In this presentation, I will first give a brief introduction to recent trends of global trade. Next, the rise of China's foreign trade and recent development in China's foreign trade will be discussed. Finally, I will suggest how to stimulate new momentum for China.
Recent Trends of Global Trade
1. The growth of trade has slowed
Since the beginning of the 21st century, global trade volume has shown an upward trend. However, the growth rate has significantly slowed down after the 2008 financial crisis. In the next two years, it is expected that the global trade growth rate will be lower than the historical average, and the trend of trade slowdown is difficult to reverse.
Although there has been a rebound after the pandemic in 2021 and 2022, reaching the peak of $32 trillion in 2022, it is mainly due to the rise in primary product prices, especially energy prices. Subsequently, global trade shifted towards negative growth due to reduced demand from developed countries, poor economic performance in East Asia and Latin America, and declining commodity prices.
In the coming years, although the global supply chain has recovered and the development of service trade will support trade growth, the global trade situation remains uncertain due to multiple unfavorable factors. It is expected that the global economic growth rate in 2024 and 2025 will be lower than the historical average, and the economic weakness will drag down consumer demand and investment, which will have a negative impact on trade.
In addition, geopolitical tensions continue to escalate commodity price volatility, and trade restrictions will also affect global trade levels. Various authoritative institutions predict the growth rate of world trade in 2024 will be lower than the historical average growth rate. Looking ahead, the trend of trade slowdown is difficult to change.
2. The rise of service trade and digital tra
de
The growth rate of service trade has far exceeded that of goods trade in the past two decades, demonstrating stronger market resilience. The development of digital technology, especially the rise of digital trade, indicates that the trade structure will be more diversified in the future.
It is worth noting that digital trade has become a new driving force for the growth of service trade. From 2000 to 2013, the proportion of service trade in the global trade structure remained around 20%, but with the development of digital technology, some service trade border restrictions have been broken. And in 2019, this proportion increased by nearly 5 percentage points. From 2010 to 2022, the average annual growth rate of global digital delivery service exports was 6.5%, much higher than that of goods trade and other service trade during the same period, contributing nearly 67% to the growth of service trade.
Looking ahead to the future, the global trade structure may become service- oriented and digitized, potentially forming a pattern of "three parts of the trade world" in goods trade, service trade, and digital trade.
3. Developing countries become new engines of trade growth
The trade growth rate of developing countries continues to be higher than that of developed countries, becoming an important driving force for global trade growth. Especially the BRICS countries played a key role in it. From the perspective of trade volume composition, the relative importance of developed countries as international market suppliers has declined.
In terms of goods trade, from 2005 to 2022, the share of developing countries has increased from one-third to nearly half, contributing approximately 54% to the growth of global goods trade. In terms of service trade, although the market is still dominated by developed countries, developing countries have seen strong growth in service trade, with their share increasing from 1/4 to 1/3.
Within developing countries, the BRICS countries are the main drivers of growth, accounting for over one-third of their exports of goods and services and contributing over 40% of the growth.
4. Globalization has been hindered and trade regionalization has developed
The geopolitical tensions and changes in trade policies have led to changes in the global trade landscape. The layout of industrial division of labor tends to be geographically friendly, and global trade tends to be regionalized.
For specific countries, the United States has shifted its trade with China to other economies, with Mexico becoming its largest trading partner. China has strengthened trade relationship with developing countries, and its exports to the Belt and Road related countries exceed those to the United States, Japan and Europe. The EU has reduced its trade relations with Russia.
Research shows that in recent years, major trading economies have shown a trend of "clustering" in their trade, strengthening trade cooperation with economies with close geopolitical stances. Therefore, in the context of hindered globalization, as trade moves closer to geopolitical friendly groups, global trade may tend towards regionalization. The number of regional trade agreements that have come into effect in the past three years has significantly increased, and technological development and trade barriers will increase the possibility of parallel and intersecting regional industrial chains, thereby promoting trade regionalization.
5. The role of carbon tariffs will become increasingly important
In recent years, the growth rate of environmental product trade has exceeded that of overall goods trade, demonstrating enormous development potential. The "carbon tariffs" and green trade barriers promoted by developed countries may become key influencing factors for future international trade.
Meanwhile, the number of trade measures related to the environment has surged. At present, the tariff barriers for environmental products are not high, but developed countries are vigorously promoting "carbon tariffs". The European Union has launched a "carbon border tax" in 2023, with plans to officially impose taxes by 2026, covering high carbon products. The United States is also advancing relevant legislation. Carbon tariffs are essentially "green trade barriers". If more countries or regions establish such a system, it will have an impact on the composition and flow of global trade, and have a greater impact on carbon exporting countries. It may become a key influencing factor in future international trade.
The Rise of China's Foreign Trade
1. Rapid growth in trade volume
In 1950, the total import and export volume of China's goods trade was only 1.1 billion US dollars, accounting for less than 1% of the world's total. Since 1978, especially since joining the World Trade Organization in 2001, China has continuously improved its level of opening up to the outside world, and the scale of goods trade has steadily expanded.
In 2013, China became the world's largest trading nation in goods for the first time. In 2023, China's total import and export volume of goods trade reached 5.9 trillion US dollars, accounting for 12.4% of the world's total, and has remained the world’s first rank for seven consecutive years.
2. Continuous optimization of trade structure
For exports, with the development of science and technology and the increasing progress of productivity, the technological content of China's foreign trade products continues to improve. The proportion of manufactured goods exports in the total export value has increased from less than 20% in the early days of the founding of the People's Republic of China to 95.1% in 2023.
For imports, the ratio of China's manufactured goods imports to primary product imports has decreased from 4.5 times in the 1980s and 1990s to 1.4 times in 2023. China's imported goods have shifted from mainly manufactured goods to the synchronous development of primary and manufactured goods.
In recent years, the export scale of the "new three" products, i.e. photovoltaic products, electric vehicles, and lithium-ion batteries has significantly increased. In the first eight months of this year, the export of mechanical and electrical products accounted for nearly 60% of the total export value, and the advantages of export products such as automobiles and integrated circuits continued to consolidate.
From the "old three products" to the "new three products", from labor-intensive products such as textiles to high value-added products such as mechanical and electrical products, China's export commodities continue to climb to the high-end of the global value chain. High technology, high added value, green and low-carbon have become the new labels on China's exported goods.
3. Significant expansion of trading partners
In the early stages of reform and opening up, China's foreign trade partners expanded to over 40 countries and regions. Since the reform and opening up, especially after joining the World Trade Organization, China has actively adapted to the international market situation, continuously deepened economic and trade exchanges with countries around the world, and diversified its trading partners.
In the new era, China has implemented a more proactive opening-up strategy, continuously promoting opening-up to a larger scope, wider fields, and deeper levels, and strengthening its trade relations with other countries. Nowadays, China's foreign trade partners have expanded to over 230 countries and regions, and have become the main trading partners of more than 140 countries and regions.
The trade volume of China to the countries jointly building the "the Belt and Road" has climbed from 10.1 trillion yuan in 2013 to 19.5 trillion yuan in 2023, with an average annual growth of 6.7%, accounting for 46.6% of the total import and export volume from 39.3%. The proportion of China's import and export volume with Africa and Latin America in the total trade volume has increased from 2.2% and 2.7% in 2000 to 4.7% and 8.2% in 2023, respectively.
