China’s export trade situation may be severe in 2022?

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    In 2021, Chinese foreign traders have experienced hardships:
    Freight rates are soaring, containers are hard to find
    Raw materials are skyrocketing, and factories are afraid to take orders
    Government cuts off electricity
    LinkedIn China Adjustment
    Will foreign trade be good in 2022? Will it be worse?

    What is foreign trade and international trade

    The relevant person in charge of the Ministry of Commerce stated that foreign trade has continued to maintain a rapid growth momentum recently, and there are many “one-off factors” such as the sharp increase in the export of epidemic prevention materials. “These one-off factors will not last for a long time. The growth of foreign trade in the second half of 2021 is gradually slowing down, and the foreign trade situation next year may be very severe.” In the face of possible large fluctuations in the foreign trade sector, the central government has recently proposed inter-cyclical adjustments in macroeconomic policies. The purpose is to allow foreign trade to operate smoothly within a reasonable range and prevent major fluctuations from harming trade growth and market players.

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    Since the second half of last year, China’s foreign trade has been advancing with leaps and bounds. The total value of imports and exports has been increasing for 14 consecutive months, and the scale of trade has hit a new high in the past 10 years, becoming one of the biggest bright spots in global economy and trade.

    The results are obvious to all, but we cannot avoid the fact that in the foreign trade industry, most of the market players have a difficult time, especially those small, medium and micro foreign trade companies are in a dilemma-on the one hand, the “crazy price-increasing container” reappears at the port. The reality of “a box is hard to find” and “the value of the goods can’t reach the freight price” makes it miserable; on the other hand, knowing that it is not making money or even losing money, you have to bite the bullet and take orders, lest you lose the future if you are not careful. customer.

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    The relevant departments have been paying close attention to the situation of the foreign trade industry. At the press conference of the State Council Information Office held a few days ago, the relevant person in charge of the Ministry of Commerce stated that foreign trade has continued to maintain a rapid growth momentum recently. It will not last for a long time. The growth of foreign trade in the second half of the year is gradually slowing down. The foreign trade situation in 2022 may be very severe.”

    Seeking truth from facts, the reason why China’s foreign trade can seize the “one-off factor” is by no means accidental. Without the concerted efforts of the whole country to effectively control the epidemic, and without the support of a complete supply chain and industrial chain, the development of China’s foreign trade industry may be another scene, which no one wants to see. In fact, the current foreign trade companies have to face not only the fading “one-off factors”, but also more pressure from the external environment, such as the much-concerned issue of shipping capacity and freight, the issue of rising prices of bulk commodities and raw materials. Another example is the pressure on the appreciation of the RMB exchange rate and the increase in labor costs. Under the superimposed effect of these factors, the market environment for foreign trade development has become extremely complicated.

    Monthly exchange rate Chinese yuan to U.S. dollar 2021 | Statista

    Take the prices of bulk commodities and raw materials as examples. In the first seven months of this year, the average import price of iron ore in China rose by 69.5%, the average import price of crude oil rose by 26.8%, and the average price of imported copper rose by 39.2%. The rise in the price of upstream raw materials will sooner or later be transmitted to the production costs of mid- and downstream manufacturing companies. If the RMB exchange rate appreciates, it will also push up the transaction costs of foreign trade companies and squeeze their already thin profit margins.

    Rising oil, raw material prices fan inflation concerns

    Based on the scientific research and judgment of the international economic and trade situation, starting from the second half of 2020, the central government has repeatedly emphasized the need to stabilize the basic foreign trade market. The development of new formats of foreign trade continues to make efforts to continuously promote the transformation and development of the foreign trade industry. However, the complexity of reality is much higher than the analysis on paper. In the face of the possible large fluctuations in the foreign trade field, the central government recently proposed inter-cyclical adjustments of macroeconomic policies. Harm to market players.

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    The focus of cross-cycle adjustments in the field of foreign trade will continue to revolve around the four aspects of stabilizing growth, promoting innovation, maintaining smooth flow, and expanding cooperation.

    1. Steady growth, the focus is on stabilizing the main body of the market and stabilizing market orders;
    2. To promote innovation is to vigorously promote the development of new foreign trade formats and models such as cross-border e-commerce, support the export of high-tech, high-quality, and high-value-added products, and increase the overseas promotion of Chinese brands;
    3. To ensure smooth flow is to ensure the smooth flow of the foreign trade industry chain and supply chain;
    4. Expanding cooperation means to deepen international economic and trade cooperation, negotiate and sign more free trade agreements, upgrade existing free trade agreements and other measures to effectively maintain the multilateral trading system and integrate more deeply into international economic cooperation.
    China's foreign trade gets off to robust start, exports surging 29.2% in Q1  - Global Times

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