Reasons for Chinese Foreign Trade Growth under Corona & Global Recession Conditions

2021/08/29 | Economy, Note, top news

Strategic Council Online- Note: Chinese export volume during the first 7 months of 2021 showed 24.5% growth and the import of the country 24.4% growth respectively. This is the case while the trade volume of foreign companies stationed in China had as much as 16.7% growth. There is a question that despite the pessimism of a large number of economists on leaving behind Corona economic crisis, how could such growth rate be attained? Reza Majid-Zade, Researcher, Development Political Economics

Prior and coincided with the spike of Delta variant of Covid-19 virus throughout the world, very many of business events in China were cancelled. Intensification of controlling measures in many provinces of the country was followed by the reduction of purchase power and demand level. Even some of analysts predicted that if such controlling measures continue by September 2021, Growth Domestic Product (GDP) of China may fall to less than 8.8%.

In fact, there was a silver lining after the successful production of Corona vaccine at global level, in a way that the spike of Corona virus will gradually contained completely and world economies will get rid of the recession emanated from the virus. Holding of the Union of European Football Association (UEFA) before the fans raised the hopes but the spike of Delta variant caused strong decline of the hopes.

Yet, the considerable growth of Chinese foreign trade in such a situation is still the matter of question. Although even before the spread of Delta, the Chinese economy had indications of performance discrepancy within itself. GDP of the country increased 18.3% in the first quarter of 2021. Many experts assessed the growth rate as temporary and short-term, but now another indication of different trend within the spike of Corona can be seen. However, during the second quarter of 2021 Chinese GDP growth rate fell to 7.9%, which still continues to be a high figure when compared with the economic growth rate of other countries.

Moreover, China has a trade volume of nearly $ 4 trillion with the whole world of which more than $ 400 billion is with the U.S. alone. A glance at the list of export-import goods of China shows that from volume point of view, the export of agricultural products, petrochemicals, bags, shoes, ceramics, steel and LCD panels are at the top of the list. Iron ore, copper ore, coal, crude oil, natural gas, diode and similar semi-conductors, integrated circuits and raw plastics are on the top of the Chinese import list.

Among the most important reasons for Chinese success are increase in consumption and retailers from one hand and further flourishing of service sector in comparison with industrial manufacturing from the other hand. Even during the first peak of Corona virus last year, state organizations and franchised internet shop online like Alibaba, used to provide vouchers and special offer festivals to boost the demand level again. The policy continued during the year 2021. The plan called “New Infrastructure” of China with mega scales that provide required infrastructure for the 5th generation of the Internet and data centers, should also be taken into account along with the aforesaid factors.

But at governing council level, coordination of a policy to preserve the economic growth at a reasonable level, stable policies of macro economy and further supporting of small and medium enterprises are all amid the reasons to register such an economic performance. Despite the trade war between the U.S. and China, trade figures between the two show an increase and Chinese exports to the U.S. had 40% growth. Although the increase of prices of raw materials exerted too much pressure on Chinese factories, but the country’s authorities tried their best to keep the prices fixed in order to prevent further increase of cost pressures on such industries. In adopting her trade and forex policies and in addition to long term approach, China concentrates on time conditions and requirements as well. After achieving her goals, China may change her political attitude but her long term trade and forex attitude is to surpass the U.S. economy and to turn into an economy dominating the world based on “Made in China 2025” perspective.

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