China's export value reached $3.364 trillion last year, an increase of 29.9 percent year-on-year, recording the highest growth rate since 2010, an important support for the nation's economic growth during the pandemic-ravaged 2021. Will it continue to perform similarly this year? By studying China's export structure since the COVID-19 outbreak and determining possible key factors－from both the supply and demand angles－we may have the answer.

Surges seen in exports

China has become an export juggernaut, with its export structure upgrading from large to competitive.

As China has been shifting from "quantity" to "quality" in promoting economic development, there are corresponding changes seen in its export structure. China's export value of high-tech products has increased from $165.4 billion in 2004 to $776.2 billion in 2020, a compound annual growth rate of 10 percent over the period.

Foreign enterprises take up the largest share of such exports. However, the share of State-owned enterprises and other types of enterprises, which mainly comprise private firms, is continuously increasing, from 16.7 percent in 2003 to 34.7 percent in 2018.

Regardless of the COVID-19 headwinds, China's exports have continued to exceed expectations. The pandemic has dealt a severe blow to global trade since its outbreak in early 2020, leading to a 7.4 percent fall in 2020 global trade of goods compared with 2019. However, China's exports have remained strong. In 2020, the value of China's goods exports reached $2.6 trillion, an increase of 3.6 percent compared to that of 2019, accounting for 14.7 percent of global goods exports in 2020 versus 13 percent before the outbreak.

China's exports maintained strong performance throughout the whole of 2021. Apart from the value and surging growth rate, the annual trade surplus reached a record high of 676.4 billion yuan ($106.4 billion).

The figures are mainly attributable to China's rapid resumption of economic activity since the COVID-19 outbreak. The effective contagion containment measures have bought China valuable time to gain an edge in global trade. At the same time, at a time when production and supply capacities of most countries were greatly hit by the pandemic, China managed to play the role of a global supply center with its stable and integrated industrial chain, which enabled it to take over a large part of the export share from developed economies in the context of overseas supply disruptions.

Also, export growth over the past two years was driven by higher prices. In 2020, COVID-19 prevention material supplies and high-end manufacturing exports increased rapidly, which spurred exports dramatically that year. Meanwhile in 2021, exports of electromechanical and transportation equipment increased rapidly, turning the export growth pattern into a price-driven one, as commodity prices rose markedly due to shortages in global supply chains.

Key factors for sound 2022

Key factors affecting China's exports in 2022 are based on both supply and demand issues.

From the supply side, issues including the progress of production recovery in the United States, Europe and Southeast Asia, global port congestion and shortages in transportation capacity will matter a lot to China's exports this year.

First, production in the US, Europe and Southeast Asia may gradually recover in 2022, but the ongoing impact of the pandemic cannot be ignored.

Although COVID-19 is still spreading globally, with more vaccinations and prevention experience, the impact on overseas production may gradually weaken. The US manufacturing capacity utilization rate has rebounded to 77.3 percent in October, and that in 19 eurozone countries in November was 82.7 percent－both close to pre-COVID levels. The industrial production indexes of Malaysia and Singapore in November were 124.9 and 122.2, respectively, both higher than pre-pandemic levels.

The recovery overseas may affect China's exports, though there are many uncertainties lingering from the virus, such as more variants and their effect on public health. The COVID-19 impact should be closely monitored.

Second, issues like port congestion, lack of transportation capacity and global supply chain stresses are easing. For instance, Xinhua News Agency reported that the US government had announced on Oct 13 that the Port of Los Angeles is expanding to 24-hour, seven-day-a-week operations as part of an effort to relieve pandemic-related supply chain issues and clear record-breaking backups of container ships at the ports of LA and Long Beach.

Third, China's manufacturing advantages are moving from low-end to high-end. The nation's manufacturing industry has a solid foundation and significant comparative advantages in industrial categories, labor productivity, economic structure and supporting infrastructure.

In recent years, China's high-tech product exports have accounted for 30 percent of the total. Integrated circuit exports, in particular, surged 30.9 percent year-on-year in 2021, and the proportion of such products among the total value has risen from 3 percent in 2016 to 4.6 percent in 2021. As manufacturing advantages are upgrading toward high-end, high-tech product exports will enjoy more resilience in the future.

From the demand side, the restart of the Juglar cycle in the US and Europe, weakening demand of durable goods consumption in the US and Sino-US trade relation trends are important factors affecting 2022 export numbers.

First, the restart of the Juglar cycle in the US and Europe is likely to drive up demand for electromechanical products. According to a report by China News Service, the US government on Nov 15 announced an infrastructure bill totaling about $1 trillion, and will pour $550 billion into transportation infrastructure, updating and improving water supply systems, grids and broadband networks. Under such a background, we consider exports of mechanical and electrical products still the pillar of China's exports this year.

Second, the cancellation of US financial subsidies, coupled with the tightening of its monetary policy and the weakening growth of commodity consumption, may drag down China's exports. COVID-19 has brought challenges to the US economy, such as a slump in GDP growth and rise in unemployment. Therefore, the US government issued higher subsidies for citizens to boost consumption, which has spurred demand for durable goods from China. However, the third round of one-off subsidies for fiscal stimulus in the US has basically been issued, and in order to promote employment recovery, 26 states in the US have announced that they will stop issuing unemployment subsidies of $300 per week. The growth rate of residents' incomes may further slow in the future, which may affect China's export figures in 2022.

Third, easing Sino-US economic and trade relations is still key to boosting exports of Chinese goods. According to Sina, which cited Caijing magazine, current US tariffs on China still cover $370 billion in goods. It is certain that the gradual improvement in Sino-US economic and trade relations and the coming into force of the tariff exclusion list will bring benefits to trade for both sides.

It is noteworthy that as the pandemic is brought under better control globally, COVID-19-related exports may weaken. Also, medical devices and consumer electronics industries are likely to witness impacts from this development.

The writer is chief economist of Haitong Securities.

The views don't necessarily reflect those of China Daily.