Export Surge Hits China's Richest County Amid Tensions with US

Export Surge Hits China's Richest County Amid Tensions with US
Photo by _dChris

The Lede: Job seekers in Kunshan, China’s wealthiest county, struggle to secure employment, amidst weakening global economic prospects and manufacturers relocating factories outside of China fueled by trade tensions with the United States.

What we know:

  • Kunshan, a county located 50 kilometres from Shanghai, previously offered wages up to 30% higher than less-developed interior provinces due to the numerous contract manufacturers that assembled critical components in the area, the Financial Times reported.
  • Home to 1,529 export-focused manufacturers from Taiwan alone and with nearly 1 million residents, Kunshan has been known as China’s richest county.
  • Companies in Kunshan are reducing their operations due to declining exports – the trend that has accelerated for the past five months since October, as western purchasers reduced orders amidst high inflation and geopolitical tensions between two economic giants.
  • Factory headcounts have decreased and companies have reduced hourly wages by as much as a third. The decline in orders has created a surplus of labor, causing many factories to reject older job applicants, according to the Financial Times.
  • As major companies seek alternative manufacturing hubs, Taiwanese manufacturers, the county's largest employer, moved production to other countries in an effort to minimize exposure to U.S.-China tensions.

The background: Chinese exports were hit by Covid disruptions and weakening global demand. Government reports indicate that China's exports declined by 6.8% in the January-February period compared to the same time last year, despite signs of economic recovery after years of the stringent zero-COVID policy. This follows a 9.9% decrease in exports in December, indicating that foreign demand remains weak amid high inflation in U.S. and Europe.

Exports to the U.S. declined by 21.8%, and imports from the U.S. fell by 5%. Additionally, exports to the European Union faced a 12.2% decrease, with imports surging by 5.5%.

During a news conference at the beginning of March, Chinese Commerce Minister Wang Wentao stated that the pressure on China's imports and exports will significantly rise this year, voicing the Chinese government's concerns that a worldwide economic slowdown will hinder the country's ability to recover from the damage caused by the pandemic. He further noted that the possibility of a worldwide recession is increasing, and the risk of a decline in external demand is also on the rise, referring to an increased number of companies searching for manufacturing alternatives outside China. But Wang considers it a “special phrase” and thinks China’s market will remain vital for many foreign companies.

Likely outcomes/Takeaway:

  • The National Bureau of Statistics revealed data indicating that manufacturing activity in China in February had expanded at its most rapid pace in over a decade, which has instilled hope among economists.
  • The Chinese government is trying to avoid an increase in debt and promote self-sustaining economic growth based on domestic consumption instead of relying on exports and investment.
  • Following the lifting of COVID-19 restrictions in December consumer confidence is expected to be improved, possibly driving the gradual increase in exports and imports.
  • However, the worldwide economic crisis, high inflation and intensified trade war with the U.S. could slow down the recovery, especially if more companies would opt for moving manufacturing out of China.
  • Kunshan county serves as an example that despite official data pointing to an increase in economic activity in recent weeks, the recovery has yet to reach businesses and job seekers.


  • "The weak export growth highlights the importance of boosting domestic demand as the key driver for the economy in 2023," Zhiwei Zhang, chief economist at Pinpoint Asset Management told Reuters earlier this year.
  • “Currently our development is focused on providing for people’s basic needs. Going forward, the focus will be shifted toward delivering a life of better quality for the people,” China’s new premier Li Qiang.

Good Reads:

China’s richest county suffers export slump as US tension hits factories (FT)

China stocks: recovery bets doubted as empty shipping containers pile up at Shanghai, Ningbo, Shenzhen ports (The South China Morning Post)

China's external environment poses serious challenges to trade - commerce minister (Reuters)