China's exports at a glance

money.jpgA couple of days ago I posted an entry about the global economy and the China effect. In that entry I discussed to socalled China effect of exporting deflation in consumer and manufacturing goods and argued based on data showing rising wages and costs in China that this effect might well be on the reverse. However, I did not look at the nature of Chinese exports and this was a mistake since this tells a great part of the story. Not only is China's declining spare capacity for producing cheap consumer and manufacturing goods pushing up prices but China is also as a consequence pushing up the value chain ... or at least trying hard. This important aspect of China's place in the global economy comes from New Economist ...

(from the FT) 

'The composition of China’s exports has begun to change rapidly, away from reliance on cheap, low-margin goods to more value-added manufactures offering much higher profits, according to a number of new reports.

While sales overseas of low-end goods are in many areas stagnating, often because China’s penetration of foreign markets is already so high, exports of telecommunications equipment, auto parts software and ships have grown by between 30 to 150 per cent since 2005, according to a Deutsche Bank report.

The change means China is increasingly competing against developed countries in industries in which it used to be a bit player, and will also provide ballast to the country’s high and politically sensitive trade surplus. “Across a wide range of machinery and industrial intermediate goods, China is now a net exporter,” said Arthur Kroeber, of Dragonomics, a consultancy, in Beijing.

The transformation has been driven by factors ranging from rising Chinese wages, which have pushed some low-end manufactures offshore, to increased policy support for higher value-added goods.

China’s nimble and growing private sector has also helped accelerate the move up-market, because of its ability to take advantage of opportunities more quickly than the state sector.

“Private enterprises have been growing much faster than state enterprises, and many of the private firms have moved quickly into the high-end products to capture the market and profit margins,” said Jun Ma, chief China economist for Deutsche Bank.'