Work Smarter，Not Harder

　　SUMEC Group Corp. is one of the largest exporters of machinery products in east China’s JiangsuProvince. Founded in 1978， the company used to be anoriginal equipment manufacturer for foreign big names.Facing faltering demand and decreasing profit marginsafter the financial crisis since 2008， the company made atough decision to change its business model， which laterenabled it to transform to an original design manufacturerand finally an original brand manufacturer.

　　By integrating resources with domestic researchinstitutions and universities， SUMEC has developed manyhi-tech products and greatly increased its profitability.

　　For instance， gasoline engine generators underthe company’s brand Firman have occupied the No.1market share in Africa. High-pressure washers under thebrand name of Cleanforce are the top seller in the NorthAmerican market. To date， exports of products under thecompany’s own brands have accounted for 30 percentof total sales.

　　Cai Hongbo， Chairman of SUMEC， said industrialupgrade is the only way out for exporters. “Our corecompetitiveness should be based on technological innovationand better branding， instead of low prices.”

　　Economic data released earlier this year showed thatChina had surpassed the United States as the biggestgoods trading nation.

　　China’s total goods trade volume in 2013 stood at arecord high of $4.16 trillion. Exports reached $2.21 trillionand imports， $1.95 trillion. The World Trade Organizationconfirmed that China’s goods trade in 2013 was $250billion more than the United States.

　　As big as it is， China is far from a strong trading nation，experts and government officials argue. More needsto be done to improve the country’s trade structure byadding value to exported goods and fostering trade inservices.

　　A rising force

　　China’s rise to dominance in world trade happened overa very short period， with the value of Chinese traderoughly doubling every four years over the past threedecades.

　　Since the reform and opening-up policy was adoptedin 1978， China’s trade volume has surged from $20.6billion to $4.16 trillion， representing a compound annualgrowth of 16.4 percent.

　　China accounts for 12 percent of global trade volumeand is now the largest trading partner of 120 countriesand regions. Foreign trade adds 180 million jobs to thecountry each year and contributor 18 percent of China’stax revenues. One out of every four employees in thecountry works in a foreign trade-related business， accordingto the Ministry of Commerce (MOFCOM).

　　“Foreign trade has become the most dynamic drivingforce for social and economic development，” said GaoHucheng， China’s Commerce Minister.

　　Bai Ming， a research fellow with the Chinese Academyof International Trade and Economic Cooperation，attributed the leapfrog development of China’s foreigntrade to the reform and opening-up strategy， a globalindustrial shift and China’s low cost advantage.

　　“Since World War II， the global industrial shift hasbeen accelerated. Many industries were transferredfrom the United States to Japan， and then to the FourAsian Tigers (Singapore， South Korea， and China’s HongKong and Taiwan) and later to the Chinese mainland.After that， China became the world’s factory，” Bai toldChinAfrica.

　　Weak links

　　Analysts， however， said the top trader spot is no reasonfor gloating as China is far from being a strong tradingnation due to a lack of hi-tech exports and the lacklusterservice-trade data.

　　“Among our exported goods， most of them havean economically low added value and we have few ofour own brands. We still lag behind in global marketingnetworks and models，” said Gao.

　　In 2013， China’s exports of hi-tech products accountedfor 29.9 percent of its total exports， but 73 percentof those products were made by foreign-investedcompanies， according to data from MOFCOM.

　　Processing trade still occupies the bulk of China’sforeign trade， said Liu Yuanchun， Deputy Dean of theSchool of Economics at Renmin University of China. Alarge amount of components are brought to China tobe assembled and then re-exported. MOFCOM figuresshow the processing trade made up 32.6 percent of totalimports and exports in 2013.

　　“The core technologies are in the hands of foreigncompanies or joint ventures while Chinese manufacturersare still at the lower end of the industrial chain， livingoff very thin profits，” said Liu.

　　“For a long time， Chinese products have relied onquantity and price advantages for international competitiveness，while lacking core competitiveness and addedvalue，” said Bai. “China is making products that othercountries are not willing to. Although it is the top trader ofgoods， profits belonging to China are definitely not in linewith that status.”

　　Besides the structural problem in China’s trade ofgoods， another piece of evidence for China not beingstrong enough in trade is that its service trade still lags farbehind the United States. International trade， however，is now edging away from commodities to services andintellectual property， which happen to be China’sweaknesses.

　　China’s shortcoming in service traderepresents a stumbling block on thecountry’s path to becoming a strongertrading nation. According to MOFCOM，China’s service trade reached $539.64billion in 2013， accounting for 11.5 percentof its total trade volume， far below the worldaverage of 20 percent. The amount is alsoless than half of that for the United States.

　　The country also saw a widening deficit of$118.46 billion in service trade in 2013， surging32.1 percent from the $89.7 billion deficitin 2012. Overall， the country has witnessed a deficit inservice trade for 12 consecutive years， according toMOFCOM.

　　Zhang Monan， an associate research fellow at theChina Center for International Economic Exchanges， saida structural upgrading is also happening in global servicetrade.

　　In recent years， service trade has become moredependent on the development of knowledge-， technology-and capital-intensive industries， such as telecommunicationsand finance， computer software and dataprocessing， rather than on traditional labor- or resourcesintensiveservice industries such as tourism and salesservices.

　　In China， traditional industries like tourism and transportationstill make up the bulk of its service trade， whileknowledge- and capital-intensive sectors are relativelyweak compared to developed countries. Despite thefact that high value-added industries like insurance andfinance have registered robust growth in the past fewyears， they are far from capable of playing aleading role， said Zhang.

　　“Compared with trade of goods， growth inChina’s service trade is much slower. Improvingcompetitiveness in that regard is a must forChina at a time when the country is marchingtoward being a stronger trading nation，” Baisaid.

　　“To support export-oriented servicecompanies， the government should， underthe rules of the WTO， grant preferential policies，such as more convenient registrationprocedures for businesses， introducing clientsto them， holding exhibitions to enable themto meet with potential clients and helping tosolve disputes between them and their foreigncounterparts，” Bai suggested.

　　Zhang Xiaoyu， a researcher with the Chinese Academyof International Trade and Economic Cooperation， saida “strong trading nation” is not something that a countryshould deliberately pursue， but should be a naturaloutcome after having adjusted their domestic economicstructure.

　　“A country’s trade structure is in line with its domesticeconomic structure. Only when China carries out domesticindustrial upgrades and economic rebalancing can itimprove its overall trade structure，” Zhang told ChinAfrica.“It’s bound to be a long process.”

　　“High-end service exports， such as financial services，cultural products and technology transfer， are China’sweakest links. Also， China’s service sector is not as openedup as the manufacturing sector. This problem should beaddressed.”

　　A frequent target

　　China’s foray into the global trade market has not alwaysgone smoothly. It has been the most targeted nation inanti-dumping investigations for 18 consecutive years andcountervailing investigations for eight consecutive years.Bai said it’s inevitable for a big trading nation to becomea frequent target of trade disputes.

　　“It’s not just an issue for China. When Japan and theFour Asian Tigers emerged as big trading nations andregions， they were faced with the same problem. Till today，trade disputes between the United States and Japan orSouth Korea still occur frequently.”

　　“The tallest tree is the one most swayed by the wind，”Bai said. “Since the financial crisis， trade protectionism hasbecome increasingly severe. Restrictions on import quotasfrom China imposed by other countries are aimed at savingtheir own economy.”

　　Zhang said China should treat trade protectionismrationally.

　　“China’s peaceful development has broken up thepreviously established balance. How to increase tradingstrength while getting along with trading partners is atough issue China has to face.”

　　China does lag behind developed countries in terms ofadvanced trading concepts， environmental protection andlabor protection standards. “We should constantly learnfrom them and shoulder our responsibilities，” Zhang said.“As painful as it is， it will bring about a better outcome.

　　China’s trade development should be based on structuraladjustment and should be healthy and sustainable. Onlywhen we are willing to give up some current interests canfuture gains be secured，” Zhang added.