Executive Summary

China has in the recent past risen to become a reckoning force as a world super power. It has grown fast over the last few decades and is a major importer of raw materials and equally a major exporter of consumer goods. This paper talks on China’s income and expenses from exports and imports. It also touches on the major goods and services involved on the imports and exports. The countries that trade with China in the import and export trade are also highlighted in this paper. The supply chain characteristics of this paper are also discussed briefly and information on the logistics involved in the export and import trade are also discussed.

By September 2012 the estimated exports were worth 186 billion US dollars and the imports were worth 159 billion US dollars. The country`s chief export partners are the United States at 17.1%, Japan 7.8%, Germany 4%, Hong Kong 14.1% and South Korea at 4.4%, according to 2011 statistics. China`s principal import partners are Japan, which is leading at 11.2%, followed by South Korea 9.3% with the United States following with 6.8%, then Germany at 5.3%, then Australia 4.6%, according to statistics.

China’s export of goods and services contributes to 39.7% of its GDP. The People’s Republic of China majorly exports transport equipment like ships, vehicles and boats, power generation equipment and electrical machinery, this is approximately half of what is exported.  Textile, metallurgical products and rubber take the second position of the export goods adding up to 18%. Ten percent of the total exports consist of food and foodstuffs, mineral and fuel materials and organic and inorganic chemical products. The exports also include optical and medical equipment. China has grappled the labour-intensive segments in the global marketplace by its strong competencies (Fung, Pei, & Zhang, 2006). This has contributed to the country being the world’s major exporter of IT goods, replacing the United States. it also receives a great boost from strategically advancing in its research, development abilities and technical workforce.

China’s major import goods include iron and steel, oil and mineral fuels, organic chemicals, electrical and other machinery, optical and medical equipment and plastics. The intensified living standards in China prompted its citizens to import goods from the international market (Fung, Pei, & Zhang, 2006).  The growth of import in China is because of the fall in the custom levy level and the impact of the rising prices in the international market. The Chinese government has liberalized trade in its country by reducing complications in its administration, thus leading to foreign investors being attracted to the country.

China is the world’s second-biggest economy, by nominal gross domestic product, GDP, and the purchasing power parity, PPP, following the USA. In 1978, the People’s Republic of China made reforms that greatly changed its economy that progressively changed its growth in investment to its consumption and exhibited a rise in the standards of living. Its economy is ranked as the fastest growing worldwide and has been growing averagely by 30% over the past three decades.  It is the second major importer of raw materials and the leading exporter of consumer goods globally. This is attributed to China`s vast national investment in its infrastructure and hefty industry. China is among the highest reliable countries in the world trade and it provides great benefits to the global economy though its imports and exports.

Introduction

Countries need to strategize their supply chains well in order to stabilise their competitive ability in the international marketplace. The supply chain policies have to be in line with the features of the products they produce for them to attain the best results. Most Chinese firms, especially those in the manufacturing sector, have settled for a distinction of agile, lean and agile/ lean chain supply strategies, which are acknowledged in the Western literature (Barnett& Prassad, 2004). Studies have also indicated that some firms do not comply with the above strategies. They stick to their own traditional strategies. The success of the strategies is measured by financial and operational performances of the products together with the product characteristics. Through studies, the firms that employ the traditional strategies tend to perform worse than those that follow the lean, agile and lean/agile supply chain strategies.  

China Industries

The supply chain characteristics of China utilize the lean and agile strategy. The lean strategy aims at high utilization of the raw materials, low cost of manufacturing and minimum stock. During the processing, it features waste elimination, assurance in quality, a smooth operation course and a great level of proficiency. The product characteristics that are featured include low margin, efficient products and low variety. For the agile strategy it focuses at a fast response, arrayed stock and a buffered capacity. During processing they consider market sensitivity, a virtual network, flexibility, selected lean supply chain principles and postponement. The aspects of the products include high margin, high variety and innovative products (Barnett& Prassad, 2004).

The Information and Communication Technology revolution, modern means of transport and infrastructure have necessitated global supply chains adoption in China. This comprises worldwide networks of suppliers, manufacturers, distribution centers, warehouses and retailers, who are involved in obtaining raw materials, converting them into functional products and then delivering them to the consumers. The firms outsource or offshore some of their activities. To be on the global level of competition they largely rely on coalitions and combined ventures (Barnett& Prassad, 2004).

Foreign investments contribute massively to the Chinese trading activities. The foreign economies offer enormous support to the trade, thus they gain directly from China’s trade. Most of the Chinese export is re-exported to the world through Hong Kong. On the other hand, some of the Chinese imports first enter Hong Kong, and then they are re-exported to China. This export and import route is unique to China and its trading activities. China focuses its trade and foreign direct investments on geographic location. Large portions of its foreign direct investments run in the East and coastal areas.

Processing and assembly take a huge spot in the in the country’s trade. The data indicate that in 2003 more than half of the country`s export was composed of processed goods and two fifths of the imports were processed imports. Processed imports have indicated lower domestic value added as compared to the non-processed exports. Averagely the direct domestic value added from the exports of Chinese products is somewhat uncertain. From statistics, it can be concluded that importing and exporting of high-technology goods is ample and can be traced back to the manufacturing industries in China and its overseas investments. China also benefits from owning a lot of foreign enterprises, through foreign direct investments (Barnett& Prassad, 2004).

China’s boost in imports and exports of goods and services can fundamentally be attributed to its enormous and emergent market together with its high quality labor force at a low cost (Barnett& Prassad, 2004). Most countries that export their goods and services to China enjoy the domestic market that is highly reliable in that country. This greatly influences the foreign direct investment. It offers a large market for information technology and semiconductors. Every business has to put the cost of production into consideration when planning to come up with a product that should be both useful and profitable. Due to the low wages, the cost of production is greatly reduced, so most countries with multinational investments use their affiliate firms to produce in China, then export their products to other countries, where they have their target consumers. Despite the low wages, the quality of the products is esteemed and this attracts a steady flow of imports and exports. China is increasingly becoming a low wage export platform for the global trade. The value chain is reduced since the production stages are evened out to specific different sites where the production is done to satisfaction and not much is spent to come up with a quality product that is globally viable.

China is recognized as a global production sharing site so it may be mandated to import and export goods from the same industry. An example of such goods is electrical equipment or minerals and fuels. Studies have depicted that the total domestic added value that emanates from exporting electric machinery is approximately 14.4% and that of manufacture of electronic and communication equipment contributed to 13.8%. Conclusively processed and non-processed parts produce a higher domestic added value.

The global supply chains employed in China have a range of benefits that include: reduced cycle time, surge in productivity, increased projection accuracy, an expansion of the international connexion, a reduction in the total costs of production, inventory reduction, a rise in the intellectual asset, improved delivery, a diversity in trading and business, rise in speed and efficiency, competitive advantage, unexploited markets realization, enhanced capacities and a surge in productivity.

There are many logistics companies based in China that deal with the logistics aspects involved in the import and export trade. They offer a variety of services that cater the imports and exports sector. They mostly deal with the transportation of various goods and services offered. The logistics companies compete among themselves in order to meet the clients` requirements based on quality, time of delivery and the intended destination. There is a provision for the goods storage before delivery or transportation at a specified time.

The delivery is both within the country and overseas. The transportation of goods overseas has to meet the international standards so that the quality of the product is not compromised during transportation. Most logistics companies have diverse networks with all the related sectors, whether government or private, to ensure efficiency in the import and export trade. These range from custom clearance, trade customs, regulations, maritime cargo handling and other logistics procedures. The means of transport vary from coastal vessels, barge and railway to trucks. Different goods need different packaging modes and this has to be met, especially if the goods are exported.

Goods entering China are either sent directly or indirectly by the use of intermediaries. The intermediaries are only four and these are: distributors, agents, retailers and wholesalers. Agents are not granted any property rights. They only have orders that compel them to stick to their duties only (Rai, 2007). There are two types of agents: exclusive agents and non-exclusive agents. A distributor buys the goods then resells them to the consumers at a profit. Any losses incurred when selling the goods are in the full responsibility of the distributor. A wholesaler buys items in bulk and then sells them at any chosen amount to several consumers. Retailers fall in the last classification of the intermediaries; they buy goods from manufacturers or wholesalers and then sell them to consumers, who are the end users.

In China the middlemen can be presented by the Chinese importers, foreign companies and international trading companies. Indirect export of goods to China has its benefits in that it reduces the time taken by the product to enter the market in China. The manufacturers directly receive their money when they sell their products to exports merchant reducing their exposure to foreign exchange risks and other credit risks (Rai, 2007). The manufacturer can valuably get export expertise and personal contacts with the export merchants. It also gives them the opportunity to know beforehand if their product has the ability to be sold overseas avoiding risks and a flopping financial investment.

Direct export into China utilizes three channels: the company`s employees travel to China or are stationed there, using the services of Chinese import agents or  Chinese distributors. Using this network, products can directly get to the consumers who are the end users. The pros of direct export include: it gives the manufacturer an opportunity to establish a channel network leading to a rise in its international marketing level; a boost in the manufacturers’ marketing strategies since they can get a response from the consumers directly; the manufacturer will consequently have a larger market abroad and control the market at a close range (Rai, 2007). The major disadvantage of direct export into China is that it is costly as compared to indirect export. Putting up the business may need massive amounts of capital and necessitate the use of a variety of talents. When setting up the networks abroad one has to be fully committed.

Foreign invested enterprises constitute more than half of China’s exports. The state owned enterprises constitute a fifth of the total exports and the rest is made up of other business types’ products. The state owned enterprises are alarmingly posting a decrease in their exports: the trend was at 43% in 2001 and displayed 19% in 2007. Processing trade takes lead in China’s exports while the next proportion comprises of conventional trade and other trade patterns. Approximately three fifths of Chinese imports are made up of foreign invested enterprises, state owned enterprises follow closely with 28%, while other types of businesses amount to 13%. The import in foreign invested enterprises has been on a rising trend with a record increase of 7% in 2005 from 51.7% in 2001. In contrast, state owned enterprises have shown a falling trend in imports recording 28.2% in 2007 down from 42.5% in 2000 (Garnaut, 2009).

China has a striking oil consumption rate. It solely cannot provide for its oil consumption necessitating the country to import oil to supplement the demand. The country imports a large portion of its oil from the Middle East. In China this imported oil makes up 20% of the processed crude. The oil imports keeps increasing yearly due to the surge in oil consumption through manufacturing and processing and the fact that many firms are setting up plants in China. They have developed oil imports from Central Asia and have also sought additional oil fields by investing in Kazakhstan. As of 2005, they were importing a net of 2,740,000 barrels a day.

In July 2012 the United States exported 32,000 barrels a day of total crude oil and products. In 2011 Brazil exported 85% of its exports to China and most of it was bulk commodity that consisted of iron ore, soybeans and crude oil.

The United States is the largest import and export partner of the People’s Republic of China. In 2006 the statistics were valued as follows: China exported computer accessories, parts and peripherals that accrued at 28.9 US dollars, miscellaneous household goods, like clocks and other furnishings, amounted to 26.5 US dollars, toys and sporting goods, like bicycles and dolls, at 22.7 billion US dollars, computers at 17.4 billion US dollars, household furniture at 13.2 billion US dollars, video equipment, like DVD players, at 14.5 billion US dollars, footwear at 10.7 billion US dollars, non-cotton household furnishings and clothing at 14.6 billion, cotton household furnishings and clothing at 9.9 billion and telecommunications equipment at 8.3 billion US dollars.

China’s import from the US in 2006 included semi-conductors that cost the country 5.9 billion US dollars, plastics at 2.2 billion, civilian aircraft at 5.3 billion, soybeans at 2.5 billion, raw cotton at 2.1 billion, industrial machines at 1.97 billion, copper at 1.86 billion, computer accessories 1.82 billion, aluminum at 1.7 billion and steel making materials at 1.69 billion US dollars among other products.

The top exports from China to Canada in 2008 were listed based on the dollar: computers that amounted to 2.2 billion US dollars, video games at 1.2 billion US dollars, toys, like tricycles, dolls and puzzles, at 972.4 million US dollars, cell phones at 708.2 million, computer monitors at 611.1 million, modems, routers and switches at 536.1 million, magnetic tape recorders and small size players at 479.4 million, parts for printers at 430.5 million, which faced a decline as compared to the previous exports, TV receivers that included Internet set-top boxes at 426.7 million and Digital and TV cameras at 410.2 million US dollars, upholstered seats with wooden frames at 393.5 million, rubber, plastic and leather footwear at 364.7 million, knitted outwear at 7.8 million, wooden furniture, including cabinets, at 317.7 million and women’s clothes at 291.4 million. Most of the exports showed an increase from the previous year with a few showing a decline. From the list it is clear that computer goods and high technology equipment comprised a huge part of the export list. China experience a constant increase in exports of coke and semi-coke of coal, since the country has stringent environmental laws that hinder the production of coke from its source products, like coal (Organization for Economic Co-operation and Development, 2010).

China and the United Arab Emirates have an expansive trade relation that keeps growing yearly and is based on the paper and machinery industry. Chinese companies export tissue paper and disposable products to the Middle East. In 2009 the export revenue was 531.49 million US dollars.

China supplies Japan with vegetables. Although there have been disputes about safety and quality of the products, the Chinese government has launched several researches and the findings proved the vegetables are safe and of high quality. The Japanese government has been very adamant in creating trade barriers. China uses Hong Kong as its re-exports centre; some of the products in the re-exports include light manufactured articles, like apparel and footwear, which constituted 27.9% of the direct exports. Mineral fuel, food and foodstuffs, crude materials and chemicals are among the re-exports goods.

Conclusion

The Chinese imports and exports have been a key boost to the country’s economy and have served the most important role of putting the country in the best position in the global marketplace. Most of the markets of the country’s products are located in the developing countries. This shows that the country has left its mark on the global trade and it has very powerful ties with other strongholds in the global marketplace. As a result, China has become an emerging superpower. This has lead to improved living standards, tech-savvy individuals, a massive advance in the military following reforms and the trade success, which heighten the ammunition, agricultural, manufacturing and processing sectors revamp. This is also an advantage to the country`s tourism industry because, to some extent, commercial tourism is as a result of import and export activities.

The country has faced a few drawbacks in its trade; some of them affected the whole international marketplace and others affected China individually. Among the problems that the country faces are financial crisis and sanctions on some of Chinese products. The country has been in non-evident trade battles for supremacy with neighboring countries, but it has tactically managed to outdo the rivals. This has not damaged its trading prowess, which gets better yearly and has opened up the country to foreign investments and expansion in its businesses, which make it have a stable economy.

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