While Hong Kong’s trade numbers deteriorate amid a worsening global economy, Guangdong’s are staying in positive territory. Could this be due to relocation of production of older industries from the province to countries in Southeast Asia, particularly Vietnam? It is hard to tell from the latest data, but it is a plausible theory.
Guangdong’s trade with ASEAN members (including Vietnam) rose 5.3% in the first seven months of the year. At RMB524.91 billion, it now accounts for 13.5% of Guangdong’s total foreign trade. However, the province’s resilience in the face of the US-China trade war is not only showing up in the nearby region. Trade with the European Union – hardly a low-cost processing center – rose 12.7% in the first seven months. At RMB487.66 billion, it now accounts for 12.6% of Guangdong’s total foreign trade.
Bigger than both of these markets, however, is countries along the Belt and Road Initiative, which rose by 5.45% to RMB911.52 billion. Who are they? Basically everyone between here and Europe, including Asia, Africa and central Europe.
The slowdown in trade with the US cannot be ignored, of course. From January to July, Guangdong’s overall trade grew just 0.2% to RMB 3.89 trillion, i.e., no guesses as to where the weakness came from if all the other main partners were growing above the average. However, here is a news flash for US President Donald Trump: this decline was due more to a drop in imports rather than exports, which rose 3.3% to RMB2.36 trillion, i.e., the tariffs are having the opposite of their intended effect, at least where Guangdong is concerned. (By the way, Guangdong accounts for 22.3% of China’s overall foreign trade.)
Moreover, growth in the private sector continues to looking encouraging, with trade for the first seven months up 5.2% to RMB1.98 trillion yuan. It now accounts for 50.9% of the province’s total, up 2.4 percentage points over the same period last year.
The quality of trade is also on track for significant longer-term improvement. Exports of mechanical and electrical products rose 2.5%, accounting for 68.7% of the province’s total. Medical equipment was a standout at RMB15.31 billion, up 19.4%, while vehicle exports shot up 23.8% to RMB2.34 billion yuan. Exports of traditional goods, known as “labor-intensive products” still dwarfed these at RMB406.28 billion, yet even these are still in positive territory at 1.2% YoY growth.