Chinese exports to almost all major economies have fallen, except those to Russia

Weakness of global demand is forecast to persist and will weigh on Chinese exports until at least early next year

The decline in exports does not bode well for multinationals deeply intertwined with China-based supply chains. It indicates dwindling global demand for Chinese goods, and considering the current macroeconomic climate in major developed economies, a rebound is not imminent. Indeed, the total export value generated from goods exported by foreign-invested enterprises in China has been declining every month in H1 this year on a cumulative basis.

This unfavorable trend means multinationals with manufacturing facilities in China will have to consider amending their strategies to deal with this reality. One potential approach is to redirect some of their production focus to China’s domestic market in search of potentially larger markets within the country. This strategy, dubbed “China for China,” is gaining popularity with multinationals, not just due to the falling global demand, but also the escalating geopolitics that have motivated a series of additional tariffs and product checks in Western countries on goods sourced from China. While it is true that China’s domestic demand is also waning because of its deteriorating economic outlook, the sheer size of the country may make it worthwhile to identify and develop more domestic customers.

Another possible strategy is to restructure the existing supply chain and move part of the production capacity outside of China, producing and exporting from there. This alternative would ensure goods are not identified as originated from China and, under today’s global trade mechanisms, would likely bypass extra checks and potential additional tariffs. However, restructuring a supply chain is easier said than done. It requires a significant amount of time and resources—often a few years—to fully implement, and even once completed, firms may find that the new host country cannot compete with China in terms of the quality of the infrastructure and workforce skills. It’s likely to be a painful process and could easily undermine profitability. 

In summary, there are no ideal solutions. However, remaining passive is increasingly unviable. Multinationals will need to face difficult choices and make tough decisions. Moreover, these are not likely to be decisions for regional leaders alone. Corporate involvement will almost certainly be necessary.


  • China’s exports saw a robust rebound immediately upon reopening. However, this surge lost momentum in the following months, leading to a contraction.
  • The global demand weakness, particularly from the US and Europe, traditionally the two most significant external markets for China’s exports, is the primary cause.
  • The declining consumer demand in the West weighed not only on China’s exports, but it also had a negative impact on the exports of numerous ASEAN countries. These regions previously saw a benefit from Multinationals’ supply chain reorganization, which had relocated many final assembly lines from China.
  • A considerable portion of the intermediary products and components needed by these assembly lines still originate from China. Consequently, the drop in exports from ASEAN countries also led to a decrease in China’s exports to these regions.
  • Other BRICS nations are not aiding the situation. China’s exports to Brazil, India, and Africa have been declining YOY in recent months. The only exception has been Russia, highlighting the profound and close economic relationship between the two nations.

Our View

For approximately two decades, exports have been a primary engine of China’s rapid economic growth. Through the import of vast quantities of Chinese goods, the world—most notably developed economies—has grown increasingly reliant on China’s manufacturing prowess, effectively earning the nation the title of “world’s factory” or the “supplier to the world.”

However, this momentum is now under scrutiny. As interest rates in Europe and the US have risen sharply, ordinary consumers are feeling the financial squeeze. Confronted by a cost-of-living crisis, they have been forced to curtail nonessential expenditure, including on relatively inexpensive goods made in China. Circumstances in major developing economies, where China had vested considerable hope, are not encouraging either. The purchasing power of consumers in India, Brazil, and across the African continent is not robust enough to compensate for the decline in the Western world. This global reduction in demand is forecast to persist into early 2024, further suggesting that China’s exports are unlikely to recover this year.

The restructuring of supply chains that started during the COVID-19 pandemic and continues amid escalating geopolitical tensions between China and the West has further affected Chinese exports. A growing number of Western customers are diverting their procurement and sourcing away from China. South Asian and Southeast Asian countries, such as India, Vietnam, and Thailand, have seized this opportunity to bolster their manufacturing capabilities to enhance their exports to the West. China’s plunging exports to the US and Europe provide some initial evidence of their success.

Nevertheless, few manufacturers are immune to the continually weakening global demand. Exports from APAC countries, excluding China, have also suffered in recent months. This is evident in China’s exports to ASEAN countries, given that a large proportion of intermediary goods and components needed by these countries’ final assembly lines are still produced in China. As ASEAN countries’ exports to the West fall, China’s exports to these nations also fall. 

While the ebbs and flows of global demand are cyclical and are projected to rebound sometime in late 2024, the reshuffle of supply chains across the APAC region is more structural. Factors such as the fallout of the pandemic, the Russia/Ukraine conflict, escalating tensions between China and the US, and increasing emphasis on security within China all suggest a deteriorating demand landscape for goods made in China. Thus, it’s almost certain that China’s export challenges will continue at the very least into next year.

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