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quarterly update

Cautious optimism about condition of Chinese exports

Louis Kuijs's picture

We cannot be too optimistic on China’s exports, even though we think the country’s competitiveness is still strong. Image credit: scobleizer at Flickr under a Creative Commons license.
As we were looking at recent developments as background for our China Quarterly Update, which was released yesterday, we had to make up our minds about how well China’s exports are doing. This was necessary because there are conflicting answers to this question. On the one hand, we are reading many reports from the coastal provinces, Guangdong in particular, about how bad things are there in the export industries, with factories closing and migrant workers going back to rural areas. On the other hand, the data on overall export developments suggests exports have held up reasonably well so far, with overall exports in real terms still far outgrowing overall world import growth, implying continued gains in global market share for China (see left hand figure below).

An important part of the answer lies in the fact that the export performance differs markedly between sectors. Exports of light manufacturing products, such as textiles and toys, are by now lower than a year ago in real terms (see right hand figure below), while real exports of (higher value added) machinery and equipment are still growing by over 30 percent year-on-year. Exports of light manufactures have been hit by cost increases as well as weak overall foreign demand—which matters a lot because China now produces the bulk of global production in certain sectors, such as toys. On the other hand, China’s exports of machinery and equipment still occupy modest market shares globally, and China’s strong underlying competitiveness means that its exporters can continue to gain market share even in more challenging global circumstances.

Anxiety and hope in Guangdong, China

David Dollar's picture

A large number of export-oriented processing firms have already closed in Guangdong, the heart of China’s export machine. Image credit: lylevincent at Flickr under a Creative Commons license.
I visited the Pearl River Delta in Guangdong this week, the heart of China’s export machine. A large number of export-oriented processing firms have already closed in Guangdong in sectors such as toys and footwear. Of course, firms close all the time in market economies, while others start up. This churning is part of the normal cycle in a market economy and is one of the key sources of productivity growth. Less productive firms die off while the successful new firms have especially rapid productivity growth. As the global economic crisis hits China, it is hard to keep track in real time of the balance of closings and openings.

Entrepreneurs and local officials here are certainly aware that demand for China’s exports has dropped sharply, and they wonder when the global economy will pick up again. Still, at the same time I was impressed at how many see this as an opportunity for China to pursue its rebalancing agenda. These discussions took place at a workshop in Jiangmen on Investment Climate, Innovation, and Industrial Transfer. The phrase “industrial transfer” refers to the fact that the most labor-intensive activities are moving away from the highly successful coastal cities, either to inland China, or other countries (Vietnam, Bangladesh) with lower wages.

China’s economic slowdown—what to do?

Louis Kuijs's picture

The World Bank released the China Quarterly Update —of which I’m the lead author, full disclosure here-- today at a press launch in our Beijing office. The economic journalists noticed that the Bank’s projection for GDP growth in 2008 is now 9.8 percent, more than 2 percentage points lower than the outcome in 2007.

Is China de-linking from the U.S. economy?

David Dollar's picture

The year 2007 was an important milestone in modern economic history.  While the U.S. grew well, China contributed more to global GDP growth than the U.S. did.  That pattern is likely to continue for the foreseeable future.  Roughly speaking, the U.S. economy is about four times the size of China’s.  If the U.S.

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