How to "retain" incoming export orders

In the first 10 months of this year, China's import and export of goods totaled 25.95 trillion yuan, up 1.1 percent from the same period last year, marking the seventh consecutive month of positive growth in exports, the General Administration of Customs announced in October. In addition to the timely control of the epidemic and steady resumption of production and work in Europe and the United States, and the improvement of the external demand environment for the economies of the United States and Europe, some Countries in South Asia and Southeast Asia have transferred some of their export orders to China due to the severe epidemic.

Some textile export orders have been diverted from India to China recently. In addition, furniture, auto parts and other orders from some countries have also been diverted to China. However, whether this "inflow" of export orders will be temporary or can be "retained" into the long-term development space should be further analyzed, which is related to whether China's manufacturing industry can be more active in the international division of labor in the future.

Take export order transfer in Indian textile industry as an example, I think it should be treated calmly. Although India is a major exporter of textiles, its long-term substitution relationship with China's textile industry is not obvious, so short-term order transfer cannot be linked to long-term capacity substitution. Different from Vietnam, Bangladesh, Cambodia and other countries, India is not the most important destination for China's textile industry to transfer production capacity to other countries in recent years. The flow of Indian textile orders to China is less characterized by "return", so in the short term, the flow of orders to China's garment industry is more based on connections. Orders diverted simply out of "emergency" needs are easy to come in and just as easy to come out in the future when India's textile industry returns to normal.

In addition, the recent transfer of Indian textile export orders does not mean that the pressure brought by the epidemic on the whole manufacturing industry will disappear, still less does it mean that the transfer process of some manufacturing enterprises will stop. Textile export orders in India to China almost at the same time, the United States apple from China to India the six production lines, shows that under the outbreak of export orders into represent only a partial of manufacturing, and for other manufacturing companies, not necessarily will meet orders inflow, perhaps even facing the offshoring production capacity. Due to the difference in labor costs, the transfer of some labor-intensive enterprises in China to low-income countries in Southeast Asia and South Asia, such as Vietnam, Cambodia, Bangladesh and Indonesia, will also continue.

In general, when China has achieved remarkable results in its fight against the epidemic, the order transfer has its rationality due to the serious epidemic situation in other countries, but in the near future, it does not belong to the trade transfer effect in the sense of international division of labor. The "inflow" of orders is far from equal to "retention". If domestic export enterprises do not have core competitiveness, they can only take the role of "spare tire" to undertake international order transfer. To this end, we need to continue our efforts in the following areas:

First, although the export trade situation has improved due to the "inflow" of export orders from other countries, the intensity of "stabilizing foreign trade" measures should not be weakened because of this, and in order to "retain" orders, special support policies can be introduced to strengthen the adherence of China's manufacturing industry to export orders. As a major trading nation in the world today, it will be increasingly difficult for China to expand its international market in the future. In addition to the increasingly fierce competition, there will also be more and more trade frictions, which is an unfair treatment that China, as a trading power, can hardly avoid. Therefore, it is necessary to strengthen the support policies for "stabilizing foreign trade" and make it develop in the direction of regulation. We can follow the practices of some countries such as the US and study the introduction of China's version of the Trade Remedy Law, so as to make all kinds of trade promotion measures more lawful under the epidemic situation.

Second, by taking advantage of the inflow of orders to China, it also attracts the relevant advanced production capacity, cutting off the "turning back" in order to prevent the export orders flowing into China from flowing out of China again. Despite the gradual rise in labor costs, China's complete industrial chain is also an irreplaceable competitive advantage for countries around the world. In September 2020, Harley closed its factory in India and stopped all operations in India. After paying a $169 million restructuring charge, Harley accelerated its entry into the Chinese market. While India's labor costs are lower than China's, the supply of components for assembling motorcycles can be largely met in China. Moreover, India's tax burden is so heavy that Harley pays a third of the price of every motorcycle it sells in India, making it virtually unprofitable for the company. In view of this, we need to match the improvement of the competitiveness of export products with the improvement of the business environment, so that incoming orders can play a guiding role in attracting investment. It is suggested to set up a special fund for "attracting investment through trade", starting from industrial supporting facilities, logistics services, freight forwarding, research and development, information, training and other aspects, so as to increase the attractiveness of China's manufacturing industry to export orders and turn it into an attraction for foreign advanced production capacity.

Third, take the initiative to improve the overall competitive advantage and increase the manufacturing industry's capacity to undertake incoming orders. For some industries with development potential in China, we should not only "retain" orders, but also try to take advantage of the opportunity to extend the "Chinese segment" of the global industrial chain and supply chain. Therefore, on the one hand, we should attract the inflow of export orders with price competitive advantage; on the other hand, we should retain the transferred export orders with non-price competitive advantage. We should more actively cultivate new advantages in foreign trade competition and make China's manufacturing industry more attractive to foreign customers by focusing on technology, quality, service, brand and standards. Although the rising of labor costs is a long-term trend, we should strive to cultivate new competitive advantages in foreign trade, so that the resulting non-price competitive advantages increase faster than the rate of price competitive advantages decline caused by the rising of labor costs. In order to facilitate the import of incoming orders into the division of labor system of China's manufacturing industry, it is suggested to establish "import platforms" for a number of industries on the basis of existing Chambers of commerce for importers and exporters and corresponding industry associations to provide intermediary services for domestic and foreign export enterprises.

Fourth, while it is true that export enterprises should strive to retain orders, they also need to be prepared with both hands to undertake some export orders that are difficult to undertake and have little room for growth. Once the inflow of export orders becomes unsustainable, there is no need to "hold on" to prevent orders from turning into "chicken ribs". According to the change of export order flow direction, we should increase the adaptability of export enterprises to the changes of international market. To this end, in the process of receiving orders to enhance the initiative, as far as possible to use the existing capacity to complete the order, to prevent the dilemma can not fall into. At the same time, not all current export orders, known as flyers, are suitable to stay in China. To see whether they have the conditions to retain orders, some orders are unstable, the completion of some orders require large-scale expansion of supporting facilities, so it is not appropriate to stay. In addition, we should always be alert to the signs of "withdrawal of orders" from overseas customers, and resolve the possible risks of "withdrawal of orders" in advance by increasing export varieties, expanding market scope, and trying to transfer exports to domestic sales.