Trade rides digital wave, new formats

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The COVID-19 pandemic may have savaged many a business, but the dark cloud has a silver lining: resurgent foreign trade riding the wave of new formats and models like cross-border e-commerce, new technologies like big data, and tools like digital payments and online exhibitions 鈥 all necessitated by curbs on travel and transport, and measures like social distancing.

China’s Ministry of Commerce said first-half foreign trade volume rose by 27 percent year-on-year to 18.07 trillion yuan ($2.78 trillion), driven by robust demand from the rapid recovery in major economies and the speedy growth of cross-border e-commerce.

Last year, as many as 10,000 firms like exporters and importers embraced digitalization for the first time, helping boost foreign trade via cross-border e-commerce by 31 percent to 1.69 trillion yuan.

From Christmas goodies to juicers to laptops to mini-excavators to even large-scale machinery, everything is now par for the cross-border e-commerce course. And momentum is picking up in the second half.

Xu Wei, chairman of Shenzhen Dome Technology Co Ltd, which makes and exports consumer goods from Dongguan, Guangdong province, knows all about the digital revolution sweeping China’s foreign trade.

In mid-July, Dome Tech had to resort to air cargo to rush 4,300 car cameras and sports recorders from Shenzhen Baoan International Airport to Frankfurt, Germany. That was done because overseas customers who placed the orders for the Christmas season using cross-border e-commerce channels, wanted delivery sooner than later, to preempt any possible delays.

Even as the cargo flight took off from the Shenzhen airport, Xu called his most capable freight forwarder to inquire about the ocean shipping containers booked by Dome Tech. More goods had to be shipped from the cargo terminal of Shenzhen’s Shekou Port to Port of Rotterdam in the Netherlands.

Such is the pressure created by orders generated by cross-border e-commerce channels that he and his staff can barely breathe these days, said Xu. “Many of our overseas clients, especially those from the retail sector, demand that we ship their goods for Christmas sales as early as possible to prevent risks like potential delays. They want to prepare their inventory, so some of them paid us more to deliver their goods via air cargo service,” he said.

Dome Tech’s order book is full, with deliveries scheduled till November, he said. “We’ve also been pressed by our foreign clients to ship their car and kid cameras, as well as other car accessories to South Korea, Argentina, Europe and the United States via container vessels in recent months.”

Like Dome Tech, a large number of export-oriented firms in China have started to adopt digital solutions like big data, business-to-business or B2B platforms and online exhibitions to attract overseas customers and boost sales.

In the process, they are also embracing new formats for trade and novel business models 鈥 cross-border e-commerce, market procurement, comprehensive foreign trade service providers, bonded maintenance, offshore trade and overseas warehouses.

This new approach will foster competitiveness in foreign trade, said Wang Tiedong, a professor specializing in regional economic development at the University of International Business and Economics in Beijing.

“Owing to the previous lockdown and other restrictions on outdoor activities, foreign consumers have gradually shifted their shopping habit from offline to online channels,” he said.

They have spent more money on cross-border e-commerce platforms of late than any time in the past, he said.

Stay-at-home routines meant that many household products and other key goods like laptops and juice extractors were bought online using cross-border e-commerce channels.

As the pandemic situation peaked last year, many foreign consumers began to buy even mini-excavators and large-scale machinery online from Chinese manufacturers.

Zhang Jinjin, director of overseas sales at Hunan province-based Sunward Intelligent Equipment Group, a construction machinery manufacturer, said sales of mini-excavators with capacity of 0.8 metric tons to 9 tons surged by 145 percent year-on-year in the first half of this year. Many of them were sold via the group’s online sales platforms.

“Mini-excavators have become our bestselling products. They have been exported to Europe and North American countries this year. This is mainly related to the continued epidemic abroad. Overseas users are keen to decorate their gardens and houses, and the excavators have benefited from the stay-at-home economy,” he said.

A 2.5-ton mini-excavator sells for anywhere between 20,000 euros ($23,584) and 30,000 euros in Germany today.

Sany Group, another renowned construction machinery company from Hunan province, also saw its sales in this category rise considerably on cross-border online channels this year.

Although buying machinery online for the first time could prove challenging, customers appear to welcome the freedom to customize and pick and choose from different varieties, from the comfort of their office or home, with just a few taps on screen or mouse-clicks.

“Clients in the US prefer white color and customers in Russia like green color, while our Indian customers are fond of both white and yellow colors,” said Wang Tao, a manager of Sany’s manufacturing business unit.

In a guideline issued on July 9, the General Office of the State Council, China’s Cabinet, highlighted the importance of accelerating the growth of new business models to advance the high-quality development of foreign trade.

Key measures include encouraging the use of new technologies and tools to empower the growth of such trade, promoting the transformation of traditional sectors and enabling service providers to offer more professional services.

The guideline set out objectives to establish more optimized mechanisms and policy systems for the sector by 2025, by when the nation is expected to upgrade a cluster of internationally competitive businesses.

Besides cross-border e-commerce, the government’s latest measures also aim to have an impact on market procurement, comprehensive foreign trade service providers, overseas warehouses and other businesses, said Ren Hongbin, assistant minister of commerce.

Johnny Chou, chairman and CEO of Best Inc, a Hangzhou, Zhejiang province-headquartered integrated supply chain and logistics solutions provider with a business network in a number of Southeast Asian countries, said the company plans to build more overseas warehouses in signatory states of the Regional Comprehensive Economic Partnership in the coming years.

The Chinese company has already built overseas warehouses in markets of the Association of Southeast Asian Nations, as well as export transshipment warehouses in China. It currently operates 16,000 square meters of overseas warehouses in five Southeast Asian economies including Thailand and Malaysia, and more than 26,000 stock keeping units (SKUs).

It handles more than 11,000 orders per day, and mainly provides services to home and global companies from chemical and home appliance industries.

“Building overseas warehouses and conducting cross-border e-commerce businesses can stimulate consumption of quality products. They are also practical solutions to strengthen China’s dual-circulation development paradigm in both exports and imports,” he said.

China’s new development pattern has the domestic market as the mainstay while the domestic and foreign markets reinforce each other.

The country’s cross-border e-commerce has grown nearly tenfold over the past five years. Domestic firms currently run more than 1,900 overseas warehouses and about 130 bonded maintenance projects of processing trade across the world, said Li Xingqian, director-general of the foreign trade department at the Ministry of Commerce.

To spur new forms and models of foreign trade, China will encourage its pilot free trade zones and comprehensive bonded areas to build global supply warehouses and transportation hubs during the 14th Five-Year Plan period (2021-25), said Li Kuiwen, director-general of the General Administration of Customs’ statistics and analysis department.

With China and its partners pushing for the RCEP agreement to become effective next year and preparing to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, it is vital for the country to establish such facilities in these zones as well as at the Hainan Free Trade Port, Li said.

Under the administration’s five-year plan, the government will assist companies to conduct bonded area research and development, product testing, repair and remanufacturing businesses within FTZs and comprehensive bonded areas, and introduce new forms of Customs clearance facilitation measures for companies engaged in certain businesses like cross-border e-commerce, procurement trade and overseas warehouses.

Even though China’s growth pace of foreign trade may slow down in the second half, the country will achieve the goal of steady expansion and improved quality in imports and exports this year despite challenges, including severe outbreaks of the COVID-19 pandemic overseas and surge in the prices of commodities, said Bai Ming, deputy director of international market research department at the Chinese Academy of International Trade and Economic Cooperation in Beijing.

To boost global trade and stabilize the world’s supply chain, China will host the 130th China Import and Export Fair in both offline and online forms from Oct 15 to Nov 3, the Ministry of Commerce announced in late July.

The event, better known as the Canton Fair, will be hosted in such an integrated format for the first time in its history. Owing to the COVID-19 pandemic, the past three Canton Fairs were held online.