China’s unapologetic export playbook: What the China Development Forum really signaled

Chinese authorities are done apologizing, if they ever started.

That’s been one of the main themes from my conversations in Beijing this week – many of which focused on messaging from the new 15th Five-Year Plan and remarks by Chinese officials at the China Development Forum (CDF).

• The CDF, for the uninitiated, is an annual gathering where Chinese officials tout the wonders of China’s economy and the huge opportunities it presents to foreign companies – or at least that’s what it used to be.

While I wasn’t at CDF myself, the folks I’ve spoken with who attended almost universally noted that the tone from officials was notably matter-of-fact, largely focused on trade, and pretty much boiled down to:

• “Yes, we’ve got an export-oriented growth model. Deal with it.”

The official verbiage was, of course, less direct – but only slightly. Premier Li Qiang, for example, in his keynote speech at the CDF, at least padded the message with this:

• “We take our trading partners’ concerns seriously and we are ready to work with all parties to promote the sound and balanced development of trade.”

But only before proceeding to state that:

• “China’s imports and exports represent fair trade conducted within a rules-based framework.”
• “China’s competitive advantages have not been achieved through subsidies and protection, but through…the hard work and dedication of the Chinese people and Chinese enterprises.”

As one European diplomat put it to me, the message was: “Quit whining that our companies are more competitive than yours.”

What I find remarkable about this messaging isn’t what it says about China’s fundamental approach to economic growth.

• We’ve been saying for months that China’s plan is to double down on industrial innovation and upgrading, which almost by definition means continued reliance on export markets to absorb excess production.

What’s striking is the pointed shift to a much more unapologetic attitude.

• China’s leaders clearly understand that much of the rest of the world is deeply concerned about the influx of Chinese goods hitting their markets.
• But rather than seeking to assuage those concerns – and avoid future fits of trade tension and retaliation – they seem to be daring other countries to do something about it.

The bet seems to be that most countries, or trading blocs, won’t get their acts together enough to materially push back against China’s export juggernaut.

• Even the US tariffs on Chinese goods – unprecedented in recent history – have only succeed in diverting low-value manufactures (think toys, textiles, and fast fashion) away from the US and toward new markets.
• They’ve had less impact on higher-value exports to the US – either because those goods were never sold there at scale (i.e. NEVs) or were exempt from the tariff regime anyway (i.e. smartphones and medical equipment).

It seems to me, then, that China is likely to continue pushing its export machine to its absolute theoretical limit – and I think we still have a way to go until we reach that limit.

• That means that China’s exporters can continue capturing wallet in a range of new markets, both by riding overall global demand growth and – crucially – by eating into the market share of exporters from developed economies.

The upshot will be that despite the loud – and growing – complaints from other countries, China’s export model will prove more sustainable than is commonly assumed. 

• And until other countries take action, rather than simply complaining, Chinese officials will happily stay the course.

As always, if you want help thinking through what this all means for you, get in touch and we can set something up.

Andrew Polk, Partner and Co-founder, Trivium China