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The upcoming Canton Fair is witnessing a "hard to find" scene, reflecting the growing demand for Chinese goods. As China's foreign trade recovers, the voice of stable external demand policies should be gradually withdrawn, yet the RMB exchange rate faces significant pressure for appreciation. Despite this, China’s foreign trade remains in a phase of recovery and growth, with its future development still uncertain.
Industry insiders suggest that foreign trade policies, including exchange rate measures, should remain stable to sustain the rebound in exports and prevent a potential double dip. Since last year, foreign demand has not shown a strong recovery. In response, China introduced policies to stabilize external demand, such as maintaining the RMB exchange rate and increasing export tax rebates. These measures have had a noticeable impact.
With the recent recovery in foreign trade exports, there is now a growing debate on whether these stabilizing policies should be phased out and when. The recent U.S. pressure on the RMB to appreciate has intensified this discussion.
According to the Import and Export Chamber of Commerce of Machinery, Textiles and Light Industry, the recent surge in exports is mainly due to short-term factors rather than a real rebound in external demand. For instance, importers have largely cleared their inventory, leading to increased stock replenishment. Additionally, some companies are rushing to export before the RMB appreciates, and certain product prices have risen temporarily.
Zhang Yujing, president of the China Chamber of Commerce for Import and Export of Mechanical and Electrical Products, noted that while export data has improved, most orders are short-term, with over 80% of orders within 60 days. Long-term orders remain limited.
Li Jian, a researcher at the Ministry of Commerce’s Trade Research Institute, highlighted that global uncertainties—such as the Dubai crisis, European debt issues, and rising trade protectionism—continue to pose challenges for China’s foreign trade.
Domestically, rising labor costs, raw material prices, and difficulties in industry transfer and market expansion add pressure on export companies. Li Wenfeng, vice president of the China Chamber of Commerce for Import and Export of Light Industrial Products, emphasized these concerns.
Liang Yaowen, director of the Guangdong Provincial Foreign Trade and Economic Cooperation Department, stated that rapid growth in import and export is unlikely. Instead, steady development and transformation are essential.
Experts agree that maintaining policy stability is crucial. Zhang Yujing pointed out that sudden changes in the RMB exchange rate could severely impact newly expanded profits of companies. A 3% appreciation could reduce profits by 30% to 50% for industries like home appliances and automobiles, while textile firms might see a 1% profit drop per 1% appreciation.
Zhang Yansheng, director of the Foreign Economic Research Institute, noted that while RMB appreciation can push enterprises toward restructuring, it must be done carefully to avoid pushing struggling firms into crisis.
Small and medium-sized enterprises (SMEs) play a vital role in absorbing labor. Li Wenfeng suggested maintaining the RMB exchange rate in the near term and advocating for a slow, gradual appreciation if conditions improve later.
Additionally, financial instruments for hedging exchange rates should be developed, and the cost of export credit insurance should be reduced. Liang Yaowen stressed the importance of continuing export tax rebate policies to support corporate profits.
While stability is key, experts also emphasize the need for transformation. With rising costs, China’s open economy faces major adjustment pressures. Some foreign firms are shifting production to India and Vietnam, where labor costs are lower.
Li Jian urged caution against abrupt policy changes or overly lenient environments. He suggested focusing on supporting innovation, product value addition, and export quality improvement.
Huo Jianguo, president of the Ministry of Commerce’s Trade Research Institute, recommended targeted and flexible policies to promote trade structure upgrades and explore new markets.
Li Wenfeng proposed more support for independent innovation, technology development, green practices, brand acquisition, and overseas expansion. He also advocated for domestic market exploration and smoother trade mechanisms.
Overall, a balanced approach combining stability and transformation is essential for sustainable foreign trade growth in China.
July 23, 2025