Pandemic Increased China's Manufacturing Share... US, Germany, and Japan Declined

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] China's influence on global manufacturing has further expanded amid the COVID-19 pandemic. Despite ongoing efforts by Western countries to reduce dependence on China due to national security and supply chain concerns, China has solidified its position as the world's largest supplier of manufactured goods.

According to a report by the Wall Street Journal (WSJ) on the 21st (local time), citing data from the United Nations Conference on Trade and Development (UNCTAD), China's share of global merchandise exports increased from 13% in 2019 to 15% by the end of 2021 in US dollar terms. During the same period, the United States' share declined from 8.6% to 7.9%, Germany's from 7.8% to 7.3%, and Japan's from 3.7% to 3.4%.

The Biden administration in the US, along with the UK, Europe, and other Western countries, have been pouring efforts into revitalizing their domestic manufacturing sectors after experiencing supply chain crises due to COVID-19. Nevertheless, experts predict that despite global economic challenges this year caused by inflation, interest rate hikes, and the impact of the Ukraine war, China's export boom is expected to continue, WSJ reported.

One reason for the continued expansion of China's manufacturing influence is price factors. As consumer goods prices rise due to inflation, the value of Chinese exports, when converted into US dollars, has increased rapidly. According to Chinese government announcements, China's export volume in June this year rose by 22% compared to the same period last year.

Another factor is China's improvement in production technology, steadily increasing its market share of high value-added products. WSJ analyzed that as Chinese factories expand into high-quality products such as semiconductors and smartphones, as well as new technologies like electric vehicles and green energy, the 'decoupling' strategy aimed at reducing dependence on China has become more difficult.

In fact, China's share of global textile exports increased from 32% in 2019 to 34% in 2021, while the share of electronics exports expanded more significantly from 38% to 42% during the same period. Additionally, China's solar cell exports in the first half of this year reached $25.9 billion (approximately 34.6 trillion KRW), a 113% increase compared to the same period last year. China's automobile exports also hit a record high of 290,000 units in July.

Lori Green, Head of China and Asia Research at TS Lombard, explained that this is why traditionally electronics and heavy equipment manufacturing countries like Germany are losing export market share to China. Although the US is leading efforts to reduce dependence on China, WSJ reported that other countries find it difficult to distance themselves from China considering its importance as both a buyer and seller in the global trade market. Green said, "The US is fighting against geographic realities and the center of the economy."

The Chinese government's provision of subsidies and low-interest loans to manufacturers rather than consumers during the pandemic was also mentioned as a background for the expansion of China's manufacturing influence in the global trade market. This, according to Michael Pettis, a professor at Peking University, has made Chinese consumers struggle with consumption and made the Chinese economy vulnerable to sudden changes in overseas demand. He told WSJ, "It is completely wrong to view China's trade figures as a bright side of its economic activity," pointing out that "China's inequality problem is worsening."

This content was produced with the assistance of AI translation services.