This article is from WeChat official account:Atom Think Tank-Tencent News (ID: AtomThinkTank) span>, author: Shi Xianjin, original title: “Weakening of Export Substitution Effect and Carbon Barrier: Advantages and Challenges of China’s Foreign Trade in the Post-epidemic Era｜Atomic Think Tank Exclusive”, the title picture comes from the vision China
Starting in the fourth quarter of last year, China’s imports and exports have grown beyond expectations. From January to April this year, this fast-growing foreign trade situation continued. However, due to the obvious epidemic factors behind this, market views worry that once the post-epidemic era is entered, the recovery of overseas production capacity will weaken the effect of China’s export substitution, and this foreign trade situation will not be sustainable.
But Shi Xianjin, an assistant researcher at the Institute of World Economics and Politics, Chinese Academy of Social Sciences, wrote an article to Tencent News·Atom Think Tank after rigorous calculations and pointed out: The recovery of overseas production capacity also shows that the global economy has begun to enter a normal track. The demand effect produced by the economic recovery may be far greater than the substitution effect on external capacity, and the demand recovery is for the overall product. The substitution effect under the epidemic may be more concentrated in medical supplies and “home economy” products. , Product substitution is relatively limited-therefore, after the epidemic is fully controlled, the proportion of COVID-19 material exports may fall to a large extent, but the development of consumption habits may consolidate the export momentum of the “home economy”.
Shi Xianjin also put forward a series of suggestions including the establishment of the “Global Green Economic and Trade Leading Group” by the Ministry of Commerce to consolidate China’s export advantages in the post-epidemic era and respond to the US trade and investment “carbon barriers.”
1. Reasons for the successful start of foreign trade
From January to April 2021, China’s foreign trade has achieved good growth results, with a total import and export volume of US$1.7895 billion, a year-on-year increase of 38.2%. Among them, exports were 973.7 billion U.S. dollars, a year-on-year increase of 44.0%, and imports were 815.8 billion U.S. dollars, a year-on-year increase of 31.9%. The growth momentum was even better than the same period in 2019 and 2018. The main reason is that under the impact of the epidemic, the massive increase in the export of epidemic-related medical supplies and “home economy” materials has driven overall export growth, and the timely and effective domestic epidemic prevention and control policies have consolidated overall imports by stabilizing effective domestic demand.
In order to gain insight into the source of growth in export trade, this article willIt is divided into three major categories: medical or protective materials closely related to COVID-19, “home economy” and other commodities other than the two, and analyzes the evolution trend of various commodity trade and proportions from 2000 to 2020.
The COVID-19 supplies include some medicines, medical supplies, medical equipment, and personal protective equipment; this article broadly defines the “home economy” as “electronic products such as home appliances, computers or tablets, office supplies, kitchen supplies, toys, and household goods , Pet supplies, fitness supplies, etc.”. Figure 1 shows the exports and their proportions of the two types of commodities: From 2011 to 2019, the proportions of these two types of products have been on the rise. Among them, the proportion of “home economy” has risen from 5.3% to 6.9%, and the proportion of COVID-19 supplies has risen from 1.4%. To 2.1%. Under the impact of the 2020 epidemic, the proportions of these two types of products have surged. The proportion of “home economy” exports has risen to 9.4%, which is 2.5% higher than in 2019, and the proportion of COVID-19 exports has risen to 4.8%, which is 2.7% higher than in 2019. In the past year, the increase in the proportion of exports of the two types of products exceeded the increase in the previous 10 years. However, if we remove these two types of materials and observe the exports and proportions of other commodities, as shown in Figure 2, from 2019 to 2020, exports of other commodities will fall from US$2.2744 billion to US$2221.1 billion, and the proportion will drop from 91.0% to 85.7%. The speed also dropped from -0.2% to -2.3%.
Observing the imports of three types of products, it is found that the epidemic in 2020 has not caused a significant impact on all types of products. Both the growth rate and the proportion are consistent with the trend two or three years ago, as shown in Figure 3 and Figure 4: COVID -19 Product imports have continued to grow since 2010, and their proportion has increased from 1.3% in 2010 to 3.1% in 2019, and to 3.4% in 2020. The 0.3% increase continues the situation in 2019, and the impact of the epidemic in 2020 The following has not changed significantly. Imports of materials for the “home economy” have also increased in the past, but their share of total imports has shown a downward trend since 2015, maintaining at around 1.4% in both 2019 and 2020. Since 2011, there has been no obvious increase in imports of other types of commodities, but the proportion has shown a declining trend. This declining trend is caused by the trend of COVID-19 products.
Figure 1 “Home economy” and COVID-19 material exports and proportions, data: calculated based on UN Comtrade data
Figure 2 Exports and proportions of other commodities, data: calculated according to UN Comtrade data
Figure 3 “Household Economy” and COVID-19 Material Import and Proportion, Data: Calculated based on UN Comtrade data
Figure 4 Imports and proportions of other commodities, data: calculated according to UN Comtrade data
Prediction of export trade trends in 2021
Although external demand has been hit hard, the “home economy” and the export of COVID-19 materials have shown an abnormal growth. After this part is discharged, we observe the export of other products and find that the export of other products is not showing a growth momentum, but With the decline of the global economy, it has fallen back.
Therefore, this article chooses a simple elastic forecasting method: first observe the actual elastic trend of other product exports to external demand, predict the actual growth rate of other product exports, and convert it into a nominal scale, and then set the “home economy” in the context And the changes in the proportion of COVID-19 materials, predict the growth rate and scale of China’s foreign trade exports in various scenarios. The actual elasticity of export growth of other products to external economic growth is shown in Figure 5:
Figure 5 The actual elasticity of other commodities to external economic growth, data source: calculated according to the data of the General Administration of Customs of China, IMF, the actual elasticity of other products exports=other The actual growth rate of product exports/the actual growth rate of the external world economy. The external world economic growth rate is the actual growth rate of global GDP excluding China’s GDP.
In order to more accurately predict the scale of China’s export of foreign trade commodities in 2021, the export of Chinese products will be divided into “home economy” products, COVID-19 products and other products, and three scenarios are defined to predict the trend of foreign trade this year: Scenario 1 is the global epidemic Completely controlled, the actual elasticity of other commodities can be restored to the level of 2019, and the proportion of “home economy” new crown epidemic products exports to the level of 2019; scenario two (benchmark Situation) is that the global epidemic is partially controlled and the world economy is gradually recovering. The proportion of exports of “home economy” products, the proportion of exports of new crown epidemic products, and the actual elasticity of other commodities are the average values of 2019 and 2020. Scenario 3 is that the global epidemic continues to be out of control, the actual elasticity of other commodities is still at the level of 2020, and the proportion of exports of new crown epidemic products in the “home economy” remains unchanged.
According to the above assumptions and methods, China’s total exports are directly determined by multiple factors: the actual economic growth of the outside world, the actual elasticity of exports of other commodities, China’s domestic inflation target, exchange rate fluctuations, the “home economy” and the proportion of exports of COVID-19 products, etc. . It should be noted that exchange rate fluctuations have a greater impact on China’s merchandise exports. The IMF predicts that the world growth rate will be 6%(priced in U.S. dollars) and domestic Growth rate 8.4%(denominated in RMB) Under given circumstances, exchange rate changes will affect the actual growth rate of the outside world(priced in U.S. dollars) will affect the established RMB inflation target (3%) in U.S. dollars The inflation index in turn affects the dollar-denominated nominal export growth rate, and exchange rate fluctuations will also affect the actual export growth rate through devaluation effects. The nominal growth rate of China’s export trade corresponding to the exchange rate in different contexts is (U.S. dollar denominated). The export trade forecast results are as follows:
First, when the epidemic is completely controlled (Scenario 1), if the actual export demand elasticity of other commodities is restored to 1.2 in 2019 In addition, the proportions of the “home economy” and the proportion of the epidemic product exports have also returned to their proportions in 2019: if the average exchange rate of the US dollar against the RMB in 2021 remains at the level of 6.5, the actual export growth rate will be -1.0%, nominal growth rate denominated in US dollars It will be 8.2%, and the nominal growth rate denominated in RMB will be 1.9%; if the exchange rate depreciates to 6.9, the actual export growth rate will be 0.5%, and the nominal growth rate denominated in US dollars will be 3.6%, denominated in RMB. The growth rate is also 3.6%; if the exchange rate depreciates to the 7.2 level, the actual export growth rate will be 1.7%, the nominal growth rate denominated in US dollars will be 0.4%, and the nominal growth rate denominated in RMB will be 4.8%.
Second, in the case of partial control of the epidemic, (Scenario 2, Baseline Scenario), if the actual elasticity of other commodities is restored to 2019 The average level of the year and 2020, and the proportion of the “home economy” and the proportion of exports of new crown epidemic products have also recoveredAverage level by 2019 and 2020: If the average exchange rate of the US dollar against the RMB in 2021 remains at 6.5, the actual export growth rate will be 0.4%, the nominal growth rate in US dollars will be 9.7%, and the nominal growth rate in RMB If the exchange rate depreciates to 6.9, the actual export growth rate will be 1.4%, the nominal growth rate denominated in US dollars will be 4.5%, and the nominal growth rate denominated in RMB will also be 4.5%; if the exchange rate depreciates to At the level of 7.2, the actual export growth rate will be 2.3%, the nominal growth rate denominated in US dollars will be 0.9%, and the nominal growth rate denominated in RMB will be 5.3%.
Third, if the epidemic continues to be out of control (Scenario 3), if the actual elasticity of other commodities is still 0.4 in 2020, The proportion of exports of “home economy” and COVID-19 products is the same as in 2020: if the average exchange rate of the US dollar against the renminbi remains at 6.5 in 2021, the actual export growth rate will be 1.6%, and the nominal growth rate in US dollars will be 11.1%. The nominal growth rate denominated in RMB will be 4.7%; if the exchange rate depreciates to the 6.9 level, the actual export growth rate will be 2.2%, the nominal growth rate denominated in US dollars will be 5.2%, and the nominal growth rate denominated in RMB will also be 5.2%. ; If the exchange rate depreciates to the 7.2 level, the actual export growth rate will be 2.6%, the nominal growth rate denominated in US dollars will be 1.3%, and the nominal growth rate denominated in RMB will be 5.7%.
II. China’s trade trends in the post-epidemic era
01 Trade reality in the post-epidemic era
The impact of the epidemic has had an asymmetrical impact on China’s “home economy”, COVID-19 supplies, and other product exports and imports: exports have surged while imports have a weak impact. If we select a country or region whose exports to that country or region account for 90% of total exports in 2020 as a sample, do a scatter diagram to analyze the growth rate of China’s exports to these countries or regions and the proportion of the country’s population infected by the new crown epidemic in 2020. It is found that the higher the proportion of the infected population in the export target country or region, the higher the growth rate of China’s exports to that country or region, and there is a significant positive correlation between the two, as shown in Figure 6:
Figure 6 Scatter plot of the proportion of COVID-19 infected population and the growth rate of exports to the country or region. Data description: The data on the new crown epidemic comes from WHO, exports The data comes from China Customs, sorted by the proportion of China’s exports, and 42 countries (regions) with a cumulative proportion of 90% are selected as samples, and samples of countries with small proportions and abnormal export growth rates are excluded.
Obviously, the favorable situation of China’s exports is related to the epidemic. As the epidemic subsides, the “home economy” and COVID-19 supplies may return to their previous trending levels. Market views worry that the recovery of overseas production capacity will weaken China’s export substitution effect. In fact, the recovery of overseas production capacity also shows that the global economy has begun to enter a normal track. The demand effect of economic recovery may be far greater than the substitution effect of external production capacity, and the demand recovery is for the overall product. The substitution effect may be more concentrated in medical supplies and “home economy” products, and product substitution is relatively limited.
It is worth noting that the proportion of exports of “home economy” and COVID-19 products has also continued to rise, and the growth rate before the epidemic has also maintained at about 10%. The impact of the epidemic on demand may need to be observed in the short and long term. In the short term, it will respond to acute demand such as medical supplies and other demand surges, or the replacement of production capacity, but in the long term, it may change the original consumption habits. Therefore, after the epidemic is fully controlled, the proportion of COVID-19 material exports may fall to a large extent, but the development of consumption habits may consolidate the export momentum of the “home economy”.
In addition, by observing the actual elasticity of other commodities to external economic growth in Figure 5, we find that since 2001, there has been obvious cyclical fluctuations, especially when the global macro economy suffers a large impact, the elasticity of other products will drop sharply. The economic recovery rebounded again, but after 2008, the elasticity was significantly lower than before, and after 2018, it began to show a cyclical downward trend. Therefore, to understand the future trend of China’s foreign trade exports, three realities may need to be recognized:
First, the convergence of growth has made the global value chain more loose, and the rise of regional growth poles has increased the cohesion of the regional value chain, so foreign trade may naturally shrink; second, the domestic aging problem has begun to become prominent, and labor costs The gradual rise will increase the cost of cross-border trade based on labor arbitrage. Under the constraints of “carbon peak” and “carbon neutrality”, production companies will alsoFaced with higher production costs, the increase in comprehensive production costs may accelerate the overseas transfer of export-oriented enterprises, and China’s export capacity may gradually decline in the future. Third, the impact of the rise of trade protectionism since 2018 and the impact of the epidemic last year have reduced the elasticity of other types of commodity exports to the actual growth of the external economy.
Therefore, after the epidemic subsides, one must face the consequent decline in exports of epidemic-related products such as COVID-19 medical supplies and the “home economy”, and second, the actual elasticity of other commodities to external growth will decline. Regarding future trade trends, what we can do at the policy level is to reduce non-systematic risks, and the systemic uncertainty brought about by the evolution of the global industrial chain is beyond our control.
In the future development of China’s foreign trade, the following potential risks need to be addressed: First, the risk of export barriers. The new Biden government pays more attention to the new issues of global trade barriers, emphasizing restraint mechanisms, labor and environment, digital trade, agricultural trade, Service trade and other issues are expected to be the focus of Biden’s trade barriers in the future; labor and environmental issues are expected to be the focus of Biden’s future trade barriers. The second is the risk of counter-attack. The new crown epidemic is still uncertain. Since mid-February this year, the number of new crown infections worldwide has increased daily There is a continuous upward trend. On May 15 there were 680,000 new cases worldwide, and more than 310,000 new cases were added in India. The third is the risk of policy shocks. Large-scale easing policy stimulus will increase the level of global inflation, which is not conducive to the recovery of demand; fourth is the risk of RMB appreciation that is indirectly stimulated by external easing policies. The exchange rate appreciation is not conducive to the improvement of the competitiveness of my country’s exports of goods. The price effect affects the nominal growth rate and the growth rate denominated in RMB. Fifth, domestic resource structure risks, aging issues and carbon emission constraints drive cost increases. The improvement of production conditions in ASEAN and the attraction of population advantages may strengthen the motivation of enterprises to migrate overseas.
02 Consolidation of China’s export advantages
For a long time, China’s merchandise exports have been dominated by industrial products. Since 2007, the proportion of industrial products has remained at about 95.0%, and the proportion of primary products has been about 5%. As shown in Figure 7:
Figure 7 China’s exports and proportions of mechanical and electrical products and high-tech products, data source: General Administration of Customs of China
Among them, the export of industrial products is dominated by mechanical and electrical products and high-tech products. The proportion of the former is maintained at about 60%, and the latter is maintained at about 30%. The export of electromechanical products is mainly electrical and electronic products (45% in 2019 on average) and mechanical equipment (28% on average in 2019), electrical and electronic products have an upward trend, machinery and equipment have a downward trend, and the proportion of other types is small and fluctuating. High-tech products are dominated by computer and communication technology, and electronic technology. Since 2000, the former has shown a gradual downward trend, while the latter has shown a gradual upward trend. In 2020, the average proportion of computer and communication technology exports is 62.3%, and the average electronic technology It was 24.3%. The export of other types of products accounted for a relatively small proportion. In the past ten years, the export proportion of optoelectronic products has gradually declined, and the export of life science technology and computer integrated manufacturing technology products has gradually increased.
In the future, the export of products will still be dominated by industrial products, with electromechanical products and high-tech products still taking the lead. In particular, the proportion of high-tech products exports may further increase as China’s industrial transformation and upgrading.
Consolidating export advantages in the post-epidemic era is not only related to the effective demand of the external economy, but also closely related to the structure of China’s product supply. In terms of effective demand consolidation, the policy focus should be:
First, actively respond to export barriers, based on the new development pattern of “dual cycles”, through institutional opening to the outside world, reasonable control of opening risks, expansion of China’s opening to the outside world, deepening of economic and trade relations with other countries, and “hard decoupling from China” The possibility and feasibility of “” will be reduced; at the same time, institutional reforms should be accelerated internally to deal with potential environmental barriers: The Ministry of Commerce has established a “Global Green Economic and Trade Leading Group” to focus on dealing with environmental issues in investment and trade, and through “strengthening, guaranteeing, “Local carbon neutrality” responds to the double pressure of the United States on the “Belt and Road” project, by advancing global certification standards, establishing international carbon trading institutions, strengthening international cooperation in low-carbon technologies, preventing the United States from spreading “carbon barriers” and strengthening carbon emission standards Related infrastructure construction to deal with the US trade and investment “carbon barriers.”
The second is to respond to external supply chain containment, actively improve the domestic business environment, consolidate weak links in the supply chain, and cooperate with major Asian economies to implement industrial upgrading plans or supply chain coordination mechanisms.
The third is to respond to policy shocks, adhere to fiscal discipline and the independence of the central bank’s monetary policy, defend China’s fiscal policy and monetary policy space, maintain stable fluctuations in the value of China’s renminbi, and leave enough space for hedging external inflation risks and systemic debt crises room.
In terms of domestic supply structure, the policy focus should be: First, actively impact on domestic aging, increase protection of the enabling effect of the digital economy on the growth of traditional manufacturing, and increase fiscal and financial support for the development of producer services. , To consolidate the foundation of the manufacturing industry, promote the transformation and upgrading of traditional manufacturing, offset the impact of population aging on productivity, and increase protection measures for the aging population and the new population. The second is to deal with the weakening of comparative advantages, implement the strategy of rejuvenating the country through science and technology, improve the competitiveness of export products, implement the strategy of exporting famous brands, increase the added value of products, encourage enterprises to increase R&D investment and brand building, and realize the product structure from extensive and quantitative expansion to intensive , Transformation of quality and benefit model.
3. The impact of rising prices of raw materials and shipping on China’s trade
The dual impact of the epidemic on demand and supply is the main factor in the increase in raw material prices and shipping prices this time.
Global raw material prices are rising. On the one hand, in order to reduce the relative oversupply under the epidemic, OPEC and non-OPEC partners (OPEC+) implemented production cuts The plan is to boost prices and eliminate excess supply. Among them, Saudi Arabia voluntarily cut production by 1 million barrels per day. However, the momentum of this reduction may gradually weaken from May to avoid hitting the real demand in the recovery; on the other hand, the global economy is expanding. Large-scale macro policy stimulus and the gradual normalization of epidemic control, concerns about high inflation have led to an increase in preventive demand.
The increase in shipping prices also includes both supply and demand. The supply side is due to the asymmetric impact of the epidemic on regions and industries, which increases shipping risks, labor costs, and return empty-load rates. However, when the elasticity of shipping demand is relatively rigid, Shipping companies can achieve income security by reducing shipping capacity and raising shipping prices, so that the price markup of shipping companies will also rise; the demand side is closely related to the global macroeconomic trend, reflecting the gradual improvement of global trade.
The impact of rising raw material prices on China’s trade: In the short term, rising prices will have little direct impact on China’s exports, because 95% of China’s exports are manufactured products, while food and live animals, beverages and The export of primary products such as tobacco, non-edible raw materials (except fuels), fossil fuels and lubricants and related raw materials, animal and vegetable oils, fats and waxes is about 5%, and no more can be obtained through price effects.Foreign exports increase.
In the medium and long term, China is a big demand country for raw materials. In 2020, 33% of imports are primary products. Therefore, the increase in raw material prices can be transmitted to China’s final products through cost effects, weakening the price advantage of China’s exports.
Sea shipping has an irreplaceable position in international trade. According to the statistics of the United Nations Trade Development Council, the volume of seaborne trade accounts for 90% of the total global trade by commodity weight, and more than 70% by commodity value. In 2019, in the trade between China and the countries along the “Belt and Road”, ocean shipping accounted for 61% of imports and 74% of exports. Therefore, relatively speaking, ocean shipping is “rigid demand”, and rising shipping prices will bring both imports and exports. Adverse effects will not only increase direct import and export costs, but also affect trade by affecting the capital advances of trade credit companies, and may also be transmitted to imported and exported products through cost effects.
This article is from WeChat official account:Atom Think Tank-Tencent News (ID: AtomThinkTank) span>, author: Shi Xianjin, editor: Yang Xi (the manuscript has been deleted during the editing process, the title is added by the editor, and the comment is omitted)