Innovative exporters best COVID woes and protectionism

A worker produces aluminum alloy wheels at a material technology company in Yuncheng, Shanxi province, on June 21. The Yuncheng city government has helped small and medium-sized enterprises sell products both domestically and abroad. (YAN XIN / FOR CHINA DAILY)

Over the last few years, Wu Dazhi, president of the Guangzhou Leather& Footwear Association, has seen China's foreign trade companies undergo a remarkable makeover, which, he said, encapsulates the amazing resilience of the Chinese business spirit in the face of a plethora of seemingly insurmountable odds.

To buttress his point, Wu cited the instance of a number of Chinese companies that have invested in or built new factories in Southeast Asian countries, especially in the northern region of Vietnam, which neighbors China.

Chinese firms need to restructure their supply chains and enhance their production layout, to stay competitive and irreplaceable so as to secure more orders and profits.

Wu Dazhi, president of the Guangzhou Leather & Footwear Association

"The labor costs are relatively low there, and thanks to the continuously improving interconnection between China and the Southeast Asian nations, it has also become quite convenient to transport raw materials and other resources to factories there from China," Wu said.

"Besides, with some European countries and the United States adopting protectionist measures of late, Chinese firms need to restructure their supply chains and enhance their production layout, to stay competitive and irreplaceable so as to secure more orders and profits."

Wu, who is also chairman of Guangdong Zhida-Walking New Material Technology Co Ltd, said the company, like many other Chinese companies, has cooperated with investors from regions outside the Chinese mainland to establish commercial entities outside the mainland, which then go on to invest in Vietnam, as per local laws.

He also said some countries' protectionist measures in trade have led some clients of Chinese exporters to transfer their orders to Southeast Asian nations.

But protectionist measures are just one aspect of the myriad troubles currently buffeting Chinese trade enterprises. Surging raw material costs, geopolitical tensions, softer global demand and domestic resurgence of COVID-19 cases are all posing unprecedented challenges at the same time.

Yet, amid all this turbulence, a resilient China remains committed to its stated goals of expanding foreign trade and improving its trade structure, experts and business leaders said.

A worker packs carbon fiber bicycle frame in Suqian, Jiangsu province, on June 18 for export. China's exports in May surged by 15.3 percent year-on-year. (CHEN YU / FOR CHINA DAILY)

The core competitiveness of Chinese products in global markets has not been damped. In fact, Chinese trade firms are determined to get stronger. They are stepping up efforts to improve product quality, expand sales channels and climb up the industrial value chain, they said.

Such efforts have already borne some fruit. Beating expectations, China's exports in May surged by 15.3 percent year-on-year to 1.98 trillion yuan ($295.19 billion), while imports increased 2.8 percent to 1.47 trillion yuan, Customs data showed. That lifted the trade value for the first five months of the year to 16.04 trillion yuan, up 8.3 percent year-on-year.

The strong rebound (from a two-year low of 3.9 percent year-on-year export growth in April) was mainly attributable to effective COVID containment measures, which enabled recovery of domestic logistics, factory reopenings and resumption of business operations.

Like Wu, Gao Lingyun, director of the international investment division of the Institute of World Economics and Politics, which is part of the Chinese Academy of Social Sciences, considers the rebound as proof of "the strong resilience and adaptability of Chinese trade enterprises".

Gao could have been talking of Fashion Flying Group. The Fuzhou, Fujian province-based company makes outdoor garments and performance workwear. It is one of the biggest performance outdoor wear suppliers in China. It also has production bases in Vietnam and some countries in Africa.

When a major Russian client canceled some business orders due to the Russia-Ukraine conflict, Fashion Flying took the unexpected reverse in its stride. But little did it realize more surprises awaited it. The Russian client changed its mind and said it merely wants the shipments to be delayed, not canceled. Even before Fashion Flying could reschedule the shipments, it received another request: deliver the goods as per the original schedule. Well, Fashion Flying handled the unseemly turn of events with a cool head and managed to make deliveries as per the original schedule, by leveraging its multiple production sites and rearranging production to suit client needs.

It used online channels to communicate with its client on samples, production inspections and finished product examination, reinforcing long-term relationships and trust.

Lan Qingxin, a professor at the Academy of China Open Economy Studies, which is part of the University of International Business and Economics in Beijing, said China has a complete manufacturing or industrial chain, which ensures high quality and strong competitiveness of Chinese products in global markets.

"The pressures on Chinese foreign trade enterprises mainly come from external factors such as high prices of raw materials, disruptions to logistics and supply chains, decline in overseas demand and competition from other countries," Lan said.

Chinese enterprises, he said, should better utilize free trade agreements, enhance their core competitiveness and brand image, use digital tools and new trade formats more, and proactively meet customer needs.

A worker checks high-voltage motors in Haian, Jiangsu province, on June 13. The motors will be exported to Europe and the US, apart from meeting domestic market demand. (ZHAI HUIYONG / FOR CHINA DAILY)

Analysts said policy measures already in place will help improve the situation, lighten the burdens on Chinese enterprises, facilitate foreign trade growth and improve foreign trade structure.

Since the beginning of this year, the Chinese authorities have been stepping up efforts to stabilize foreign trade growth and improve trade quality, they said.

The authorities have rolled out measures to promote new trade formats, smooth transportation and logistics, refine government and financial services, reduce enterprise costs and strengthen trade facilitation.

For instance, the Ministry of Commerce said the nation will innovate and optimize organization of online trade expos to help enterprises receive more orders. It will also encourage enterprises to communicate with clients through online channels and exhibit products at overseas offline expos.

At a recent news conference in Beijing, Li Xingqian, director-general of the ministry's foreign trade department, said the scale of China's foreign trade order outflow is manageable and its impact is limited.

With continuous upgrade of domestic industries and optimization of production factors, some Chinese enterprises have been relocating manufacturing capacities to overseas sites in the region, thus ensuring global division in labor, he said.

So, it is not right to interpret this phenomenon as a shift in export orders from China to markets of the Association of Southeast Asian Nations, said Zhao Wei, chief economist at Sinolink Securities.

The export structures of China and some member states of the ASEAN such as Thailand and Malaysia have a high degree of overlap. There is also complementarity in their exports of intermediate and capital goods like electrical and electronic equipment and parts, he said.

Li from the ministry said China will further promote the implementation of policies for enterprises to resume full production, provide facilitating services to help them solve problems in logistics and order acquisition, and guide relocation of industries to central, western and northeastern regions of China to optimize industrial layout.

Zhang Yan, founder of BeiAng Air Tech, which makes air purifiers and exports 70 percent of its annual output to 81 countries and regions from Suzhou, Jiangsu province, said government measures aimed at enabling foreign trade enterprises helped the company a lot, especially when it encountered challenges from inefficient logistics and labor shortage this year.

Specifically, measures facilitating development of cross-border e-commerce, simplified Customs procedures for business-to-business e-commerce exports, and the Regional Comprehensive Economic Partnership agreement, which took effect on Jan 1, have all helped trade firms such as BeiAng Air Tech a great deal, she said.

The company's first-half revenue grew by 90 percent year-on-year. Its annual revenue is expected to be around 500 million yuan, promising a stable profit amid various challenges.

Yet, Zhang said she expects some pressure in the second half. So, the company has been strengthening investments in research, design and development of new products, besides ramping up efforts to expand into new markets.

"Chinese products' quality has improved a lot over the years. But there are difficulties in bagging new orders due to external factors," she said, adding some enterprises have been streamlining processes and hiring fewer staff members to cope with the situation.

Zhang Jianping, head of the Center for Regional Economic Cooperation, which is part of the Chinese Academy of International Trade and Economic Cooperation, said Chinese enterprises should utilize opportunities arising from China's dual-circulation development pattern that takes the domestic market as the mainstay while letting domestic and foreign markets reinforce each other.

Firms focused on either product exports or imports are expected to better utilize supportive policy measures, to cope with external challenges and enhance their competitiveness, he said.

Contact the writers at liuzhihua@chinadaily.com.cn