Take Stock Of "Chinese Style Trade" In Footwear And Other Industries.

foreign trade

Compared with the growth rate of GDP, it can be said that the speed of development is too much.

China's export growth is second to none in the world.

At the beginning of reform and opening up, China's exports accounted for less than 1% of global exports and export value ranked thirty-fourth.

Today, China's exports account for about 10% of global exports, ranking the top.

In 2009, under the influence of the global financial crisis, China's exports dropped by 16% over the historical high of 2008. There was no hope of upgrading from the second largest exporters in the world.

But there is no coincidence that Germany is dragged down by the crisis, and exports are decreasing sharply.

In this way, China took the seat of the first big export country in 2009.

Then, is there a unique "China mode" for China's exports?

At first glance, it does not seem to exist.

IMF has done a study: if the main industrial countries in Asia are

But obviously, this does not explain all the problems.

As pointed out by Professor Dani Rhodes Rick Dani Rodrik of Harvard University, the complexity of China's export products is much higher than that of the same income level countries.

According to reason, China is a labor-intensive country with a large population and low wages. It has a comparative advantage over foreign countries and will export labor-intensive products.

The problem is that data do not fully support this theory.

In fact, the most exported products in China at present are not clothing and shoes, but pportation equipment and machinery products.

Real world examples are also consistent with data.

Ten years ago, I drove along the 90 interstate highway nearly two thousand miles across the US mainland.

When passing through Montana, people were sparsely populated. It was hard to see a truck in front of the road.

After stepping on the throttle, it was found that it was a special delivery of Haier air conditioners! I went to the The University of Western Australia for an academic lecture two years ago. There was a Hisense TV in the hotel room.

In fact, there is a lot of trade with the industry in China today.

Take the machinery industry as an example, at present, the import of machinery products accounts for about half of China's total imports. At the same time, the export of machinery products accounts for nearly half of China's total exports.

Why are there imports and exports in the same industry? According to Krugman, the economist Nobel prize winner, it is mainly due to the increasing scale economy.

Because the products in the same industry are very similar, but for consumers, good is good for this "small difference", they like to have more choices.

To producers, the expansion of the market is the main reason for trade in the same industry.

This explanation applies to China, of course.

However, the highlight of China lies in the processing trade.

China imports raw materials and intermediate products from abroad and sells them to foreign markets after processing.

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Processing trade is the biggest difference between China's exports and other countries today.

It is said that processing trade is Chinese mode, not equal to that of other countries.

In fact, such countries as Mexico and Vietnam have processed trade.

But the problem is that the scale of processing trade in these countries is not as large as that of China.

Last year, China's import and export volume of processing trade exceeded US $1 trillion and 100 billion, accounting for half of China's total import and export volume.

Processing trade is the biggest feature of China's trade today, not before.

As early as the early 80s, there were "three to one supplement" in Guangdong, Dongguan and other places.

The problem is that the volume of processing trade at that time is relatively small.

Since 1996, processing trade has begun to exceed general trade, and since then, China has secured the half wall of China's foreign trade.

With the analysis of the import and export pactions provided by the General Administration of Customs in the new century, the author finds that China imports more raw materials and intermediate products from Japan and Korea, and exports to Europe and the United States are mostly finished products.

This partly explains why the United States and Japan are both big countries, but China has a large trade surplus with the United States, while Japan is mostly trade deficit.

The existence of processing trade also explains the mystery of the current export of Chinese enterprises.

At present, there is a very important debate in the international trade academia, that is, the performance of Chinese export enterprises is good, or is the performance of domestic enterprises good?

Because enterprises have to export, they must contact importers abroad, set up sales channels and sales network.

The extra cost of these exports requires export companies to achieve better performance.

But in China, things are not so simple.

A few days ago, my collaborate with Professor Robert Feenstra of California University and Dr. Li Zhiyuan of fortune Cai found that the performance of Chinese exports and the performance of non export enterprises were lower than those of other industries.

But in general, the performance of export enterprises is worse.

Why? There are many reasons for the explanation, but mainly because of the processing trade.

More accurately, thanks to the "incoming processing" trade.

Although there are sixteen kinds of processing trade, there are two main categories: processing and processing.

In eight and 90s, raw materials processing accounted for the largest part, but in the new century, the processing of raw materials came first.

What is the difference between the two categories?

There are two differences.

The first is that the customs impose different taxes on these two categories of processing, and the customs does not impose tariffs on the processing trade.

But for the processing of feed, it is a pass and goose.

Tax rebates, after processing and re export, are called tax rebates.

Roughly speaking, there is no difference between the two, but the "little nine nine" is still very interesting: the processing of materials is completely free of tax burden, so enterprises with low performance can also do it, which is a good case of empty handed white wolf.

However, the processing of incoming materials has higher requirements for the cash flow of enterprises, so only those enterprises with relatively high performance can cross this threshold.

Secondly, raw materials processing strictly follows "where and where to go".

Processing enterprises do not have to pay the cost of incoming materials, they only earn processing fees and sell cheap domestic labor.

Because the added value of products is not high, and most of them are labor intensive.

Three under five, except two, labor productivity or performance of enterprises is low.

Feed processing trade is different.

The source and whereabouts can be different.

For example, an enterprise can import core components from Japan, assemble and process in the country, and then export to Europe and the United States.

And enterprises must pay the cost of raw materials.

As a result, enterprises have the initiative to adjust the input of various elements, so as to optimize their production and maximize their profits.

In fact, the performance of the feed processing enterprises is very good, and their productivity is not only higher than that of the raw materials processing enterprises, but also higher than that of the pure domestic sales enterprises.

To put it plainly, the low performance of processing trade has dragged the back leg of export enterprises.

In this case, do we still insist on processing trade?

Yes.

The answer is very simple.

Although the raw material processing trade is worse than domestic enterprises, it can solve at least part of the problem of labor force employment.

As for the development of processing trade, the benefits are more obvious.

First, through the process of feed processing, enterprises have the opportunity to get the "imported products" of higher quality. By learning the core technology, enterprises can really make use of the "jade of his mountain" to realize the independent innovation of core products.

Second, the income of core components, combined with other raw materials and peripherals of enterprises, is likely to increase the scale of 1+1>2.

Recently, foreign scholars have used the US data to verify this possibility from the measurement.

Third, for consumers, processing trade means that consumers can have more choices of consumption.

In this way, consumers can achieve higher utility when given the same expenditure.

Speaking as a vernacular is: processing is beneficial to the people to get more money with the same amount of money.