It has become fast the new jargon, China´s “new normal”, an economic growth on a lower level. But a fast-dropping export could still hurt the country´s economy severely, warns financial analyst Sara Hsu in the Diplomat. If it realizes its restructuring agenda, that might change, but that is still an “if”.
U.S. exports to and imports from China decreased in February, falling by 14 percent and 8.7 percent, respectively. Imports of automobiles and auto parts from China fell by 22 percent. U.S. imports from China were down by 8 percent in March. Japanese exports to China also slowed, contracting by 17.3 percent year on year in February and 24.8 percent in March.
While it is a myth that China’s growth relies mainly on the production of exports, exports do contribute about 26 percent to China’s GDP growth, so that a slowdown in exports has a moderate to strong impact on GDP. The numbers directly impact GDP, and also generate anxiety among market makers about China’s economic future; for example, the Australian dollar fell almost 1.5 percent on China’s trade news, since China is a large consumer of Australia’s natural resources. Despite assurances by China’s leadership that China’s slower expansion is a healthy sign of the “New Normal,” the markets appear not to be fully convinced by this.
China’s future hinges in large part on its restructuring agenda. As such, China is attempting to move up the export value chain, and has increased exports of technology-intensive goods such as smartphones and transportation vehicles. While most of China’s high-tech export products are assembled rather than fully produced in China, home-grown technology companies are being encouraged. High-technology manufacturing will, over time, result in higher-paid jobs, higher value of production and exports, and commercial innovation. This will hopefully increase China’s export value, in time. In the short run, until China’s economy bottoms out, Europe really rebounds, and the dollar slows its ascent, we may see more surprises in the trade figures. Beijing will no doubt be hoping they won’t be as shocking as they were this time around.
Sara Hsu is a speaker at the China Speakers Bureau. Do you need her at your meeting or conference? Do get in touch or fill in our speakers´ request form.
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