"Can't say it is a good year," said Jiang, reflecting on the one-third drop in sales for 2023. Like the other traders in Yiwu Small Commodity Mall, dubbed the world's largest wholesale market, Jiang has a small store front but she derives most of her sales from exports.
China's loosening of its border controls early in 2023 after years of strict COVID restrictions raised expectations. But to many exporters like Jiang in the eastern city of Yiwu, business was better in 2022 when consumers across the globe indulged in heady post-pandemic splurging.
"Luckily, we had Russia and the Middle East markets to offset weakened demand from big spenders in the U.S. and Europe," said Jiang. Similar sentiments were echoed by other traders in the market.
Compared with the last few years, there seemed to be more visitors to the sprawling mall of 260,000 sq. meters, the equivalent of about 36 soccer pitches. But traders say this foot traffic does not necessarily translate into sales.
"Customers in the U.S. and Europe are generally asking for a 10% cut to our catalog prices citing high inflation in their countries," said one seller of fake Christmas trees.
China's exports broke a six-month drop to grow 0.5% in November, but total outbound shipments in the first 11 months still declined by 5.2%. Imports dropped by 6% over the 11 months.
Exports to the key U.S. market fell by the biggest margin, down 13.8% in the year to end-November, while those to the EU and Southeast Asia fell by 11% and 5.5%, respectively. China would be facing an even bleaker picture if not for strong vehicle exports, which surged 71% in the 11 months to end-November from the same period in 2022.
Capital Economics estimates that China's export value has fallen by some 16% in dollar terms since the end of last year. Consequently, exporters' net profit margins have fallen to their lowest since 2010, excluding the initial pandemic lockdown.
"China's export strength evident in the [post]-pandemic years is over, with annual export growth in negative territory for a large part of 2023," said Arjen van Dijkhuizen, senior economist at ABN Amro. "Besides base effects, this reflects the cooling of global demand on the back of sharp monetary tightening, and a post-pandemic rotation in global demand back to services."
U.S. toymaker Hasbro, which has factories in Asia but sells its products worldwide, announced last week that it was cutting staff by 15%, affecting 900 people, due to softened demand. This was on top of the 1,000 fulltime positions it had cut earlier in the year.
Some retailers have resorted to aggressive price-cutting to expand market share. But Chen Liguo who sells mugs and clothes to customers in the U.S. and Europe through online marketplaces Shein and Temu says higher advertisement spend cut into an already low profit margin of about 15%, compared with 20% a year ago.
"Merchandise won't catch eyeballs without advertisement," said Chen who expressed concerns over the sustainability of sales through these marketplaces known for ultralow prices. "Business will get tougher in 2024 due to competitions and bilateral tension."
Temu's parent PDD Holding became the most valuable Chinese company listed in the U.S. briefly last month after reporting strong earnings. But PDD, like other Chinese companies in the U.S. face greater scrutiny as U.S. lawmakers reportedly vowed to close "loopholes" in import rules.
The European Union has started an anti-subsidy investigation into imports of EVs from China
Economists expect China's export rout to bottom out in the coming months due to a cyclical turnaround in global trade, but they do not see a sharp rebound.
"Many Chinese policymakers and business executives are already proceeding on the assumption that the U.S. and EU will be less important export markets over the longer term," said Stephen Olson, senior research fellow at Singapore's Hinrich Foundation.
Instead, emerging markets in Southeast Asia and domestic consumption will gain greater importance. "On an overall basis, exports are likely to become less significant as a driver of China's growth," Olson said.