0911 GMT January 22, 2022
The shift highlights the growth in the domestic economy, which could make Beijing better able to withstand trade tensions under US President Donald Trump, who has threatened to hit the country with punitive tariffs.
China exported $1.65 trillion of goods and services in the first three quarters of 2016 — a 7.2-percent fall from the same period a year before. During the same period the country’s ratio of exports to gross domestic product fell to just 20.2 percent, compared with a 2006 percent peak of 38.6 percent, according to FT calculations.
Its export intensity is now a fraction above that of India, which had a comparable figure of 19.4 percent in the first nine months of 2016, and which is tipped to overtake China, possibly as early as this year.
If so, this would be the first time China’s export intensity has fallen below India’s since 1979, shortly after Deng Xiaoping began the deconstruction of Chairman Mao Zedong’s legacy with a call for reform in December 1978. Then, China’s exports amounted to just 6.4 percent of GDP.
“Since 1991 China has had a phenomenal rise in terms of the integration of its manufacturing sector in the global economy, but even before the global financial crisis that picture started to change,” said Louis Kuijs, head of Asia economics at Oxford Economics, who believes India could forge ahead this year, although his central forecast is that it will not do so until 2020.
“It’s not that since then we haven’t seen any export growth, but global trade is growing significantly slower than China’s own economy. In our medium-term forecasts, India’s ratio stabilizes and China’s continues to fall,” he added.
Mark Williams, chief Asia economist at Capital Economics, who believes India could overtake China this year, added: “It’s not so much that China has done so much worse than other parts of the world, but its GDP has grown very fast so its share of exports to GDP has gone down a lot.”
Although many smaller countries already have higher export ratios, it would symbolize a major shift in the global economy if China — a country widely perceived as an export powerhouse with a large current account surplus — fell behind India — commonly seen as a relatively closed economy beset by a current account deficit — given that India’s population of 1.33 billion is comparable to the 1.38 billion of China.
China’s rise as an exporting powerhouse was driven by a concerted push to develop a low-cost manufacturing sector, integrate it into the global economy and grab global market share.
However, Kuijs argued that now China has built up a significant market share in many sectors, it has become ever harder to increase it still further.
Meanwhile, China’s government has been attempting to reorient the country away from export-led growth and towards domestic consumption.
“China launched a huge and sustained stimulus effort at the end of 2008,” said David Lubin, head of emerging markets economics at Citi.
“Domestically-driven demand for capital goods replaced what had previously been an externally-driven demand so the economy came to have a more domestic bias.”
In contrast, “India has struggled to develop a big manufacturing sector, which all of the really successful Asian economies have used to generate lasting economic growth,” said Williams.