Rediff:Export growth: China does a better job than India

[haidian]

Export growth: China does a better job than India
Last updated on: January 7, 2013 11:26 IST

Sharmistha Mukherjee in New Delhi


Despite the rupee losing value against the dollar, Indian exports fell in April-November (year-on-year) by nearly 6 per cent. Experts say this is because our product-mix largely veers towards the low end of the manufacturing chain.

China, on the other hand, managed to retain export competitiveness and registered a 7 per cent growth in exports during the same period, despite the yuan rising against the dollar.

The rupee has depreciated by 6.75 per cent against the dollar between March 30 and November 30. It stood at a record low of Rs 57.06 on July 22 in this period.

The Chinese yuan appreciated steadily to a peak of 6.39 against the dollar till July 25; then, it depreciated to close at yuan 6.226 (a rise of 1.1 per cent as compared with yuan 6.297 on March 30).

However, China's exports lagged the target of double-digit growth its government had set, due to slackening demand in advanced economies.

India's exports in this financial year would also find it difficult to touch the $300 billion of 2011-12, let alone the target of $360 billion for 2012-13, say analysts.

The difference

Ajay Sahai, director general, Federation of Indian Export Organisations, said, "More than cross-currency movements, what has been affecting external trade out of India and China is the product profile of the commodities they trade in. China mainly exports electronics and machinery products. India ships out goods at the lower end of the manufacturing chain such as gems and jewellery, textiles and leather products, where competition is more intense."

Among India's top export commodities, outbound shipments of engineering and gems and jewellery items - two of the largest export revenue generating sectors in the country - contracted 5.3 per cent and 10 per cent, respectively.

Those of cotton yarn, jute, readymade garments and handicrafts shrunk 11 per cent, 14 per cent, 8 per cent and 65 per cent, respectively, during April-November.

Engineering goods do not sound low-end manufacturing products but India did not, in the segment, export very high value-added items, experts said.

Sahai says any benefits that might have accrued to exporters on account of the depreciating rupee was nullified by wage increases in the manufacturing sector.

"All products exported out of India are manufactured in labour-intensive sectors. The wage increases blunted the advantages of a depreciating rupee," he said.

Comparisons

Cumulatively, between April and November, exports fell 5.95 per cent to $189.2 billion, while imports fell only 1.6 per cent, to $318.7 billion.

Data from the General Administration of Customs (China) show exports from China increased 7.3 per cent to $1,421 billion between April and November. Its largest export markets are the European Union, the US, Hong Kong, Japan and South Korea.

China largely exports office machines and data processing equipment, telecommunications equipment, electrical machinery, apparel and clothing.

Sridhar Venkiteswaran, executive director, Avalon Consulting, said the EU and the US feature among India and China's top trading partners. External trade out of both countries have been affected by the recession in the EU.

"But while China exports more value-added products, with the bulk of manufacturing of electronic products for companies like Apple having shifted there, India, even in engineering goods, is near the bottom of the manufacturing chain," he said.

All this means when globally the markets contract, despite favourable currency movement for exporters, India is unable to maintain export growth, Venkiteswaran said.

In the first half of 2012, in fact, the US had overtaken the EU as China's largest export destination. While China's exports to the EU declined 0.8 per cent to $163.1 billion in the first half of the financial year, shipments to the US went up 13.6 per cent to $165.3 billion.

Similarly, in India, while the EU share in India's exports have declined to 16.25 per cent in April-September from 17.2 per cent in the corresponding period last year, that of the US rose to 13.9 per cent from 11.35 per cent.

Venkiteswaran also said the decline in India's exports have come on an artificially inflated base. For, last year, there were extraordinary exports to tax havens like the Cayman Islands, because of round-tripping.

China detail

But even in China, growth in external trade has moderated sharply from the yearly 20 per cent seen during the years before 2008, when the global financial meltdown sharpened due to collapse of the US financial services icon, Lehman Brothers.

China had set for itself a target to grow both exports and imports by 10 per cent in 2012, a number unlikely to be met.

Between January and November, while exports out of China had increased by 7.4 per cent to $1,850.9 billion, imports had gone up four per cent to $1,649.7 billion.

The shortfall in terms of the target of exports has happened due to contraction in demand because of recession in EU and recovery remaining patchy in the United States.

China's trade surplus, however, has shot up 41.8 per cent in April-November to $200 billion as compared to $141 billion recorded in the corresponding period in 2011.

India's trade deficit, meanwhile, increased to $129.5 bn, higher by 5.6 per cent than the $122.6 bn between April and November last year.

 

[haidian]

never thought that the gap can be tihis big...

 

[darkhero]

Unlike China, India's growth is domestically driven. Slow but stable.

 

[haidian]

Unlike China, India's growth is domestically driven. Slow but stable.

maybe subsistence economy is even better.

 

[KRAIT]

We all know. Chinese are good businessmen. When do we learn this ?

 

[haidian]

We all know. Chinese are good businessmen. When do we learn this ?

I hate business people yet I m trying to become one.hopefully I can find some business partners here,ha.

 

[AADHAAR]

China's figures (both of import and export) include the processing trade.

Huge amounts of high value products (e.g. practically every component of iPhone) are imported from Japan, South Korea and Taiwan. (the value of these alone is close to $ 1 Trillion).

Then, these same are re-exported after adding the cost of chinese labour for assembly and packaging.

The components are imported at a USD price and exported at a USD price. USDCNY rate has very little impact on helping or suppressing this processing trade.

Yes, the model works well for china because all the three: Japan, South Korea and Taiwan are close .... but it doesn't make an apples to apples comparison.. when the Imports and Exports both are inflated with the same "items" which are not actually made in china.

Profits from the Import / Export business are kept by Apple, Philips et al who use china for assembly. So, the "huge" total numbers are irrelevant from china's perspective.

As for the trade surplus... china produces 50% of world's coal (worth $ 350 Billion).. and it's unlikely that all it's useful value is consumed within china. (20% of world's population can't be consuming 50% of world's coal and still have at-best average living standards). Probaly, $175 billion of the coal produced (still 25% of the world's production) is used for benefit of chinese ... and the remaining gets "exported-in-kind".

Well, if $ 175 Billion worth of coal is to be exported ... you'd expect to see it in the trade surplus figures. no?

 

[Hellraiser007]

We all know. Chinese are good businessmen. When do we learn this ?

India do have good business men and entrepreneurs it is just China started a decade or 2 early. No need to worry Indian growth is steady and economy is strong.
India do follow different growth model.

 

[haidian]

China's figures (both of import and export) include the processing trade.

Huge amounts of high value products (e.g. practically every component of iPhone) are imported from Japan, South Korea and Taiwan. (the value of these alone is close to $ 1 Trillion).

Then, these same are re-exported after adding the cost of chinese labour for assembly and packaging.

The components are imported at a USD price and exported at a USD price. USDCNY rate has very little impact on helping or suppressing this processing trade.

Yes, the model works well for china because all the three: Japan, South Korea and Taiwan are close .... but it doesn't make an apples to apples comparison.. when the Imports and Exports both are inflated with the same "items" which are not actually made in china.

Profits from the Import / Export business are kept by Apple, Philips et al who use china for assembly. So, the "huge" total numbers are irrelevant from china's perspective.

As for the trade surplus... china produces 50% of world's coal (worth $ 350 Billion).. and it's unlikely that all it's useful value is consumed within china. (20% of world's population can't be consuming 50% of world's coal and still have at-best average living standards). Probaly, $175 billion of the coal produced (still 25% of the world's production) is used for benefit of chinese ... and the remaining gets "exported-in-kind".

Well, if $ 175 Billion worth of coal is to be exported ... you'd expect to see it in the trade surplus figures. no?

funny logic,honestly,do you believe in this logic yourself??

 

[AADHAAR]

India do have good business men and entrepreneurs it is just China started a decade or 2 early. No need to worry Indian growth is steady and economy is strong.
India do follow different growth model.

Yup.. India's model is different.

Or we could say, we import $ 1 Trillion worth of "data / software requirements etc" from around the world ... and sell back the processed "software / IT services" at $ 1.07 Trillion. And we make a trade surplus from IT services equal to $ 70 Billion.

It's just that the "components" for IT Services "processing trade" are valued at zero.... so imports / exports don't get fattened up by $ 1 Trillion each.

That said.. India is an energy deficient country. We don't produce 3500 million tonnes of coal .... so we can't expect to export 1750 million tonnes of coal "in kind".

Our model is different ... we won't be exporting coal etc.

 

[Hellraiser007]

Yup.. India's model is different.

Or we could say, we import $ 1 Trillion worth of "data / software requirements etc" from around the world ... and sell back the processed "software / IT services" at $ 1.07 Trillion. And we make a trade surplus from IT services equal to $ 70 Billion.

It's just that the "components" for IT Services "processing trade" are valued at zero.... so imports / exports don't get fattened up by $ 1 Trillion each.

That said.. India is an energy deficient country. We don't produce 3500 million tonnes of coal .... so we can't expect to export 1750 million tonnes of coal "in kind".

Our model is different ... we won't be exporting coal etc.

I feel sometimes the data provided by Chinese is some what exaggerated can you shed some light on that mate.

 

[haidian]

Our model is different ... we won't be exporting coal etc.

It doesnt matter ,you dont export much anyway.

 

[AADHAAR]

I feel sometimes the data provided by Chinese is some what exaggerated can you shed some light on that mate.

Even if the "raw" numbers are true.. it doesn't make an apples to apples comparison. Those numbers are irrelevant.

Say, all component of an Apple iPhone costing $395 are imported into china from Japan, South Korea and Japan.
Then, they are exported out of China (after iPhone assembly at Foxconn) at a cost price of $400.

Then, Apple sells the iPhone at $ 500, keeping the $100 profit for distribution to US shareholders.

Net result: China shows huge Import (aka $395) and Export (aka $400) numbers. Makes paltry money (aka $ 5) earned by chinese labour. And Apple earns a huge profit (aka $100) sitting and just doing "R&D" in california !!!

Then what's the main source of china "trade surplus" .... they're digging.. and digging deep into the Earth.

The "processing trade" doesn't earn china even $70 Billion, which we earn by exporting IT services. Chinese manufacturing labour is still to cheap (as compared to what software engineers earn in India).

They earn the money.. because they are "digging" ... and "digging" out everying .. not just coal !!!!!

Just see the figures of every mineral ... and you can include "iron-ore" in those minerals too. They're digging... and probably the world's happy that .. "they're digging".

 

[djsjs]

As for the trade surplus... china produces 50% of world's coal (worth $ 350 Billion).. and it's unlikely that all it's useful value is consumed within china. (20% of world's population can't be consuming 50% of world's coal and still have at-best average living standards). Probaly, $175 billion of the coal produced (still 25% of the world's production) is used for benefit of chinese ... and the remaining gets "exported-in-kind".

Well, if $ 175 Billion worth of coal is to be exported ... you'd expect to see it in the trade surplus figures. no?

absolutely wrong ,haha.
the biggest consumers of coal are handruds of thermal power plants.and the biggest consumers of electricity are metallurgy and mechanical industries.don't forget we produce about 50% steel and electrolytic aluminum of the world.and we are the biggest ship and construction machinery manufacturer and consumer.and cars ,too.
what you mentioned such as electronics industry does not consume much electricity /coal.

 

[haidian]

You can say that China doesnt make trade surplus at all but the country still holds one third of the world's total foreign reserves.

List of states by foreign-exchange reserves