The export industry that bucked the trend showed its real kung fu

In July and August this year, the trade surplus hit a record high, reversing the "double drop" situation in China's foreign trade in the first four months of this year.

Interactive topic: Is there a golden age for export and foreign trade?

The main reason for the record surplus was a decline in imports, indicating a slowdown in domestic demand. Fortunately, there is a recovery in exports of traditional labor-intensive products, again highlighting the importance of these industries in the overall economy.

A while ago, economic commentators unanimously called on China to say goodbye to relying on foreign trade and investment to drive economic growth, and instead rely on national consumption as the main force in the troika. The reason is that the labor cost and the price of production factors faced by foreign trade, coupled with factors such as the strong RMB, are not conducive to price competition with other emerging markets such as Vietnam; and a large amount of investment results in inefficient use of capital and excess production capacity. and lead to economic bubbles.

All of these arguments are valid, but the transformation of the economic growth model cannot happen overnight. If it is not supported by foreign trade in a timely manner, the economic downturn may be dangerous and endanger the operation of the overall economy. Macroeconomic stability is a prerequisite for the growth of foreign trade. Only when the economy runs smoothly can the traditional manufacturing industry have room for self-regulation.

Mei Xinyu, an international economic and trade expert from the Ministry of Commerce, pointed out that China's toy production accounts for 70% of the world's toy production, the textile, apparel and equipment industry output accounts for more than one-third of the global market, and the production of mobile phones is even more astonishing. Accounting for more than 80% of the world, these production enterprises facing the global market can only make full use of the production capacity established by long-term efforts and effectively exert their potential only by relying on exports.

The mobile phone manufacturing base that is sweeping the global market is in Shenzhen. Experts who have recently come to Shenzhen to investigate and do business can see Shenzhen's unique electronic communication manufacturing ecosystem better than Chinese people. Ito Joichi, director of the Nieman Laboratory, believes that the booming climate of the place is better than that of Tokyo's autumn leaves. The original area leads the production and sales of electronic products even more.

About 400 million smartphones were produced globally last year, with the vast majority being designed and produced in Shenzhen. The phenomenon of "Chinadroid" has attracted widespread attention. Orders from all over the world can be customized with a wide variety of products. The development speed is very fast. It only takes three months from design to delivery, and it is cost-effective and practical. It is very popular with users in developing countries such as Africa.

At present, the recovery of the world economy is not satisfactory. The commodity exporters in Central and South America are experiencing slow sales. Due to the devaluation of the currency, the import momentum is weakened. The tension caused by geopolitics includes the sanctions imposed by the United States and the European Union on Russia. , Sino-Japanese political and economical coldness has shrunk the bilateral trade between the two world's second and third largest economies, the war in the Middle East, and the spreading Ebola hemorrhagic fever in West Africa are all extremely negative factors.

The World Trade Organization forecasts that this year's global trade growth will increase by just 3.1 percent in volume terms from last year, down 1.6 percentage points from the previous April forecast. The organization also revised down its 2015 growth forecast to 4.0%, which is also 1.3 percentage points lower than its previous forecast.

Looking at the export growth rate this year by region, Asia has the highest growth rate of 5.0%, followed by North America with 3.7% growth. In terms of imports, Asia increased by 4.0% and North America increased by 3.9%, both leading the world level. Central and South America is the worst, with imports expected to fall by 0.7%. Chinese export companies are bound to target markets in Asia and North America with higher growth rates. However, there is still a lot of room for development due to the rigid demands of new countries such as Africa and Latin America.

Since July, the continuous appreciation of the US dollar has brought new uncertainties. Due to the warming of the US economy, the Fed's quantitative easing is coming to an end, and the expectation of interest rate hikes has attracted attention. The world's investment funds are optimistic about the "strong dollar" , are flowing into the United States one after another, causing the long-dormant dollar to hit a new high in four years and become the new favorite in the foreign exchange market. Renminbi remained in a tug-of-war with the U.S. dollar, hovering around 6.1 to the U.S. dollar, while it was in a trend of overall appreciation against other major currencies, squeezing the profit margins of foreign trade companies.

Ordinary people still tend to regard a strong currency as a symbol of a strong country. The first two dollar appreciation occurred during the Reagan and Clinton presidencies. The former was after the so-called "Black Monday" when Wall Street crashed, and the latter. At a time when the euro was born and threatened the dollar's status as the world's central bank reserve currency, these appreciations were based on political considerations rather than objective economic factors.

After the 2008 financial crisis, the United States suffered a blow to its international reputation. It is also a political consideration to restore the US dollar's advantages as a safe-haven currency in troubled areas. Moreover, American tourists travel abroad and spend a lot of money, which is also a manifestation of American soft power.

How long will the strong dollar last? There are different opinions.

US President Barack Obama has sought to attract US manufacturing from overseas, create new jobs, and set the goal of expanding exports to promote economic recovery. The US dollar is too strong, weakening the competitiveness of exports and seriously affecting US multinational companies overseas. profit, which is extremely bad for the ruling Democratic Party in the 2016 presidential election. However, in the short term, from the perspective of the flow of funds, the dollar's rise is not over.

A strong currency is a double-edged sword. Although the U.S. stock market keeps hitting new highs, if earnings fail to meet expectations, investors’ withdrawal of capital will weaken the strong momentum of the U.S. dollar. The lack of national funds will exacerbate the imbalance of the world economy, which is not good for the prospects of US exports, and it is only a matter of time before the dollar falls.

The outlook for global trade also has a brighter side: The drop in oil prices helps global trade reduce transportation costs, thereby expanding trading opportunities. While tensions remain in the Middle East, previously stored oil has become a source of excess amid a weakening global economy. The U.S. oil shale revolution and the inability of OPEC producers to effectively limit production have led to oversupply in the market, and crude oil prices fell below $90 a barrel. If this trend can continue, it will become a favorable condition for promoting the resumption of global trade.

With the overall poor external environment, foreign trade has once again become the main force driving China's domestic economic growth. Over the years, the flexibility of the foreign trade industry and the ability to self-regulate have shown real effort. The most reliable and powerful troika driving economic growth is none other than Chinese exporters.

Zhou Naiping, Editor-in-Chief of World Manager, Visiting Professor of School of Media Design, Sun Yat-Sen University. Ms. Zhou taught East Asian history at American University and financial news at Hong Kong University. She was a senior reporter for Reuters, the founder and director of the Global Finance Project at the School of Journalism and Communication of Tsinghua University, and the author of International Financial News Knowledge and Reports. Op-eds represent personal views only.