In 2016, China is the second largest economy but the biggest trading nation in the world since it surpassed the US in 2013. Imports to China reached USD 1.96 trillion in 2014. The three top exporters to China are South Korea, Japan, and the US and until now, Asian low-income countries have not received much attention as exporters to China. The Chinese market would offer them great opportunities, though: here is information about how these countries currently export to China and how to enhance their trade ties with the Chinese market.
ASEAN’s low-income countries’ export to China are resource-driven
Within the Association of Southeast Asian Nations (ASEAN), a regional organization that facilitates economic integration amongst ten Southeast Asian states, China was the largest individual trading partner. It realized 14% share of ASEAN trade in 2014 compared to the United States with 8.2% share. The exports of the four low-income ASEAN countries – Vietnam, Myanmar, Cambodia, and Laos – to China are primarily resource-driven, and these countries all run growing trade deficits with China.
Vietnam, the third most populous nation in ASEAN, exported USD86.9 million to China, whereas it imported USD329 million from China in 2014. Top 3 product categories exported to China were vegetables (65%), metals (13%), and minerals (10%).
Myanmar exported USD4.25 billion to China and imported more than the double in 2014. As this country currently lacks industrial development and is centered on mineral extraction, more than one-quarter of Myanmar exports were minerals.
Cambodia is similar to Myanmar regarding the level of development, but Cambodia’s trade is quite different: its biggest share of exports to China are plastics and rubber, and textiles, each category accounting for 29% of exports.
Laos is one of ASEAN’s smallest and poorest countries, and its trade volumes are quite small. Its primary trading partners are all countries with which it shares a border. Natural resources such as minerals, metals, and wood occupy 87% of Laos’ exports to China. An extraordinary figure of Laos’ exports is the 55% share of minerals exports to China compared to 22% of the world.
The Chinese market is full of opportunity but export to China is challenging
For the small Asian countries, increase exports to China would reduce their trade deficits with China while developing their economies. China’s imports of commodities are expected to exceed USD 10 trillion by 2020, which means significant exports opportunities. Asian less-developed countries could focus on three key sectors: food, textiles and apparel, and wood. “Low-income Asian countries are agriculture-oriented” according to Lin Lu, Project Manager at Daxue Consulting. As China is among the biggest markets for vegetables, fruits, and nuts in the world, these countries could meet the Chinese demand in the future.
However, exporting to China is not an easy task: small and medium enterprises (SMEs) would have to face the complexity of the export process to China. Companies willing to export to China need to take into account restricted and prohibited imports, certifications, standard levels, labeling and packaging requirements, taxes and fees to Chinese customs among an ocean of criteria to meet. Moreover, for products such as rice and sugar, the Chinese government continues to provide trade support and protection for its domestic industries, which can strongly hinder exports to China. Another issue for SMEs of Asian low-income countries is the difficulty to reach Chinese importers: for products such as coffee and cassava, bigger companies have already established solid partnerships with some Chinese importers.
ITC and the Chinese Ministry of Commerce project to enhance Asian SMEs exports to China
To help SMEs from Asian less-developed countries to increase exports to China, the International Trade Centre (ITC) set up the project “Enhancing Export Capacities of Asian LDCs for Intraregional Trade” supported by the Chinese Ministry of Commerce. In cooperation with Daxue Consulting, ITC organized training sessions on “How to export to China” in Bangladesh, Cambodia, Laos, Myanmar, and Nepal. “The training lasted two days in each country, focusing on selected products, and consisted of two modules: the first one was about general information about how to export for SMEs to China, how to collect information about the market, how to manage it inside the SMEs. The second module gave more details on concrete actions of the export process,” explains Lin Lu of Daxue Consulting, who prepared these training sessions.
How can Daxue help its clients – Export to China strategy
ITC contacted Daxue Consulting to create a training program on “How to export to China” that includes comprehensive material and tools on the Chinese trade environment. Daxue’s team completed desk research and realized interviews and mystery calls as an initial research step to prepare tailor-made and actionable training material.
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