I don’t buy in the argument that China depreciates its currency to lift its “slowing” export and GDP growth. True, China faces significant export challenges as the competitors depreciate their currencies as if there’s no limit, and China also has its own problems such as high single digit wage growth. However, China has held up well its export competitive advantages through product/technology upgrade and world class infrastructure and logistic system. The chart below shows an astonishing fact that China actually accelerates its export market share while its currency experiences a faster appreciation pace.
So why we have been hearing China’s export growth is slowing? It’s true, compared to the glory days in the early and mid-2000s, China’s export growth number has declined, but so is global demand. Therefore, China is still able to get a bigger slide in a slower growing global trade pile.
It’s also interesting to see that, if excluding China and Japan, the market share of all the other Asian countries are basically the same as a decade ago. We know lots of plants are moved from China to other ASEAN countries as they are cheaper, but they are not able to lift their share. Apparently, China has moved up the value chain.
So who’s the loser? It’s Japan. Japan’s share of global trade declined from 7.4% in 2000 to 3.8% in 2015, with the Yen in 2015 is around 10% cheaper than 2000. True, we can argue that the Japanese companies already move their manufacturing base out of Japan to other Asian countries. But still, we can see China has an edge from the data above.