Healthy 2023 trade rests on many factors

Many people are saying that global market demand is declining sharply, but such an assessment does not necessarily reflect the truth. What is certain is that global market demand growth is slowing, but overall demand is not declining sharply.

The World Trade Organization predicts that global trade in goods will grow 1 percent from a year earlier in 2023. However, if we consider price factors, it is possible for global trade to achieve an annual growth of 7 to 8 percent this year, which is not low compared with recent years.

Currently, global market demand is merely slowing in some sectors. The growth potential for China's exports is still very large if we properly handle the situation, despite demand for some products from some countries facing saturation.

Many Chinese products' shares in global export markets rose in 2022, even though China's exports declined in the fourth quarter. Based on statistics released for the first 11 months, major importers worldwide all saw their imports grow by double digits.

Although there were price factor influences, no signs showed a sharp slowdown in demand. On the other hand, figures in this regard did have some monthly or quarterly growth slowdowns last year, but that was due to other factors and did not represent full-year trends.

Based on import data released by 71 countries, China's share in their import markets in 2022 declined slightly by 0.6 percentage point. If we exclude data from oil and natural gas trading, China's share in their import markets actually rose, and their reliance on Chinese products, in particular mechanical and electrical products, increased.

For instance, the share of mechanical and electrical products imported from China by 71 countries increased from 21.9 percent to 22.2 percent. The corresponding figure for high-tech products from China rose from 20 percent to 22 percent, while that for seven categories of labor-intensive products imported from China also increased, albeit slightly, to 30 percent, despite Vietnam's share growing significantly.

China accounted for nearly 75 percent of global imports of computers, while the figure for new energy-related products, including new energy vehicles and lithium batteries, also surged.

Demand growth for China's products is slowing, but overall demand is still expanding. Based on my experience in studying foreign trade for many years, I think as long as demand in the international markets is on the rise, China's foreign trade will grow.

Last year, due to persistently high prices of oil and natural gas, the share of Chinese goods among exports worldwide may have experienced a slight decline from that in 2021, which was 15.1 percent.

That is because the share of oil and gas in international trade in 2022 increased to challenge the shares of other goods and commodities, and China is not a big oil and gas exporter. In 2023, however, I think China's share in global exports is likely to further increase.

As for Sino-US trade, data released by China showed its share among US imports has been declining since 1999. In 2022, the figure hit a historic low of 16.1 percent, while the share of US products in China's imports also decreased to 6.5 percent from 11.8 percent in 1999.

Data from the United States also showed a clear trend that since 2017, the share of China's products in US imports has plummeted by around 5 percentage points, while the share of US products in China's imports also decreased.

From the perspective of foreign direct investment, although the value of FDI from the US into China increased in 2022, the share of US FDI in China's overall FDI decreased to 1.6 percent in 2022 from 1.9 percent in 2017. The same is true of China's outbound direct investment in the US.

However, despite additional US tariffs on Chinese products, China's exports remain stable.

The country's exports to South Korea, India, Malaysia, Singapore, Indonesia and Regional Comprehensive Economic Partnership countries have all increased significantly, with the increase making up for the decline in Chinese exports to the US to stabilize China's overall exports.

Despite the fact that US imports from the European Union are growing faster than its imports from China, we cannot say that the US and the EU have closer trade ties. That is because the main items the US imported from the EU last year were pharmaceuticals due to the pandemic.

US imports from China, such as mobile phones, toys, video game consoles, storage batteries, motor vehicles and others, are still growing.

It is true that many Chinese products' shares in US import markets are declining, but the size of Chinese exports to the US remains huge. And there are no trade orders from other countries leaving China, as China's share in other countries' import markets is still growing.

Last year saw a negative impact on China's foreign trade, while US' decoupling efforts also created an unfriendly environment for China's foreign trade. Yet China's foreign trade last year stood at more than 40 trillion yuan ($5.8 trillion), showing strong resilience.

We are studying ways to prepare some new foreign trade policies, and some experts suggested China seize growing opportunities arising from emerging markets' import expansion amid their economic recovery.

While stabilizing the scale of exports to the US, it is also necessary to actively restore Hong Kong's role as a "super-connector" to shore up an increase of foreign trade.

Our exports to Europe are expected to further expand, and some RCEP countries and Belt and Road-related economies will account for considerably increasing shares of China's exports. We are studying relevant strategies to expand exports to these countries and regions in the next step.

This year, we should also intensify efforts to fuel the development of some new trade formats and models in order to strengthen and cultivate market entities in foreign trade while stimulating the vitality of foreign trade market entities.

We have advantages in products like new energy vehicles, lithium batteries and photovoltaics and should further expand exports of such goods. Amid the trend of electrification and intelligence in the vehicle industry, such exports will enjoy considerable growth.

We will also introduce relevant policies to match supply and demand, promote trade and integrate domestic and foreign trade as well as launch new financial policies and sanction responses to assist enterprises to actively tap the potential of offshore markets.

Last year, we faced great challenges in the export sector because of pandemic-related disruptions. If there are no major "black swan" or "gray rhino" events this year, I think China's foreign trade will achieve relatively rapid growth.

Personally, I believe that if there is no major external risk, China's foreign trade will grow 2 percent on a yearly basis, and if the situation is favorable, the growth rate could be around 5 percent.

The writer is director of the Institute of International Trade under the Chinese Academy of International Trade and Economic Cooperation. The article is based on his speech at a seminar held by the China Macroeconomy Forum, a think tank.

The views don't necessarily reflect those of China Daily.