To consolidate the resilience of foreign trade development, we should continue to improve the level of digitalization and service-oriented

Chen Hongna

According to customs statistics, in the first quarter of this year, the total import and export value of mainland trade in goods was 10.17 trillion yuan, a year-on-year increase of 5%. Among them, exports were 5.74 trillion yuan, up 4.9 percent year-on-year, and imports were 4.43 trillion yuan, up 5 percent year-on-year. The scale of import and export of goods trade in mainland China exceeded 10 trillion yuan for the first time in the same period in history, and the growth rate of import and export hit a new high in six quarters.

The resilience of foreign trade comes from many achievements

The reason why the mainland's foreign trade has been able to show strong resilience is mainly due to the good interaction between the government and the market, and the adjustment, optimization and development breakthroughs of enterprises in multiple dimensions such as product structure, market structure, and trade model.

From the perspective of new growth points, the development momentum of mainland vehicle and ship manufacturing has been further consolidated. As a concentrated embodiment of new kinetic energy, in 2023, the mainland's exports of the "new three" products such as electric manned vehicles, lithium-ion batteries and solar cells will total 1.06 trillion yuan, breaking the trillion yuan mark for the first time, a year-on-year increase of 29.9%, and automobile exports will cross two million steps on the basis of 3.111 million units in 2022, reaching 5.221 million units, a year-on-year increase of 57.4%. According to data released by the United Nations Conference on Trade and Development, in 2023, the surplus of mainland vehicles and their parts will increase by about US$53 billion, a year-on-year increase of 75%, and the surplus of ships will increase by about US$8 billion, fully reflecting the international competitiveness of mainland vehicle and ship manufacturing.

From the perspective of product structure, the trade of intermediate goods has been elevated to a higher development status. From last year's Central Economic Work Conference to this year's National People's Congress and the National People's Congress and the National People's Congress, the expansion of trade in intermediate goods has been mentioned many times. The greater emphasis on trade in intermediate goods stems from a deep understanding of the changes in the mainland itself and the situation at home and abroad. From a domestic point of view, the mainland's comparative advantages in participating in the international division of labor and carrying out international trade have changed, from the cost advantages of labor, land and other factors to strong supply chain supporting capabilities and system advantages, and the improvement of the status of intermediate goods trade is an important manifestation. According to the data, China has been the world's largest exporter of intermediate goods for 12 consecutive years, and is a key "hub" in the global value chain. Since 2015, the global share of mainland exports of intermediate and capital goods has increased. From an international point of view, with the change of the mainland's comparative advantages, it is an inevitable trend for the low-end industries to gradually shift outward, but the mainland still has obvious competitive advantages in the medium and high value-added production links.

By carrying out intermediate goods trade and deeply embedding themselves in the supply chain, we can continue to benefit from the process of globalization even if the trade status of final goods declines, and the increase in intermediate goods exports can offset the impact of the decline in final product exports to a certain extent. For example, between 2018 and 2022, the average growth rate of mainland textile product exports was 6.4%, far exceeding the growth rate of clothing exports by 2.1%. A study based on value-added analysis found that the actual dependence of the U.S. manufacturing industry on the mainland was nearly four times that of customs statistics. This dependence along the value chain means that any attempt to "de-risk" China will only lead to higher risks and uncertainties. Therefore, in the new wave of industrial transfer, multinational companies have adopted the "China+1" model to continue to benefit from China's huge supply chain system.

From the perspective of the market structure, the diversification strategy has made significant progress. Relying on the mainland's successful major power diplomacy in emerging economies such as the "Belt and Road" countries, BRICS, ASEAN, and Central Asia, "Made in China" has been relatively smooth in exploring emerging markets. In 2023, the mainland's imports and exports to the Belt and Road countries will reach 19.47 trillion yuan, a year-on-year increase of 2.8%, accounting for 46.6% of the total import and export value, ASEAN will maintain its position as the mainland's largest trading partner for four consecutive years, with a trade scale of 6.41 trillion yuan, and imports and exports to Latin America and Africa will increase by 6.8% and 7.1% respectively.

From the perspective of trade patterns, the vitality of cross-border e-commerce continues to emerge. According to data released by the General Administration of Customs, in 2023, the total import and export volume of cross-border e-commerce in mainland China will be 2.38 trillion yuan, a year-on-year increase of 15.6%. If we take into account that many cross-border e-commerce goods are actually exported in the form of general trade, according to market statistics, the proportion of cross-border e-commerce exports in the mainland's foreign trade exports has exceeded 40%. This achievement can be seen from three levels: first, cross-border e-commerce in the mainland is not only the digitization of trade, but also the digitization of industry, but also the product of trade and industry real connection and mutual integration, and the mainland has greatly enriched the connotation and extension of cross-border e-commerce. Second, the mainland's current development achievements are the result of the gradual maturity and concentrated explosion of capabilities in all fields, reflecting the mainland's comprehensive competitiveness. For example, high-quality and low-cost goods are backed by a strong manufacturing foundation, "small orders and quick returns" test the ability of the supply chain to respond quickly, the bridge to promote the goods is a diversified e-commerce platform system, logistics, especially overseas last-mile transportation to a certain extent, is also the output of the mainland's e-commerce express experience, and new technologies such as large language models will further activate the e-commerce ecology in the future. Being able to open up and continuously optimize these different links is the most powerful support for the rapid development of the mainland's foreign trade. Finally, active guidance from the government is also indispensable. In recent years, the mainland has carried out a lot of reform and innovation in fiscal and taxation, customs clearance facilitation, foreign exchange and other policies, and has continuously optimized the policy environment for the development of cross-border e-commerce.

To cope with the challenges, we must continue to consolidate the resilience of foreign trade development

Of course, while seeing the development achievements, the impact of external risks mentioned in this year's "Government Work Report" cannot be ignored. Taking the changes in the surplus and deficit of various industry sectors as an example, first, affected by economic, non-economic and other factors, some industrial processing and assembly links have moved out, which is ultimately manifested in the reduction of the surplus scale in individual fields, such as the surplus of electronic equipment and its parts decreased by about 36 billion US dollars, and the surplus of textiles, clothing, shoes, hats and accessories decreased by about 34 billion US dollars; Under the influence of cyclical factors such as inventories, the surplus of furniture and bedding has decreased by nearly $10 billion; third, integrated circuits are the mainland's largest import commodity, and the number of imports has dropped sharply due to the export controls of individual upstream countries and the weak consumption of downstream electronics, and the scale of the deficit has decreased by about $48 billion. Industry-specific factors and the impact of foreign trade entities delaying export settlement and sales in order to avoid RMB exchange rate risks, the mainland's trade surplus in goods in 2023 will decrease by about US$48 billion compared with 2022.

In 2024, in the face of the external environment where strategic opportunities and risks and challenges coexist, it is necessary to maintain and consolidate the resilience of foreign trade development, continuously gather potential energy, and continue to make efforts in digitalization and servitization.

The first is to speed up the development of modern producer services and enhance the competitiveness of foreign trade with value-added services. Trade in goods is closely related to the development of trade in producer services, and the two affect each other. According to data released by the Ministry of Commerce, in 2023, the mainland's service trade deficit will be US$170.9 billion, an increase of US$130 billion from 2022, of which transportation will contribute US$84.2 billion to the deficit, which is the second largest source of deficit. This is mainly because the transportation related to the trade of goods is often led by overseas parties, resulting in the lack of dominance and pricing power of the mainland in the international transportation market. According to the data released by the United Nations Conference on Trade and Development, in terms of the proportion of global scale, mainland goods exports account for more than 14% of the world's total, but the global share of service exports is less than 6%, and there is a certain imbalance. In the future, we should promote the linkage development of trade in goods and transportation, intellectual property transactions, maintenance services, processing services, and supply chain financial services, and promote the transformation of commodities from "Made in China" to "Created in China" through the development of producer services, so as to help build a trade power.

The second is to enhance the driving role of the digital economy in the real industry and help the industry go overseas. For a long time in the past, although new formats and models such as cross-border e-commerce have provided new opportunities for traditional manufacturing enterprises to go overseas, they have served more as trade channels and have a limited role in driving the industry. According to the data released by Taotian Group, in 2023, there will be 50 industrial belts with a transaction volume of more than 10 billion yuan, distributed in coastal and inland provinces and cities, which is an important way to tap the new growth potential of foreign trade and help the inland opening up. In the future, cross-border e-commerce should move towards a new stage of integrated development of the trade end and the production end, and get rid of low-price competition and improve the benefits of going overseas by creating differentiated products, increasing brand premiums, and improving service value-added.

The third is to enhance the consistency of macro policy orientation, and play a good role in supporting the high-quality development of foreign trade. With the combination of the development of trade in goods and the transformation of economic digitalization, servitization and greening, the influencing factors will move from the border to the post-border, and from the flow of factors such as commodities, talents, and capital to institutional factors such as policy supervision. On the one hand, the mainland should strengthen the coordination and cooperation of domestic fiscal, monetary, industrial, scientific and technological, environmental protection and other policies, realize the integrated deployment and implementation of the innovation chain, industrial chain, capital chain and talent chain, strengthen policy coordination, and ensure that the same direction is exerted and form a joint force; on the other hand, it should take the initiative to connect with high-standard international economic and trade rules, steadily expand institutional opening-up, strengthen international cooperation in electronic customs declaration, customs data sharing, AEO mutual recognition, green and low-carbon development, and strive to optimize the international environment for the development of the mainland's foreign trade.

(The author is an associate researcher at the Foreign Economic Research Department of the Development Research Center of the State Council)