China's status as world manufacturing base hard to buck

Bryan Chuang, Taipei; Willis Ke, DIGITIMES Asia 0

Yangshan Deep Water Port, Shanghai. Credit: AFP

The position of China as the world's largest manufacturing base can hardly be shaken in the short term despite the ongoing global supply chain restructuring and the emergence of short chains under the intensifying US-China trade and tech wars, according to market observers.

China's overall scale of industry, trade, and financial transactions is still quite astonishing and hard to be matched by other countries, the observers said, citing related study data.

China Customs statistics showed that its exports increased 7% on year to US$3.5936 trillion in 2022, and imports rose 1.1% to US$2.716 trillion, leaving a trade surplus of US$877.6 billion. This has indicated that China's industrial production performance remained strong amid the pandemic.

Despite trade conflicts with and technology containment from the US, China's industrial production has expanded rapidly after the COVID lockdowns were lifted in early 2023. Its manufacturing PMI (purchasing managers' index) rose 2.5pp from January to 52.6% in February.

While China's industrial production and trade performance are gradually back to normal, its trade with the US and China have shown signs of cooling down. Customs statistics indicated that the US imports from China reached only 16.7% of its total inbound shipments in 2022, down 1.1pp from 17.8% in 2021 and much lower than an average of 21% registered before trade war broke out in 2018.

Meanwhile, Taiwan's two-way trade with China declined to 20.8% of the former's total foreign trade in January 2023, down 1.8pp from 2022 and significantly lower than nearly 30% recorded in 2020. In the month, Taiwan saw 35% of its exports delivered to China and Hong Kong, down from an average of 40% in the past, with IC and electronics products commanding 70% of China-bound shipments.

However, Taiwan still maintains close relationship in banking transactions with China. In 2022, all banks in Taiwan remitted US$573.9 billion to China, edging up 0.1% on year, and remittances from China increased 1% to US$441.51 billion.

Statistics also show that since China adopted an open market policy in 1979, through the end of 2022 the country approved 1.126 million direct foreign investment projects valued at US$2.698 trillion, effectively helping to spur China's technological advancements and economic prosperity.