For mechanical and electrical products and machinery, which account for more than 40 per cent of all Chinese exports to the US, the Chinese share also decreased to 26 per cent in the first four months of the year, down from 30.3 per cent in 2022.

The decline in sourcing from China was partially incentivised by various industrial policies from the US government to attract more companies to invest in the country, including the Chips and Science Act that went into effect in August, the Kearney report said.

While no single country can entirely fill the void left by China, a variety of low-cost Asia-Pacific countries such as Vietnam, Cambodia and India, as well as Mexico, can benefit from the shift, it added.

The United States was China’s third-largest export destination in the first five months of this year, after the Association of Southeast Asian Nations and the European Union, China’s customs data showed. Last year, it was China’s biggest export destination.

With the supply-chain-relocation trend intensifying, China’s exports to the US could continue falling in the short term, according to a report from Everbright Securities in March.

For manufacturing sectors that are also dominated by China, including textiles, the country can offset losses by redirecting exports to intermediaries, such as those in Southeast Asia, the brokerage house said.

But for industries in which the US and Europe dominate key technologies, such as some electrical and mechanical products, the US’ reshoring efforts will have persistent implications for the overall export sector in China, it added.

“In the short term, the contribution of exports to the economy has weakened, and economic recovery should mainly focus on the recovery of investment and consumption related to domestic demand,” the report said.

“In the medium and long term, hi-tech products should be the key to maintaining China’s export advantage.”

By Ji Siqi. 20 Jun, 2023.

Source:  South China Morning Post (SCMP).  https://www.scmp.com/economy/china-economy/article/3224790/where-are-chinas-exports-going-less-and-less-us-latest-trade-data-confirms. 26 June 2023.