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.