Foreign trade is sluggish, it’s time to focus on internal strength

Focus on internal strength due to sluggish foreign trade

Recently, “China’s foreign trade decline, port empty container accumulation” has become a hot topic among many self-media outlets. So, is the export, as one of the three pillars of China’s economy, really “stalled”? Let’s explore the truth.

0 1 Current situation: Shipping data is indeed not good

There is currently no accurate figure for the foreign trade situation in early 2023. Due to the Spring Festival holiday, the General Administration of Customs usually releases the combined import and export data for January and February on March 7th each year. So we can only evaluate the current situation indirectly.

Overall, it is definitely on the cold side.

On February 11, 2022, China’s container shipping price index (CCFI) was still at a historical high of 3587.91 points, and it has been falling ever since. By December 30, 2022, it had only reached 1271.31 points, and in the latest issue on February 24 this year, it closed at 1077.75 points, and the downward trend has not yet stopped.

The shipping price for Shanghai to the US West Coast route is $1234/FEU (40-foot container), a year-on-year decrease of 84.7%; the shipping price for Shanghai to Europe route is $882/TEU (standard container), a year-on-year decrease of 88.3%.

Image source: Shanghai Shipping Exchange

The price trend from “hard to find a cabin” to “ship snatching” is the most intuitive reflection of the supply and demand relationship. (From “Wu Xiaobo Channel”)

0 2 Multiple observations from logistics, suppliers, and demand side

At the State Council Information Office press conference in February this year, Li Xingqian, Director General of the Department of Foreign Trade at the Ministry of Commerce, pointed out that the current risks of global economic recession are rising, external demand growth is significantly slowing down, and the international supply chain pattern is also undergoing accelerated restructuring, making the development environment for foreign trade extremely severe.

He mentioned, “The main contradiction in our country’s foreign trade field, which was supply chain disruption and inadequate fulfillment last year, has now shifted to weak external demand and declining orders.”

The essence of logistics lies in demand. At present, when the weakening of external demand has become a consensus, logistics companies are also facing challenges in their survival environment overseas.

Previously, a group of logistics companies took the fast track to overseas investment and layout by riding on the Chinese brand and cross-border e-commerce that accelerated going global. The sales of Chinese brands overseas drove the volume of logistics companies and almost became the engine of their overseas business growth.

Now, with the slowdown of foreign trade growth, logistics companies that have already headed overseas are struggling to find a second growth point.

Similarly, before the Spring Festival, news about foreign trade companies rushing to seize overseas market share was once on the hot search list, but now it seems that visiting the market in groups to conduct research is more accurate.

At the same time, suppliers such as Yiwu and Shantou also reflected that “overseas customers have increased inquiries after the Chinese New Year, but they mainly look at products and there are not many actual transactions.”

Due to the economic slowdown, the transfer of Southeast Asian industries, and political confrontations, uncertainty in bilateral trade has increased, and overseas customers are more inclined to adopt a wait-and-see attitude.

03 Cross-border e-commerce needs to improve its “internal skills.”

More and more Chinese manufacturing companies rely on cross-border e-commerce to achieve product export and overseas sales.

Especially since 2023, a series of supporting policies have been intensively introduced to improve customs clearance efficiency, cultivate and strengthen overseas warehouses, reduce the cost of cross-border e-commerce enterprises’ export returns, improve the logistics infrastructure for the development of cross-border e-commerce, and promote the high-quality development of cross-border e-commerce comprehensive experimental zones. We can see that the government is providing strong support for cross-border e-commerce.

At the same time, cross-border e-commerce has also promoted the rapid development of cross-border logistics and overseas warehousing construction.

In the foreseeable slowdown trend this year, how to more securely complete industrial upgrading and transformation, and take advantage of China’s e-commerce going global, to form a cross-border e-commerce ecosystem with an efficient supply chain and strong market competitive advantage is the “internal strength” that we must cultivate by 2023.

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