What is crippling China’s once powerful export machine?
Falling global demand and higher wages at home suffocate a private export sector struggling to come up with alternative products
Exports used to be the biggest part of China’s economic growth story, as cheap Chinese labour combined with foreign money and technology to forge a formidable export machine churning out items that filled store shelves across the world.
But even though it remains a target of political criticism in importing countries, the gears of the export machine are starting to slip and it is grinding to a halt.
China will be lucky if exports don’t drag growth down
That’s left many who rode the boom wondering what will come next.
Julia Su, a sales manager at Shanghai Eastern Resources Arts & Crafts, has spent the past two decades sourcing products such as Christmas tinsel and ornaments from a network of small workshops in the Yangtze River Delta, one of China’s key export bases, and arranging containers to ship them to wholesalers and retailers on the other side of the world.
Her company’s annual turnover of US$50 million hints at the clout of the thousands of Chinese “foreign trade firms” which link numerous family-run factories with Western consumers in an extensive global value chain. By providing a bridge between overseas buyers and Chinese producers – facilitating paperwork and shipments – they made juicy profits in the 15 years following China’s 2001 accession to the World Trade Organisation as the country’s exports grew more than eightfold.
However, after witnessing the greatest overseas sales boom in the country’s history, Su, 48, now worries that China’s whole export system is being uprooted, leaving a gaping hole in its economic landscape and no obvious means to cover it.