General

With weak foreign demand and declining foreign trade orders, how can China's foreign trade break through in 2023? Words such as absorbing foreign capital and expanding the international market may constitute the key words for stabilizing China's foreign trade this year.

According to the latest data released by the Ministry of Commerce, in 2022, the scale of China's foreign trade exceeded the 40 trillion yuan threshold for the first time. This means that against the backdrop of the volatile global economic and trade environment, China's foreign trade has withstood multiple pressures exceeding expectations and achieved stable growth.

However, it is worth noting that in 2023, the rising risk of global economic recession and the sustained slowdown in external demand growth will still be a severe test for China's foreign trade. According to the new issue of the World Economic Outlook released by the International Monetary Fund (IMF), global economic growth is expected to slow to 2.9% in 2023 from an estimated 3.4% last year. According to the World Trade Organization (WTO) report, currently, foreign trade orders continue to decline, air transportation conditions have not yet returned to normal levels, and container throughput is not ideal, slightly below the trend value. The global commodity trade volume may only increase by 1% in 2023, a significant decrease from the 3.4% previously predicted.

In this regard, Wang Xiaosong, a professor at the School of Economics of Renmin University of China, believes that although China's foreign trade will face multiple uncertainties such as an increase in the number of protectionist measures and the continued negative impact of the epidemic on trade in 2023, it should also be noted that the superposition of the construction of the "the Belt and Road" and the implementation of RCEP is conducive to the development of regional trade. In addition, a solid foundation of the manufacturing industry, deep integration into the global value chain, and sufficient investment in research and development in key industries are all favorable factors for China's foreign trade development.

The weakening of foreign demand and the decline of foreign trade orders have become the main contradiction in China's foreign trade at present

Entering 2023, facing multiple uncertainties, the global economic and trade situation is grim and complex.

On February 22nd, at the China Macroeconomic Forum (CMF)'s Symposium on Macroeconomic Hot Issues (Issue 60), Wang Xiaosong pointed out that the global economic and trade situation is the overall environment facing China's foreign trade. Both IMF and WTO forecast data are lower than last year, and the overall growth of the world economy is slow. Exports from Africa and the Middle East are likely to have negative growth, while imports from North America and the EU may also have negative growth, This may mean that demand in advanced economies may contract this year.

Wang Xiaosong took a specific market as an example to analyze and point out that as of January this year, the throughput of the two important ports in the United States, Los Angeles Port and Long Beach Port, has been declining. In the past, China's product exports to the United States were mostly located on the west coast. However, based on current data, its throughput is even lower than the normal situation in previous years, so the import demand situation in the United States is not very ideal.

In addition, he added that the eurozone economy continued to suffer from a downturn, with the capacity utilization rate falling continuously in January, reaching just around 16%; The growth rate of trade in the euro area has been declining, and both the year-on-year growth rate of imports and exports have been fluctuating. Until now, foreign trade orders have declined significantly.

Cheng Shi, chief economist of ICBC International Securities Research Co., Ltd., believes that although the global economy has experienced very significant short-term growth and rebound in the post epidemic era, and the global supply chain is rapidly recovering, there is still a certain distance from a new round of prosperity. We need to look at the current objective state of the global economy on the long-term dimension.

"Entering 2023, the global economic and trade situation has become extremely severe, and the downward pressure has significantly increased. The main contradiction in China's foreign trade sector, from the supply chain obstruction and insufficient contractual capacity last year, has shifted to the current weakening of foreign demand and the decline in foreign trade orders." Recently, at a press conference held by the Information Office of the State Council, Li Xingqian, Director of the Department of Foreign Trade of the Ministry of Commerce, said.

Guo Lei, chief economist of GF Securities, pointed out that this year's foreign trade trend of China will present a trend of "low in the front and high in the back". The whole year may not be too high, but it is better than the expectation at the end of last year. The overall trend may be "down first and then up", with the pressure mainly in the first quarter.

The long-term trend of China's foreign trade will not change

Although there are explicit variables in the foreign trade environment facing China, many experts who spoke at this online seminar said "there is no need to be too pessimistic.".

"China's foreign trade situation this year is not pessimistic." Yu Miaojie, president of Liaoning University, predicted that the total import and export volume this year will be close to 50 trillion yuan, and the trade surplus will reach 6 trillion yuan. Foreign trade will still be the most important driving force for economic growth. He explained that, on the one hand, demand may not be really weak, and the economy in the dollar zone has stabilized, not as bad as expected; On the other hand, after the release of the epidemic, the engine of supply has been fully started, which will drive the sustained growth of China's exports.

Liang Ming, Director of the Foreign Trade Research Institute of the Research Institute of the Ministry of Commerce, also pointed out in his speech that under the simultaneous impact of the supply side and the demand side, China's exports fell significantly year-on-year in the fourth quarter of last year, but there was a year-on-year decline on a monthly basis. From a historical perspective, this is not a rare phenomenon, but a normal fluctuation in foreign trade. The year-on-year decline in a single month is a cyclical dislocation effect, which does not mean that the future trend will deteriorate. In addition, based on the overall situation analysis, China's foreign trade advantages and competitiveness have not changed, and the long-term trend for improvement will not change.

Liang Ming also stated that 2022 was an abnormal year for China's foreign trade. After the epidemic was released, the adverse factors basically disappeared, which will support the stable growth of foreign trade this year. The demand in the international market has not slowed significantly, and the dependence of foreign countries on Chinese goods is still increasing. China's export share is still likely to rise further. The significant growth of China's exports to countries and regions such as South Korea, India, Malaysia, etc. has made up for the decline in exports to the United States, thereby achieving a stable total volume.

"The country will introduce relevant policies in the areas of supply and demand docking, trade promotion, domestic and foreign trade integration, financial policies, and response to sanctions, so there is still relatively large space for the development of China's foreign trade." Liang Ming expressed optimism about the foreign trade situation this year. He admitted that, on the whole, if there were no major Black Swan incidents this year, China's foreign trade would achieve rapid growth, with a growth rate of at least 2%. If the situation is good, it could even reach 5%.

The Path to Breakthrough in Foreign Trade

In the post epidemic era, the global economic recovery is still in the slow recovery stage, but the more common view is that "demand may slow down this year, but demand will still exist.".

When discussing the path of China's foreign trade breakthrough, Wang Xiaosong suggested making full use of the policy dividend of RCEP to promote the implementation of relevant measures of RCEP throughout the country. At the same time, continue to optimize customs clearance processes and improve customs clearance efficiency. He believes that service enterprises should seize the opportunities of RCEP, make full use of various preferential policies, and help enterprises develop the RCEP market.

In Yu Miaojie's view, expanding imports is also one of the ways to break through. He pointed out that we should continue to reduce tariffs, abolish non-tariff barriers, and reduce trade costs. Enterprises should seize the opportunity to expand the import of core components and high-quality intermediate products.

Cheng Shi believes that at this stage, the digital economy is booming and the globalization of service trade is constantly advancing. In this process, China has great potential. He also pointed out that the Greater Bay Area of Guangdong, Hong Kong, and Macao is one of the regions with the highest degree of openness in China. The Greater Bay Area of Guangdong, Hong Kong, and Macao should be used as a platform to tap the new potential of China's foreign trade, promote strong chain replenishment, and accelerate the integration of industrial chains and supply chains. At the same time, we should cultivate new "small giants" that specialize in specialized and specialized industries, activate the vitality of small and medium-sized enterprises in the industrial chain, promote the evolution of enterprises towards a new direction of specialized and specialized industries, optimize the industrial layout, and enhance the resilience of China's industrial chain.

At the seminar, Liang Ming revealed that the Ministry of Commerce is studying a new round of policies to stabilize foreign trade through reserves, and China will introduce relevant policies in the areas of supply and demand docking, trade promotion, integration of domestic and foreign trade, financial policies, and response to sanctions. "This year, we will also strengthen the development of new forms and models of trade, such as further expanding and cultivating foreign trade entities, focusing on new energy vehicles, lithium batteries, photovoltaic and other new products with distinctive advantages, and further stimulating the vitality of foreign trade," Liang Ming said.