$4.62 trillion! China's total foreign trade volume in 2018 hit a record high!

On January 14, data released by the General Administration of Customs of China showed that, in US dollar terms, China's trade surplus for the whole year of 2018 was US$351.8 billion, with imports up 15.8% year-on-year and exports up 9.9% year-on-year. The export growth rate hit a new high since 2011.

In RMB terms, China exports grew by 7.1% year-on-year in 2018, imports grew by 12.9% year-on-year, and the annual trade surplus was RMB 2.33 trillion.

According to Guoshi Express, China's total import and export value in 2018 reached US$4.62 trillion, exceeding RMB 30 trillion in RMB terms, setting a new historical high. Among them, imports exceeded US$2 trillion for the first time, and exports approached US$2.5 trillion.

China's 2018 foreign trade "report card" was released, showing that China's total import and export value reached US$4.62 trillion, exceeding RMB 30 trillion in RMB terms, setting a new historical high. This encouraging figure has relieved textile professionals who have been worried for several days.

After all, in the past two days, the RMB has risen sharply, and textile professionals are worried: On the one hand, the RMB is appreciating wildly at the end of the year; on the other hand, the trend of the Sino-US trade war is still unknown, and the Southeast Asian market is “waiting in the wings” ...In short, people in foreign trade are now confused and hesitant! Can foreign trade improve in 2019? Today, I will start from external situation to internal policies , to organize some information and news for everyone's reference.

external situation

From an external perspective, the world economy is expanding steadily, market demand in major economies remains strong, and global trade is expected to continue its recovery. However, affected by the intensification of global trade frictions, the tightening of monetary policies in major developed economies, and the escalation of geopolitical tensions, the downside risks to the world economy are increasing, and the external environment facing China's foreign trade development is becoming more severe and complex.

First, the downside risks to the world economy are increasing

In the past few years, the world economy has achieved relatively rapid growth, benefiting on the one hand from the cyclical recovery of the economy, and on the other hand from the continued implementation of loose fiscal and monetary policies by major developed economies.

Prospect In 2019, the supporting role of these two factors will weaken. From a cyclical perspective, important indicators such as industrial production and manufacturing purchasing managers' index in major economies have shown a slowdown trend, and the growth rate of the real estate market in developed economies has slowed down, indicating that the economy has shifted from rapid growth to steady growth.

From a policy perspective, the stimulus effect of the US Trump administration's tax cut policy is gradually diminishing, and developed economies such as the US and Europe are still tightening monetary policies, weakening the ability of global macroeconomic policies to support economic growth, while the inhibitory effect is significantly enhanced.

In particular, some emerging economies have prominent structural economic contradictions and are affected by the spillover effects of developed economies tightening monetary policies. The economic and financial situation is severe, becoming an important risk threatening the stable growth of the world economy.

Rapid technological innovation is taking place globally, with new energy technologies, new generation information technologies, and intelligent manufacturing technologies flourishing, and new industries and models constantly emerging, profoundly changing the way people live and work, but in the short term, they are also exacerbating structural unemployment to a certain extent. In its latest World Economic Outlook, the International Monetary Fund lowered its forecast for global economic growth in 2019 from 3.9% to 3.7%, the same as in 2018, and predicted that the risks are tilted to the downside.

Second, protectionism threatens the stable growth of global trade

In recent years, with some countries the tide of "de-globalization" is surging, trade protectionism is rising, foreign trade policies are becoming more conservative, and trade restrictive measures are increasing.

According to the World Trade Organization's monitoring, from mid-October 2017 to mid-May 2018, WTO members implemented 75 new trade restrictive measures, including raising tariffs, quantitative restrictions, increasing import taxes, and tightening customs supervision, averaging 11 measures per month, higher than the average of 9 measures per month in the previous reporting period (mid-October 2016 to mid-May 2017).

The WTO predicts that, affected by the intensification of global trade frictions, the growth rate of global trade volume in 2019 will fall from 3.9% in 2018 to 3.7%, declining for two consecutive years. Among major economies, the United States' trade protectionist behavior is the most prominent.

Global Trade Alert ( Global Trade Alert) statistics show that in the first seven months of 2018, the proportion of protectionist measures introduced by the United States accounted for 33% of the global total. Trade protectionism in other economies has also tended to increase, the policy environment facing global trade has undergone unfavorable changes, and it is more difficult to maintain stable growth.

Third, fluctuations in international financial and commodity markets may intensify

In the past few years, stock markets in developed economies have generally risen, commodity prices have rebounded from low levels and stabilized, and other economies have become important factors supporting world economic growth, and have also played a positive role in world trade growth.

Entering 2019, the risks facing international financial and commodity markets may become prominent, and volatility may increase. From the perspective of economic fundamentals, the downside risks to world economic growth are increasing, business and investor confidence is declining, and both financial investment and real economy investment are becoming more cautious, putting downward pressure on financial assets and commodity prices, but rising energy and resource production costs will support commodity prices.

From the perspective of liquidity environment, developed economies are accelerating the tightening of monetary policy, and many institutions expect the Federal Reserve to raise interest rates three times in 2019, and the European Central Bank will also gradually reduce the scale of quantitative easing. Reuters predicts that the amount of funds that central banks plan to withdraw from the market in 2019 will exceed the amount of funds injected, and the tightening of global liquidity will impact the stability of financial and commodity market prices. The recent sharp decline in the US stock market is related to this.

From the perspective of geopolitical situation, factors such as the OPEC's production cuts and the US's resumption of sanctions against Iran have exacerbated oil price fluctuations, and may even threaten the stability of global energy supply to a certain extent; the Brexit date is approaching, and the two sides have failed to reach an agreement, affecting confidence in European and global financial markets.

In particular, international financial markets and commodity markets are closely linked. Fluctuations in one market can quickly spread to another, creating a magnifying effect and adversely affecting world economic trade.  

Fourth, international trade rules are facing reshaping.

As the world economic landscape is rapidly adjusting and economic globalization is facing challenges, a new round of reshaping of international trade rules is also rapidly advancing. The multilateral trading system is facing difficulties, and many members are promoting reforms, but there is no consensus on the direction and measures of these reforms.

Some important new trends have emerged in regional and bilateral trade negotiations. The US and EU have agreed to conduct trade negotiations on "zero tariffs, zero non-tariff barriers, and zero subsidies for the non-automotive industry"; the US and South Korea signed a new version of the free trade agreement; the US and Japan reached an agreement to launch negotiations on a goods trade agreement; the EU and Singapore signed a free trade agreement; and the US, Mexico, and Canada reached a new free trade agreement that includes provisions targeting so-called "non-market economies".

In this regard, China believes that a country should attract trading partners based on the principles of mutual respect, equal consultation, and mutual benefit and win-win cooperation, relying on market potential, policy environment, and other factors. The purpose of establishing a free trade zone is to facilitate trade among members, and it should adhere to the principles of openness and inclusiveness. It should not restrict the ability of other members to conduct external relations, and it should not engage in exclusionism.

While new formats and models such as cross-border e-commerce are developing rapidly, they are also facing increasing regulation and restrictions. The EU has implemented the General Data Protection Regulation, strictly protecting user data and privacy rights, which will have a profound impact on cross-border e-commerce businesses involving EU companies and citizens; it has also introduced new VAT regulations for cross-border e-commerce, which will abolish the tax exemption policy for imports below €22. The United States has initiated the process of withdrawing from the Universal Postal Union, which may increase the express logistics costs for cross-border e-commerce exports from various countries to the United States.

internal policies

From an internal perspective, although the cost of factors such as labor and land is still rising, and some import and export enterprises are encountering temporary difficulties, the fundamentals of China's foreign trade development are sound, and the policy environment is constantly improving. There is a basis and conditions for maintaining stable development and improving quality.

First, China's high-quality economic development has laid a solid foundation for foreign trade development.

The 19th National Congress of the Communist Party of China made the significant judgment that China's economy has transitioned from a stage of high-speed growth to a stage of high-quality development, and made major deployments for implementing the new development concept and building a modernized economic system.

Various regions and departments are actively implementing and promoting policies and measures to promote high-quality economic development, which will continuously enhance China's economic innovation and competitiveness. Supply-side structural reforms have been deeply advanced, optimizing the allocation of production factors such as labor and capital, and effectively improving the business environment for enterprises.

In the first three quarters of 2018, the national industrial capacity utilization rate was 76.6%, the same as the same period of the previous year, and both enterprise costs and leverage ratios have decreased. New economic drivers are continuously growing stronger, with new technologies, new industries, new formats, and new models emerging and growing, and traditional industries are accelerating transformation and upgrading, and their ability to participate in high-level international competition is continuously strengthening.

China's demand structure has undergone a major adjustment, with consumption becoming the primary driving force for economic growth, In the first three quarters of 2018, the contribution rate of final consumption expenditure to economic growth was 78%, especially the rapid upgrading of consumption among the 400 million middle-income population, and the steady expansion of import demand for high-quality goods and services.

Second, Chinese import and export enterprises are actively cultivating new competitive advantages.

In recent years, in the face of increasingly fierce international market competition and continuously rising domestic factor costs, a large number of import and export enterprises have remained confident and persevered, actively adjusting their structure and promoting innovative development, increasing investment in the research and development of products with independent brands and intellectual property rights, using advanced technologies such as intelligent manufacturing to improve production processes, and actively expanding international marketing networks, continuously improving their comprehensive competitiveness.

Thanks to the proactive actions of enterprises, the pace of transformation and upgrading of China's export-oriented industries has accelerated, and the importance of capital-intensive and technology-intensive industries such as equipment manufacturing and high-tech industries has become increasingly prominent, with exports of high-value-added products maintaining relatively rapid growth.

A number of enterprises have seized the opportunities presented by the new round of technological revolution and industrial transformation, developing new formats and models of foreign trade such as cross-border e-commerce, comprehensive foreign trade services, and market procurement trade, achieving significant results.

Currently, China has produced a number of leading cross-border e-commerce enterprises, building cross-border e-commerce platforms with wide coverage and strong system stability. By optimizing transactions, finance, and logistics, they have significantly improved import and export efficiency, created many new trade opportunities, and unleashed the potential of small and medium-sized enterprises to engage in import and export trade.  

Third, comprehensively expanding opening up has expanded the space for import and export markets.

China adheres to the basic state policy of opening up to the outside world and insists on opening its doors to construction, opening up market space. In terms of the "Belt and Road" initiative, from 2013 to 2017, the proportion of China's goods trade with countries along the route to global goods trade increased from 25% to 26.5%.

Currently, China has signed cooperation agreements on jointly building the "Belt and Road" initiative with more than 130 countries and international organizations. As the "Belt and Road" initiative continues to advance, the status of emerging markets and developing countries in China's foreign trade structure will continue to rise, and the diversified international market layout will be further optimized. The "Belt and Road" initiative has also driven the central and western regions from the edge of opening up to the forefront of opening up, with continuous release of trade potential,

injecting new impetus into foreign trade development. In terms of free trade zone construction, China has reached 17 free trade agreements with 25 countries and regions, with free trade partners across Europe, Asia, Oceania, South America, and Africa. In 2017, the trade volume between China and its free trade partners accounted for 25% and 51% of China's total foreign goods trade and service trade, respectively. Currently, China is conducting negotiations or upgrading negotiations on 12 free trade agreements with 27 countries. With the expansion of the free trade "circle of friends," China's foreign trade will usher in new and greater development opportunities.

In terms of expanding imports, the first China International Import Expo was held in Shanghai, with 172 countries, regions, and international organizations participating, and more than 3,600 enterprises exhibiting, bringing a large number of high-quality goods and services, creating good conditions for enriching domestic market supply and meeting import demand.

In 2018, China lowered import tariffs multiple times, with the overall tariff level falling from 9.8% in 2017 to 7.5%, an average reduction of 23%, which will effectively promote the balanced development of foreign trade.

Fourth, the support for foreign trade policies has been further increased.

The Chinese government attaches great importance to foreign trade development. In the face of the current complex international situation, it has formulated and implemented a series of support policies.

On September 18, the State Council executive meeting decided on measures to promote foreign trade growth and customs clearance facilitation, proposing to promote a higher level of trade facilitation. In 2018, the overall customs clearance time for imports and exports, and import and export regulatory documents will be reduced by 1/3, and customs clearance fees will be lowered. Approvals in import and export processes will be reduced, and charges related to businesses will be streamlined and standardized; further reducing costs for import and export enterprises, improving export tax rebate policies, accelerating the export tax rebate process, lowering the export inspection rate, expanding the coverage of export credit insurance, encouraging financial institutions to increase financing for export credit insurance policies and export tax rebate account pledge financing, increasing lending to foreign trade enterprises, especially small and micro enterprises, encouraging and supporting enterprises to develop diversified markets, and increasing imports of raw materials needed by domestic enterprises.

On October 8, the State Council executive meeting again decided on measures to improve export tax rebate policies and accelerate the tax rebate process, reducing the burden on enterprises and maintaining stable growth in foreign trade. The Chinese government is actively cultivating new formats and models for foreign trade. Currently, the total number of cross-border e-commerce comprehensive pilot zones has reached 35, and the number of market procurement trade pilot programs has reached 14. Policies for the development of foreign trade comprehensive service enterprises are constantly being improved. These policies and measures will further consolidate and boost the confidence of import and export enterprises and stimulate business vitality.

In summary, China's foreign trade development in 2019 faces both severe challenges and new development potential.