In April, China's foreign trade surplus soared by 96.5%, and the rumors of a manufacturing crisis were debunked without any effort. Does this mean that the economy is experiencing a strong recovery? In the context of the relocation of large factories producing labor-intensive low-end products, who has taken up the mantle of China's huge trade surplus?

The rumors about the manufacturing industry were debunked without any effort.

According to data from China's General Administration of Customs, China's foreign trade surplus surged by 96.5% in April, debunking the rumors of a manufacturing crisis.

In January and February 2023, China's goods exports were on a downward trend compared to the same period last year, with a 15.1% decrease in January and a narrowing decrease of 1.3% in February. The decline in export data sparked discussions about a crisis in China's manufacturing industry.

The withdrawal of some contract manufacturing and labor-intensive enterprises from China to Southeast Asia further intensified people's concerns.

Additionally, at the beginning of the year, the container index, which reflects the good or bad economic indicators, also showed problems. Containers piled up like mountains at the world-class large port of Shanghai, and Shenzhen Yantian Port had accumulated up to seven layers.

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As a result, discussions about the decline of China's manufacturing industry were incessant, and even some well-known scholars shouted out "the collapse of China's manufacturing industry."

So, what is the logic behind these pessimistic statements? What is the truth?

The reasons for pessimism about China's manufacturing industry are roughly as follows:The first issue is the often-heard "labor shortage." With the growth of the domestic economy, the cost of living for people has been continuously increasing. Some labor-intensive manufacturing industries, due to wage reasons, do not have enough appeal to young people. Other internet industries, such as IT, food delivery, and live streaming, have attracted a large number of young workers. The shortage of labor naturally leads to the predicament of labor-intensive manufacturing industries.

Secondly, in the context of a shortage of labor talent, low-end manufacturing industries need to increase workers' wages, which increases labor costs. This leads to even lower profits or even losses for the already thin-profit manufacturing industry. A large number of manufacturing industries have moved to places like Southeast Asia, where labor costs are lower, resulting in an increase in unemployment rates in related industries in our country.

Take Foxconn, for example. Foxconn is Apple's global assembly line, as well as Intel, LG, and even some domestic companies such as Goertek and Lens Technology. For these manufacturing companies, what they pursue is cost. These assembly lines do not require a high level of industrial development; as long as the cost is low enough for the company to make a profit, it is acceptable.

Furthermore, for many years, our country has been referred to by other countries in the world as the "world's factory." However, in the past, our manufacturing industry was mostly in the middle and lower reaches of the manufacturing production chain. The entire manufacturing industry chain consists of seven links: product design, material procurement, product manufacturing, warehousing and transportation, order processing, wholesale management, and terminal retail.

Being at the lower end of the industry chain, lacking core technology, and lacking independent brands are the real situations faced by our manufacturing industry in the past.

Take the production and manufacturing of Apple's mobile phones as an example. Our country only occupies a part of the global division of labor in the product manufacturing link, while key links such as product design are abroad.

Therefore, based on the固化 thinking that most of our manufacturing industry is low-end processing manufacturing, and the one-sided view that our manufacturing industry's rise relies on the demographic dividend, this statement is inaccurate.

Firstly, looking at the data of China's manufacturing industry, as of March 31, 2023, the scale of our country's manufacturing industry has been at the top of the world for 13 consecutive years.

In addition, the rapid development of China's Industry 4.0 in recent years has broken the distribution of our country in the manufacturing industry chain. Industry 4.0 refers to the fourth industrial revolution.

According to data from China Daily, as of the beginning of 2023, there are about 3,133 manufacturing companies listed on China's A-shares, accounting for 65.5% of all A-shares, among which there are 2,121 high-end manufacturing companies, a 69.7% increase compared to 1,250 at the beginning of 2018.Several dozen world-class high-end manufacturing enterprises have emerged, including BYD, Huawei, Xiaomi, DJI, and others. Therefore, whether China's manufacturing industry is in decline cannot be judged solely by labor-intensive low-end processing industries; it is more important to observe the rapid rise of our country's high-end manufacturing sector.

Only by advancing advanced manufacturing in tandem with traditional labor-intensive products can we more comprehensively reflect the actual situation of our country's manufacturing industry.

The trade data for April in our country better reflects the current situation.

Reasons for the expansion of the trade surplus

The increase in high-end manufacturing products has led to an expansion of our country's trade surplus by 96.5% in April.

According to data from the General Administration of Customs, China's export data for the first four months of the year increased by 5.8% year-on-year, and the trade surplus in April expanded to 96.5%. China's manufacturing data show strong global performance.

Among the export products, the mechanical and electrical category increased by 10.5%, with an amount of 4.44 trillion yuan, accounting for 57.9% of the total export volume, occupying an absolute position.

Since entering 2023, the global trade situation has been pessimistic, with significant downward pressure. However, in the face of the global economic downturn, our country has been able to achieve rapid growth, which is directly related to the increase in the proportion of high-end manufacturing exports.

This first indicates that China's export commodities are more competitive globally, and other countries are more willing to purchase our products. It also shows that China's high-end manufacturing industry has gained further global recognition.

Our country's foreign trade data for April show that our advanced manufacturing industries such as mechanical and electrical products and traditional manufacturing products are developing together. They not only take into account the advantages of traditional products but also focus on products with high technological content, reflecting the upgrading of our country's foreign trade export product structure.From a sectoral perspective, the significant increase in China's trade deficit in April was primarily due to the export of automobiles, which was the largest contributing factor. In 2022, China achieved a trade surplus in the global automotive sector for the first time, with a surplus amounting to as much as 380 billion yuan in the first year.

In the first four months of 2023, Chinese automobile exports surged by 120%, while automobile imports declined by 28.9%.

Additionally, the domestic substitution of semiconductors is also a reason for the expansion of the trade surplus. In the first four months, the amount of China's imported chip imports decreased by as much as 724 billion yuan, with a decrease ratio of 21.1%.

Looking at the two major high-end manufacturing sectors of automobiles and chips, China's manufacturing industry has made significant progress. The widening of China's trade surplus is no longer solely achieved by clothing, counterfeit goods, and low-end provincial supplies, but a large part is now occupied by high-end manufacturing.

Over the past few decades, China has always been an importer in the automotive trade. While you were discussing whether German or Japanese cars are better, China's independently developed cars have already gone abroad to make a dimensional strike.

In the new energy vehicle industry chain, our country has mastered the full chain layout from upstream to downstream, and both the production and sales of our new energy vehicles are at the top of the world.

China has the world's largest lithium resource mining company, with lithium mines spread across many countries around the world, including Chile and Australia, where our companies hold shares or stakes in lithium mines. Lithium mines are indispensable materials for mainstream new energy batteries. Mastering lithium mine resources is equivalent to mastering the core assets of the global layout of new energy vehicles.

The pricing power of lithium resources can also enhance China's discourse in the lithium battery field. Currently, among the top five largest lithium battery manufacturing enterprises in the world, three are Chinese companies. CATL alone accounts for more than 30% of the global lithium battery production capacity, ranking first in the world, while BYD and EVE Energy are also global representatives of Chinese lithium battery companies.

In terms of automotive central control intelligent systems, Huawei is our country's representative. Huawei has reached agreements with many domestic new energy vehicle manufacturers to provide overall solutions for intelligent vehicles, including Seres, Arcfox, Volvo, GAC, Chery, and more. Huawei's advanced intelligent vehicle solutions have also provided strong technical support for our country's vehicles to go global.

In terms of automotive brand building and intelligent driving, our country also has world-class brands such as BYD, NIO, and Li Auto. Although there may still be a certain gap in popularity compared to a certain brand in the United States, compared to the previous major automobile importing country, the trade surplus achieved in the automotive field has fundamentally reversed the global position of our country's automotive manufacturing industry.The surge in China's trade surplus, does it mean that our country's economy is about to experience a strong recovery?

A precursor to China's strong recovery?

Does the surge in our country's trade surplus imply that our nation's economy will usher in a robust recovery? At this point, we still cannot further confirm this from the current data, but it is possible that we are in the early stages of a strong economic recovery.

This is because the fixed investment and monetary injections in the first quarter require a digestion process, and the effects may not be seen until the middle to late third quarter.

Moreover, economic growth and recovery involve multiple factors. We know that the three engines driving economic growth are investment, consumption, and exports.

The growth in our country's export trade volume and the expansion of the trade surplus in the manufacturing sector play a crucial role in the recovery of our country's economy. In addition to the growth in exports, investment and consumption are also factors that promote a strong economic recovery.

Looking at investment first, according to data released by the National Development and Reform Commission, the year-on-year growth in our country's infrastructure investment in the first quarter was 10.8%, the highest rate for the same period in five years, effectively playing the role of a stabilizing force in counter-cyclical regulation.

From the perspective of manufacturing investment, the year-on-year growth rate for traditional manufacturing and high-tech manufacturing is 7%, and the year-on-year growth in the investment field effectively drives the positive development of our country's economy.

Looking at the data in the consumption field released by the National Bureau of Statistics, there are signs of a bottoming out and rebound in residents' consumption, with a year-on-year growth rate of 5.8%, compared to 10% in the first quarter of 2017, 9.8% in 2018, 8.3% in 2019, an average growth rate of 4.2% in 2020 and 2021, and 3.3% in 2022.If we look solely at the year-on-year comparison, there indeed appears to be a sign of stabilization and recovery. However, when compared to the period before the pandemic, there is still nearly a 50% gap, and this is coupled with the economic growth and income increase over the past five years.

Therefore, the decline in the consumer sector is currently an uncertain factor in our robust economic growth. In response to the insufficient domestic demand and the decline in consumption, the central bank has previously implemented monetary policies of reducing reserves and lowering interest rates. The effects of these policies are not immediate, so whether they are effective or not may only become apparent by the end of the third quarter.

The factors affecting residents' consumption may be multifaceted, such as the slowdown in economic growth, lack of confidence among people, and the uncertainty of the past two years leading to an increased sense of caution among individuals.

Last month, our Consumer Price Index (CPI) showed a negative year-on-year growth, which is a manifestation of insufficient consumer confidence. This can be seen from the dramatic increase of 9.9 trillion in residents' savings in the first quarter. Perhaps it's not that people's incomes have decreased, but rather their confidence has waned, and their consumption habits have changed.

For this issue, the recovery of confidence is a lengthy process, and a strong economic rebound will still require some time.

However, regardless of whether the economy returns to high-speed growth in the future, for the common people, the speed of economic growth is just a number.

We should take pride in the surge of our country's trade surplus. High-speed economic growth is naturally a significant matter for China. Ultimately, it should be reflected in the daily lives of the common people. The improvement of the happiness index and the increase in income for the common people are the true keys to success.