China’s Exporters Implement “Plan B” Against Headwinds

China’s Exporters Implement “Plan B” Against Headwinds

China’s exporters are turning to an “alternative plan” aka Plan B, to underpin exports as foreign trade continued to be affected by weak demand, experts said Monday.

“Plan B” involves manufacturing high-tech and innovative products amid ongoing supply-side structural reform to replace labor-intensive products, according to an article in Monday’s People’s Daily.

To counter ongoing economic headwinds and address issues such as excess capacity, China is implementing supply-side structural reform to improve supply quality and reduce ineffective supply.

“There is no harm in export-oriented enterprises thinking more about practicing supply-side reform,” said Li Guanghui, a researcher at the Chinese Academy of International Trade and Economic Cooperation (CAITEC).

“A rebound in exports propped up by subsidies and policy support cannot be sustainable, so China had better abandon its growth-rate obsession and channel more energy into improving quality,” Li said.

The State Council announced early this month that the government will encourage homegrown companies to invest more in brand building, promote e-Commerce and other new trade models, and transfer processing factories to central and western regions with lower labor costs.

Gu Xueming, another CAITEC researcher, said technology, brands and quality should become the key strength of China’s exports. “China should accelerate fostering these new competitive edges in foreign trade to adapt to the changing global economy.”

Through technological innovation, some companies have stood apart from the overall depression in exports.

“Given that international demand is limited, exporters who want to gain more market share should increase their competitiveness,” according to Li with CAITEC, suggesting enterprises change their focus to improving quality rather than quantity.

Weighed down by rising salaries, shrinking demand and competition from other emerging economies, China has begun to reorient its exports toward quality and technology rather than cheap products.

China’s exports and imports fell more than expected in April, underlining weak demand at home and abroad, official data showed.

Experts agreed that a quick rebound in China’s foreign trade seems unlikely.

By Xiang Bo

Paul Ebeling, Editor

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