In the first five months of 2022, China's gross import and export value increased by 8.3% year on year. In May, China's exports totaled RMB1.98 trillion, up by 15.3%, setting a new high of recent months.

As far as the current global situation is concerned, demand in the US and European markets and rising raw material prices have made it impossible for enterprises in Europe, America, Latin America, Japan and South Korea to operate at full production capacity. Future demand for Chinese goods will grow strongly. As a result, China's foreign trade orders are expected to rebound strongly in the third quarter of this year.

Shanghai, which accounts for about 20% of China's total exports, is also gradually eliminating the impact of the pandemic.

The city has the ability to catch up from behind and make up for the lost ground, because it has three major advantages which other cities do not have.

Firstly, Shanghai boasts an opening-up DNA. A series of opening-up consciousnesses, policies and business environment formed over the years will play an important role in the future.

Secondly, Shanghai enjoys a strong and high-quality economic and trade force. When it comes to foreign negotiations, attracting of foreign investment, or international rule-based system building, this whole force takes the national lead in habits, thinking and expertise. These advantages have not disappeared. Rather, they are irreplaceable and will play a greater role in the post-pandemic era.

Thirdly, Shanghai has built a strong foundation in manufacturing, transportation and finance. With Pudong New Area as the pivot, Shanghai plays the role of a leader of the whole supply and industrial chains. The pause of chain operations in Shanghai will affect the Yangtze River Delta region. However, once the chain head rotates, it will drive the whole chain to rotate at the same time, unleashing the momentums of the Yangtze River Delta region and even the whole country.

In the course of catching up at the next step, Shanghai needs to focus on improving efficiency, opening up wider to the outside world, attracting more headquarters economies, and intensifying the implementation of RCEP and CPTPP. While ramping up its foreign trade volume, Shanghai will also improve its foreign trade quality.

Foreign trade is a gateway for transformation. Shanghai needs to seize the opportunity to form a new pattern with the domestic circulation as the mainstream, with domestic and international circulations promoting each other. Shanghai has the ability to optimize the allocation of all production factors, including land, capital, talented minds, technology and information. This is also a bigger test for Shanghai.

With regard to the issue of transfer of some industries and loss of orders, proximity to factories and proximity to markets are widely recognized by foreign investors as a perfect mix for investment. Shanghai is precisely such a destination – it can count on the strong supply chains of the Yangtze River Delta region, while it ranks first in the country in terms of total retail sales of consumer goods and per capita consumption.

The business transfers of some foreign investors are very much of a tentative nature. They tend to move those costly parts out to elsewhere, but still keep their R&D in China. There have been changes in the business layout of foreign investors in China, and they are also upgrading their industrial chains. While attention needs to be paid to the flow of foreign capital, there is even a greater need to analyze what have been transferred out and what are coming in. At present, China's supply and industrial chains are still the most efficient and robust ones. Higher labor costs than in Southeast Asia will not affect the pace of supply and industrial chain upgrading.

While maintaining optimism about the foreign trade prospect of Shanghai and even the whole country, we should also continue to consolidate the foundation. In particular, we need to vigorously develop the thriving cross-border e-commerce. This will not only solve the development and labor shortage problems of small and medium-sized enterprises, but also promote the improvement of the overall logistics situation.

As clouds are cleared away, the blue sky will come into view. We need to focus efforts to take the next step well. It is imperative to raise the level of opening up to the outside world. This is the main line, the starting point, as well as the foundation for establishing an invincible position. While strengthening the high-level opening-up, it is also vitally important to promote the establishment of a high-standard market system, catalyze the formation of a unified, open and orderly competitive market system, and create a market-oriented, law-based and international business environment.



Source: Wei Jianguo (former Vice Minister of the Ministry of Commerce and Deputy Director-General of China International Economic Exchange Center)