utilized by other turbine manufacturers. 

However, the standout revelation of 2023 was China’s ascension as the world’s largest car exporter, surpassing Japan. According to the China Association of Automobile Manufacturers, China’s auto exports surged by 63.7 percent in 2023, totaling 4.1 million units. While considerable attention has focused on BYD – the Chinese electric vehicle manufacturer – outperforming Tesla, a significant part of these exports is underpinned by vehicles powered by gasoline or diesel.  The main driver behind the automotive export surge was Russia. As European and Japanese manufacturers retreated from the Russian market due to the conflict in Ukraine, China swiftly moved to fill the void. Beijing exported 840,000 vehicles to Russia in the first 11 months of 2023, encompassing trucks, buses, and passenger cars. 

Considering these developments, Chinese ambitions remain lofty, extending to increasing exports of aircraft, trains, ships, automobiles, and electronics.