China is an indisputable power in international commerce, with the largest or second-largest economy in the world, depending on your statistics source. However, many small and midsize exporters should hesitate before embracing international commerce in light of this powerful colossus.
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Pessimism among US exporters is visible and is spreading, particularly in the context of the bilateral relationship problems between the US and the People’s Republic of China (PRC). The U.S.-China stalemate has gotten worse over the past several years due to China’s support of Russia in its war with Ukraine, tensions over Taiwan’s status, growing trade restrictions, and even balloon eavesdropping. Additionally, certain actions made by the PRC make it harder for businesses to do business in China by raising the burden of compliance on them and creating operational uncertainty as a result of bilateral tensions. Furthermore, the PRC’s use of forced technology transfers, intellectual property (IP) theft, and many market access problems prevents US businesses from competing on an equal basis with PRC businesses.
Should US exporters still think about entering the Chinese market in light of these factors? Sadly, there isn’t a universal solution that works for exporters.
I’ll cover a lot of topics in this post about exporting to China to help you determine if this market is right for you. These topics include the background of American trade with China, the steps involved in exporting to China, including documentation and compliance requirements, and the advantages and things to keep in mind for American businesses trying to enter the Chinese market.
China-US Trade: A Difficult Road
When adjusting for price disparities using the Purchasing Power Parity (PPP) method, China’s GDP was the largest in the world in 2017. In 2010 the nation became the greatest exporter in the world, and in 2013 it became the largest trading nation. (World Factbook, CIA) A range of tariffs were imposed on Chinese imports by the Trump Administration in 2018 as a reaction to what it saw to be unfair trade practices. China retaliated by imposing more tariffs of its own on American exports, and the two nations have been at odds ever since.
In January 2020, there seemed to be progress in the negotiations between the two nations, but by late 2020, the Administration had tightened visa requirements for Chinese Communist Party members, banned U.S. investments in Chinese companies purportedly affiliated with the People’s Liberation Army, and added dozens of companies, including China’s largest chipmaker, to its trade blacklist.
The administration of President Joseph Biden extended the Trump-era prohibition on US investment in Chinese companies with military links until 2021 and kept tariffs on Chinese imports, restrictions, and blacklists in place. NATO deemed China a “security challenge” in the same year, at the US government’s insistence.
In 2022, China halted high-level military contact with the United States, put a halt to climate discussions between the two countries, and imposed sanctions on House Speaker Nancy Pelosi after her travel to Taiwan. The United States imposed extensive limitations on China’s imports of sophisticated computer and semiconductor manufacturing goods in the same year.
The United States’ recent downing of a Chinese-owned balloon has stoked worries about the already deteriorating U.S.-China ties, which are already tight due to trade tensions and U.S. backing for Taiwan.
The framework through which the United States perceives its relationship with the People’s Republic of China (PRC) is one of strategic rivalry, according to the U.S. Department of State. In order to counter Beijing’s aggressive and coercive actions, defend its interests and values, advance economic interests, maintain key military advantages and vital security partnerships, re-engage robustly in the UN system, and stand up to Beijing when PRC authorities violate fundamental freedoms and human rights, the United States is approaching its relationship with the PRC under the Biden-Harris Administration from a position of strength.
Data and Statistics Regarding Trade and Exports to China
China’s economy is among the top two in the world as of 2023, trailing only that of the US. Its industrial sector, low-wage labor, and export connections have all contributed to its steady prosperity. It was the only significant economy to escape the COVID-19 economic downturn. (World Factbook, CIA) Despite the fact that the PRC’s private sector has been dynamic and has helped hundreds of millions of people escape poverty over the past few decades, the nation is still not regarded as having a “developed” economy because the United States had a GDP per capita in 2021 that was nearly six times larger than that of the PRC. What is the current state of the trade relationship between China and the United States?
Despite years of trade tension, the U.S. and China’s goods commerce hit a record $690.6 billion in 2022, illustrating how dependent on one another they remain. China’s exports increased 1.6% to $153.8 billion, while imports increased 6.3% to $536.8 billion.