How China is consolidating its position as the world's leading exporter?

China continues to weigh on the international stage. The country further increased its market share in world trade during the crisis. According to a note published by Euler Hermes, its market share among the world's top 20 exporters now stands at 25%, compared to an average of around 20% over the period 2017-2019. Despite the pandemic, China posted growth of 2.3% in 2020. The country's growth remains impressive, China's GDP has multiplied by 12 over the past 20 years while that of the USA has just doubled over the same period. With a current level of 16 942 billion dollars, it is now close to that of the Americans which weighs 21 921 billion dollars (Source - IMF)

 This growth is not an accident. China has been woven a network for 30 years when we entered the era of globalization after the fall of the wall. In the country of Sun Tzu, mastermind of indirect strategy, an internationalization strategy is based on 3 steps:

1.    a good knowledge of the different ecosystems through continuous Market Intelligence.

2.    an art to prioritize and target the growth market segments.

3.    a gradual allocation of the necessary resources without disturbing its foreign partners.

The two strong pillars of the international approach are the active networks and the innovation. Both are putting the country now in a more than favourable position to consolidate its position as a world leader in exports. A magical combination for China because networks provide an ideal framework for the integration of innovations and their commercialization. In return, the innovations consolidate the networks because they will be accompanied in the future by the creation of technological centres in the main foreign growth markets.

 What can we say about these 2 pillars?

 1.     Active networks :

China has been able to observe and learn the lessons of export champion countries such as Germany and Japan. The strength of a large exporting country is based on the proximity of companies to customer demand and in their functioning in partnership networks which ensure the fluidity of the dissemination of know-how. In addition to partnerships, China has understood that a strong network presupposes mastery of the essential components of a value chain, whether upstream or downstream. Thus, the country now controls the reserves of rare metals, essential for the construction of batteries for electric vehicles, and it has become a benchmark in the field of logistics by positioning itself as the leading investor in strategic port areas for world trade.

 In 2020, China has asserted itself even more against Europe and the USA. The regional partnership or RECEP, ratified on November 14, 2020, places the country in an ideal position as a locomotive in an area that represents 30% of the world's population and where a 90% reduction in customs duties is looming. By taking the lead of this zone, the country will be able to sell its new products even more easily and consolidate its position as the world's leading exporter.

2. Innovation:

It is clear that China is no longer just the workshop of the world but that it is gradually turning into a pioneer of innovation. The country no longer intends to play solely on incremental innovations and is gradually positioning itself on breakthrough innovations. Its strike force in the world of digitalization, with BATXs (Baidu, Alibaba, Tencent and Xiaomi) which already compete with GAFAM, create ecosystems and innovation clusters that benefit other industrial sectors. Its immense reservoir of economic and financial resources now allows it to accelerate in promising sectors driven by innovation: AI, energy transition, additive manufacturing (3D), robotics, electric vehicles ...

In addition, digitization will allow Chinese exporters to exercise their creative intelligence and to show even more their responsiveness in studying needs and setting up corresponding services. A recent example of agility is the Chinese company Shipparts, which offers a new e-procurement portal specializing in marine spare parts. The company supplies spare parts for boats and offshore installations. According to Shipparts, the digitization of procurement processes could soon reduce the time taken to process spare parts orders by 80%. Indeed, additive manufacturing technology has the potential to revolutionize the aftermarket industry. Parts can be produced on demand, close to the location of the demand, bypassing logistics, storage, shipping and customs procedures. It is interesting to note that this type of innovation further strengthens the network and allows Chinese players to be in contact with many foreign companies in strategic import / export locations such as port areas. Innovations do not just meet a need, they are part of a strategy of internationalization.

Conclusion

China has sowed seeds on most continents for 30 years and is now reaping the benefits of its approach to international trade. More than a lesson in economics, it is also a lesson from Asian philosophy where time is the best of allies. Besides a long-term strategy, the foundations remain solid and pandemics have not really damaged the edifice of its exporting economy. China has become formidably effective because it has taken the time to organize itself and place itself at the centre of the ecosystems of global export activity. This mastery in the art of moving and this continuous adaptability can only facilitate the introduction of new products sustainably around the world.