Business
Foreign trade enterprises seize opportunities for recovery
By Li Xiaoyang  ·  2023-04-23  ·   Source: NO. 17 APRIL 27, 2023
Colombian merchants learn about vehicle parts produced by a Chinese company at the Canton Fair in Guangzhou, Guangdong Province, on April 15 (XINHUA)

Sarwar Mohhamad, a merchant from Iraq, once again traveled to China this year to attend the China Import and Export Fair in Guangzhou, Guangdong Province. Without hesitation, he ordered 2,000 gas stoves and range hoods—altogether worth roughly 600,000 yuan ($87,085).

The products are manufactured by Zhongshan Meilong Electronic Co. Ltd. based in Zhongshan, Guangdong. "Our company focuses on the production of gas stoves and range hoods. As of April 19, our last day at the fair, some 300 clients, old and new, had contacted and visited us," Shelia Zhong, who works in the company's sales department, told Beijing Review.

The China Import and Export Fair, also known as the Canton Fair, takes place twice a year in Guangzhou. Its 133rd session kicked off on April 15 and will run until May 5 in three phases. Meilong Electronic was attending the event for its eighth consecutive year.

After taking place largely online since 2020 due to the COVID-19 pandemic, the fair this year has again provided an on-site platform for Chinese manufacturers as well as international vendors and buyers to conduct exchanges.

The first phase of the 133rd session, from April 15 to 19, comprised 20 exhibition areas for categories including household appliances, building materials and bathroom products. It attracted 12,911 companies to participate in the offline exhibition. Of these, 3,856 are new exhibitors. According to the organizers, 67,000 foreign visitors had signed up for the offline activities on the opening day alone.

Trade growth

The latest Canton Fair session offered a panoramic view of China's foreign trade, which is en route to recovering from the pandemic impacts. According to the General Administration of Customs of China (GACC), China's total goods imports and exports expanded 4.8 percent year on year to 9.89 trillion yuan ($1.4 trillion) in the first quarter (Q1) of 2023, up from a decline of 0.8 percent in the first two months of the year.

In the first three months, China's exports improved 8.4 percent year on year to 5.65 trillion yuan ($819 billion), while imports went up 0.2 percent to 4.24 trillion yuan ($615 billion).

The country's trade with its partners under the Belt and Road Initiative, which China first proposed in 2013 to boost connectivity along and beyond the ancient Silk Road routes, rose 16.8 percent year on year, while that with other members of the Regional Comprehensive Economic Partnership (RCEP) grew 7.3 percent in Q1. The RCEP is a free trade agreement between the 10 member states of the Association of Southeast Asian Nations (ASEAN) and five partners—Australia, China, Japan, New Zealand and the Republic of Korea.

During this period, the exports of green products, including photovoltaic cells, lithium-ion batteries and electric vehicles, rose 66.9 percent year on year. They contributed 2 percentage points to overall export growth. Exports of vehicles, home appliances and other electrical and mechanical products have rebounded.

Wen Bin, chief economist at China Minsheng Bank, said the foreign trade performance in Q1 could be attributed to China's expansion of exports through the Belt and Road Initiative, and the RCEP. The exports of electronic products expanded courtesy of growing demand across Asian, African and Latin American and Caribbean (LAC) countries.

"The diversity of Chinese exports, ranging from labor-intensive goods and raw materials to hi-tech products, is another reason for the [foreign trade sector's] strong resilience," he told Beijing Review.

Hitting restart

Established in 2019, Meilong Electronic focuses on overseas markets, including the LAC and Middle Eastern countries. Its location in Guangdong, a major manufacturing and foreign trade hub in China, has certainly helped it grow bigger faster.

When factories in some other countries suspended all operations due to COVID-19, many manufacturers based in China started receiving more orders than ever before. As Zhong presented, over the past three years, the company's output actually doubled—despite pandemic impacts. In 2020-21, its annual export volume improved by around one third of the previous level, which stood at about 100 million yuan ($14.5 million).

Zhong believes the LAC market has great potential and Mexico is home to the largest number of the company's clients. Mexican merchants have purchased around 150,000 gas stoves annually in recent years.

"Our products are more convenient than what consumers in many countries used to have in their houses and they also give their kitchens a more stylish look," Zhong said.

Panama and the Dominican Republic are next on the company's target list and it also intends to participate in international trade exhibitions in Brazil soon. "Meanwhile, we have also begun exploring the Russian market this year," Zhong said.

The company has benefited from China's preferential tax policies for exporters. According to Zhong, Meilong Electronic receives a tax refund whenever exporting products. These refunds in turn cover some of the company's purchasing costs, e.g., those of materials and components.

Last year, tax refunds and cuts for foreign trade companies in China totaled 285 billion yuan ($41.3 billion).

The company's export orders dropped slightly in Q1 of this year from a year earlier. "But we are still confident business will improve this year. Prices of marine transportation have declined from the previous two years and clients will see lower logistic costs which will translate into more orders and more profits," she said.

As more and more Chinese tech companies have firmly positioned themselves in the global market, foreign trade companies are embracing more and more advanced products. Guangdong Jaten Robot & Automation Co. Ltd. attended the Canton Fair for the first time this year. You Jianwen, the company's marketing director, told Xinhua News Agency that the company had been mainly producing a type of polymer composite material used in electronic products such as computers and mobile phones for the past two decades. Only in recent years has it upgraded its manufacturing chains and shifted to automated products.

"As of April this year, the export orders of our companies had increased 15 percent year on year. We hope that by attending this fair, we can expand our global business," You said.

What lies ahead

In previous months, the empty shipping containers stacked up at Chinese ports attracted a lot of (inter)national coverage. As Yu Jianhua, Minister of the GACC, told a news conference on March 20 that this phenomenon was due to the overproduction of new containers during the pandemic. Low storage costs at domestic ports and the quick turnaround of empty containers due to eased pandemic restrictions worldwide were two more reasons.

The large number of containers ready for use shows the global market's confidence in China's export capacity in the period to come, Yu said.

According to Wen, China's exports of several technological products remain constrained due to some countries' so-called security concerns. The country's foreign trade also still faces uncertainty generated by banking turmoil in the U.S. and some European countries.

"But the external pressure has driven the upgrading of China's industries. With industrial competitiveness and resilience, China is expected to see rising exports in the following months and external demand will likely contribute more to its economic growth than expected this year," Wen said. 

(Print Edition Title: The Target: Trade)

Copyedited by Elsbeth van Paridon

Comments to lixiaoyang@cicgamericas.com

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