At the end of the year and the beginning of the year, many foreign trade companies are making summaries and plans. In the last issue, I made a general summary of China’s foreign trade in 2023. In this issue, let’s talk about the foreign trade trends in 2024?
I have been communicating with many foreign trade people recently, and I am often asked, what will happen to foreign trade next year? Should I choose to continue to lie flat, or step into the game and give it a try?
01The irreplaceability of Made in China
Before answering this question, you must first ask yourself a question: How would you rate the irreplaceability of Made in China? This is a fundamental problem. We all know that Europe and the United States have not been very friendly to our trade policies recently, and our foreign trade export data in 2023 is not ideal either. This is the same as the price fluctuating around the value. Long-term judgment still depends on the core value. The irreplaceability of Made in China is the core point of why foreign countries buy our products.
China is the world's largest trader of goods. The scale of foreign trade exports has continued to expand in the past few decades, accounting for 15% of total global exports and ranking first in the world for 14 consecutive years.
In this process, our various industries have formed relatively concentrated regional upstream and downstream industrial chains , such as small commodities in Yiwu, textile fabrics in Shaoxing, wigs and eyelashes in Qingdao, 3C electronic cigarettes in Shenzhen, etc. This is the biggest feeling of many foreign trade bosses who invest and build factories abroad. Raw materials that used to be available within a few kilometers of the factory now need to be imported from China. The savings in foreign labor costs and tariff concessions are all lost. Supply chain links are consumed.
Therefore, I give full marks to the irreplaceability of Chinese manufacturing. This is the underlying logic behind my firm bullish view on China’s foreign trade. After so many years of reform and opening up, we have formed a large-scale Chinese supply chain network. The larger the supply chain network, the more specialized and efficient the internal small businesses can be; the more possible combinations of small businesses can complement each other, and the greater the flexibility of the industrial chain. This advantage has made China an indispensable part of the global economic and trade cycle structure.
On the basis of being optimistic about China's foreign trade in the long term, let's look at the short term, that is, what will happen to China's foreign trade in 2024?
02 Overlay of Europe, America and emerging markets
First, let’s look at the exports of other countries except China in 2023. I checked the relevant data and found that basically all countries’ foreign trade exports have declined, while China’s exports have remained basically unchanged, which is relatively good. This shows that the decline in foreign trade last year was not caused by our own problems, but by the global economy. As we said in the 2023 foreign trade summary, the U.S. dollar's interest rate hikes and the return of global capital to the United States have caused problems in the global economy. Everyone has no money and is tightening their belts, so a decline in global trade is inevitable. But with the end of the U.S. interest rate hike cycle, there will gradually be more money on the market this year, economic activities in various countries will gradually resume, and demand for Chinese products will return to normal levels. The European and American markets have recovered, the “One Belt, One Road” initiative and emerging markets have continued to grow. With the superimposed effect of the two major markets, China’s foreign trade will usher in great growth. The turn from negative to positive foreign trade in November 2023 has already heralded the stabilization and recovery of foreign trade this year.
03Optimistic about Russia and the five Central Asian countries
Secondly, the conflict between Russia and Ukraine has given China two markets, one is Russia and the other is Central Asia. Exports to Russia exceeded US$100 billion last year, an increase of more than 50%. The Russian market will be the absolute largest player in China's foreign trade in 2023. The Central Asian market has always been greatly influenced by Russia. Whatever products are popular in Russia and which brands of products are bought, the five Central Asian countries will basically follow suit. Next year, the Russian market and the Central Asian market will still be the main force in foreign trade growth. Friends who have not laid out the Russian market, and do not even have a Russian website or Russian promotional materials, must act quickly.
04Channel restocking drives foreign trade exports
Third, channel restocking drives foreign trade exports. More than 85% of China's exports are B2B and exist as suppliers of foreign brands. In this long-chain supply structure, small fluctuations on the demand side will lead to a very large capacity run on the supply side. The result is excessive inventory of products in channel vendors. This is the case with our large foreign trade growth in 2021. . The channel destocking cycle generally takes two or three years, so the inventory products in the channel should be almost consumed by 2024, thus entering a restocking cycle and driving the growth of China's foreign trade. Therefore, compared to the currently popular B2B cross-border e-commerce, I am more optimistic about the growth of traditional B2B foreign trade next year.
05 Rolling out of China and rolling out to the world
The fourth is our unparalleled volume culture, especially the companies that can survive after 2023, are the kings of volume. Therefore, companies that are currently competitive in China will be the companies that do the best internationalization once they go overseas. This is also the key to why Temu was able to achieve such results when he went overseas for about a year. In addition to Temu, SHEIN, AliExpress and TikTok Shop, the four overseas dragons, are also growing rapidly; as supporting e-commerce platforms, express logistics service providers such as Jitu, SF Express, "Three Links and One Express", JD.com, Cainiao, etc. are accelerating their overseas expansion. , which has put considerable pressure on established express delivery companies in Europe and the United States; among the top five mobile phone brands in terms of global smartphone shipments, Xiaomi, OPPO, and vivo are among them; Mixue Ice City, Heytea, Nayuki's Tea, Brands such as Luckin and Kudi also made new expansions and breakthroughs overseas last year. As Chinese brands travel overseas, the global influence of Chinese culture has also increased, and the export of Chinese culture through short dramas, games, and short videos is also extremely popular.
In his New Year's Eve speech the day before yesterday, Lao Luo mentioned many products going overseas. The last sentence " The era of overseas expansion for the new generation of Chinese people has finally arrived ." I very much agree with it. The future outstanding Chinese enterprises will also be outstanding global enterprises.