Top Biz News

China's higher-end exports grow rapidly

(Financial Times)
Updated: 2006-07-04 14:18

The composition of China's exports has begun to change rapidly, away from reliance on cheap, low-margin goods to more value-added manufactures offering much higher profits, according to a number of new reports.

While sales overseas of low-end goods are in many areas stagnating, often because China's penetration of foreign markets is already so high, exports of telecommunications equipment, auto parts software and ships have grown by between 30 to 150 per cent since 2005, according to a Deutsche Bank report.

The change means China is increasingly competing against developed countries in industries in which it used to be a bit player, and will also provide ballast to the country's high and politically sensitive trade surplus.

"Across a wide range of machinery and industrial intermediate goods, China is now a net exporter," said Arthur Kroeber, of Dragonomics, a consultancy, in Beijing.

The transformation has been driven by factors ranging from rising Chinese wages, which have pushed some low-end manufactures offshore, to increased policy support for higher value-added goods.

China's nimble and growing private sector has also helped accelerate the move up-market, because of its ability to take advantage of opportunities more quickly than the state sector.

"Private enterprises have been growing much faster than state enterprises, and many of the private firms have moved quickly into the high-end products to capture the market and profit margins," said Jun Ma, chief China economist for Deutsche Bank.

The bank estimates high-end exports will grow for 30-40 per cent a year for the next three to five years with some sectors, such as auto parts and software outsourcing, possibly enjoying a sustained expansion "for even longer".

The high-end goods have less market share and therefore have space to grow, whereas cheap traditional exports, such as toys, where China already has 80 per cent share of US imports, have run out of steam.