China’s 2020 Export Growth Reaffirms its Position as Core Part of Global Supply Chains
Date: 25 Jan 2021
From 2001-2020, China’s exports grew at a CAGR of 13%. The machinery & equipment sector constituted the majority share of Chinese exports for over a decade which, coupled with the high-end manufacturing level of China’s exported goods, is indicative of the country’s shift towards higher end value-added exports.
Early in 2020, China’s exports were heavily impacted by COVID-19, ongoing trade tensions with the US, and the diversification of global supply chains; however, a strong recovery occurred in the second half of the year, with full year growth of 3.6% in China’s exports.
Whilst the rest of the world struggled to contain the spread of Covid-19 within their borders, China, who successfully lowered the number of new infections in the country in the first half of 2020, was able to resume taking export orders. Continued measures to contain the risk of a further outbreak allowed the country to grow output in the second half of the year, counting themselves as one of the few nations to report growth in this tumultuous year.
Trends to follow:
- Long-term CAGR of 13% shows strong growth of China’s export capacity
- 3.6% growth in China’s exports in 2020 while global exports likely declined by close to 10% pushed China’s share of global exports higher
- China remains a leader in machinery & transportation equipment exports, contributing 48.6% to China’s 2.59tn in exports for 2020; but the export base is well diversified and constantly shifting to higher value add products
- China is typically the top trade partner or one of the top trade partners for most economies around the world
- China continues to be a key exporter in intermediate and consumer goods and should continue to be recognized for its increasing expansion into high-value goods exports
- There are segments where China has become less competitive, but China has overall remained the world’s most competitive large exporter – a trend unlikely to change in the short or medium term
Prior to the COVID-19 pandemic, global trade experienced uncertainty due to tensions between China and the US. The pandemic exacerbated trade uncertainty with countries re-evaluating their exposure to procurement and supply from China. Some countries imported fewer products due to decreased demand in their domestic markets, whilst China as a key manufacturing hub, saw an initial decline in export orders. This dynamic changed in the second half of the year, as the country was able to resume pre-pandemic levels of manufacturing output.
- China should remain a key part of a procurement managers supply chain due to this and the developed logistics capacity and technology of the country
- Countries are diversifying their supply chains after their initial concern of over-exposure to China; however, overall China remains an integral part of global sourcing due to its cost-effective solutions and manufacturing potential
China continues to lead as the world’s largest exporter, with export growth of 3.6% in 2020 while global exports likely declined 7-10%. This still places China in a central position in global supply chains. However, the initial decline in China’s exports at the start of the pandemic has led many supply managers to re-evaluate how to mitigate risks from being overexposed to one source market. China is continuing its drive towards expanding its high-end exports capabilities, meaning it shall remain an integral part of many procurement strategies, albeit alongside other developing manufacturing markets.
- Determine categories in which China remains or is expected to become a core supply partner
- Determine which markets matter more for other categories
- Anticipate that global developments will force countries to dynamically adapt to the shifting global context and therefore adjust international inbound supply chains accordingly