Foreign trade will continue to play vital role in post-virus world

The novel coronavirus pandemic has caused large-scale disruptions in international trade and undermined the entire world economy. And although China's foreign trade is likely to recover after the pandemic is contained and the global economic situation stabilizes, it should focus on long-term structural changes.

China owes its economic development to reform and opening-up, in which foreign trade has played a very important role. China joining the World Trade Organization in 2001 facilitated its further integration with the global economy. The contribution of foreign trade to China's growth increased rapidly, exceeding 35 percent at one stage, and became the main driver of the Chinese economy.

But after the 2008 global financial crisis, many countries resorted to trade protectionism; as a result, the significance of foreign trade in China's economy started declining. In 2019, exports accounted for only 17.4 percent of China's GDP, with its trade surplus adding up to only 2.9 percent of GDP.

The coronavirus outbreak has further contracted China's foreign trade, and the declining importance of foreign trade in its economy now seems irreversible. Which means in the long run, the contribution of foreign trade to China's economic growth could drop further.

But that doesn't mean foreign trade is no longer important for China, because the scale of its foreign trade is continuously expanding. Yet the domestic market has become increasingly important to China's economy. With China's continuous economic growth and increase in Chinese people's incomes, the country is gradually transforming from a global manufacturing center to a twin center of global manufacturing and consumption-and the epidemic has accelerated this process. As such, strengthening China's domestic market will also increase its economy's resilience.

A country's foreign trade structure is determined by its industrial structure. Thanks to the international division of labor, many developed countries shifted their low-and medium-end manufacturing to developing countries such as China. Of late, though, China has been exporting more and more high-end products to the global market thanks to industrial upgrading. Yet China has not shifted its low-and medium-end industries to other countries on a large scale mainly due to the high productivity and efficiency of its workers.

As a major world power, China has abundant production factors, and large numbers of high-tech talents and skilled workers. That's why, instead of transferring its low-and medium-end manufacturing to other countries, China has been shifting them from the eastern region to the central and western regions. And since China has a huge market, manufacturers that serve the domestic market are more inclined to set up plants and purchase raw materials from local areas to cope with the effects of the trade war the US has launched against China.

Therefore, after the pandemic is contained, China's exports will remain diversified. From high-tech products such as electronics, telecommunications and engineering products, and intermediate products including components, to consumer goods such as home appliances, toys and clothing, Chinese products will maintain their strong competitiveness edge in the global market.

The pace of the transfer of low value-added and labor-intensive industries to other countries will slow down because of the pandemic. And the proportion of high-tech products in China's exports will continuously increase and that of intermediate products will remain high.

Furthermore, the coronavirus pandemic has accelerated the development of some new forms of foreign trade, particularly digital trade in goods and services. China enjoys many advantages in digital trade of goods, including cross-border e-commerce, thanks to the strong global competitiveness of Chinese products and a series of innovative measures it has taken to facilitate customs clearance, which many Western countries lack.

But since China still has a big deficit in services trade, including digital trade in services, it should promote innovation in its digital content industry and improve digital governance. In this regard, China's large-scale data resource and data market are conducive to cultivating leading enterprises in digital services.

The author is a researcher at the China Center for International Economic Exchanges.

The views don't necessarily represent those of China Daily.