globalEDGE Blog: How China Keeps Pushing Forward Through Export Slump

How China Keeps Pushing Forward Through Export Slump

File under: China, Exporting,

China has long-held a reputation of being one of the world’s top exporters. 2007 World Bank Figures amount China’s exports to around $1.22 trillion, or 37% of its GDP. It is the 2nd largest exporter in the world behind Germany, and is currently number one on globalEDGE’s Market Potential Index Market Growth Rate. The annual growth rate of China’s exports had traditionally been around 25 percent, although effects from the current economic downturn now project these numbers dropping to a modest 10 percent. So with a 15 percent drop, how can it expect to satisfy previous GDP growth expectations?

The answer for China lies in intellectual capital. In 2006, the Chinese government unveiled the 11th five-year plan, which was designed to begin building for China a competitive advantage in the areas of science, technology, and innovation, rather than focusing solely on cost efficiency. Results of these policies are already being realized. Chinese exports to India, for example, comprise capital commodities based in the technological sector, such as power plants and other infrastructure equipment, and most of the aspects that cause them to be valued for importers are added within China.

Furthermore, the simple fact that China is such a large exporter has also created much intellectual capital as a byproduct. The large volume of trade has taught Chinese managers which products to produce for various world markets, the most efficient way to produce them, how to build responsive supply chains for overseas customers, as well as typical managerial duties, like managing the thousands of workers who produce such exports.

Thus, although China’s export growth rate is expected to decline, Chinese know-how will continue to boost domestic productivity, and although the quantity of exports won’t be growing at the rate it previously was, the quality of Chinese exports is expected to rise, and by targeting the right markets, China should certainly continue its rise to global economic dominance.
 

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