Alicia Garcia Herrero, the head economist for the Asia Pacific region at French investment bank Natixis, has said lower growth in China has the country focused on maintaining its trade surplus and sustaining its manufacturing sector, especially its high-value exports.
Traditional drivers of growth in China – the debt-fueled building of infrastructure and real estate – have cooled off, while foreign investors remain wary of the country’s long-term prospects and its apparent prioritizing of national security over economic growth. The result is large capital outflows, according to Herrero.
Data from China's State Administration of Foreign Exchange revealed the net outflow of foreign exchange reached USD 53.9 billion (EUR 50 billion) in September 2023, the highest level in seven years. The international business environment has further soured in China with a revised Counter-Espionage Law causing apprehension among foreign executives visiting and living in China.
Additionally, demand in China’s domestic economy has cooled, with the central government targeting 6 percent GDP growth in 2023, half the level seen a decade ago. While Herrero expects China’s growth to improve slightly after its post-Covid stagnation, the country’s longer-term economic growth will remain “moderate” for the foreseeable future due to structural issues like aging and high municipal debt levels.
“Growth markets will be elsewhere, certainly in South Asia and Southeast Asia,” she told SeafoodSource.
China's cabinet has restricted the ability of local governments in 12 heavily indebted regions to take on new debt and placed limits on what new state-funded projects they can launch. Projects like new railway stations and power plants will not be permitted.
China embraced seafood production and processing in the 1980s and 1990s as a labor-intensive generator of employment and hard currency. Yet the country has in the past decade quietly become a major importer of agricultural products, such as imports of key commodities like soy that are cheaper and of higher quality than local produce. At the same time, it solidified its status as the world’s biggest manufacturer, and its many specialties include seafood processing.
Herrero pointed to China’s “increasingly strong ties with the Global South” as key to understanding China’s continued expansion of its exports of higher-value items such as cars and machinery. Herrero said she sees China being an increasingly formidable competitor for E.U.-based manufacturers due to a gain in competitiveness from the relative lack of inflation in the Chinese economy and the weakening of the renminbi over the past year.
China continues to press any advantage it can find on trade, including the signing of strategic partnerships like the deal it signed with Colombia in October. The agreement means China now has strategic ties with 10 out of the 11 South American countries with which it has relations.
Colombia’s government has stated its goal of tapping Chinese financial resources, technology, and building firms to modernize Colombian infrastructure in return for the expansion of agricultural and livestock exports to Chinese buyers. China has become the leading supplier of automobiles to Colombia and neighboring Ecuador.
Photo courtesy of Natixis
