In recent years, many practitioners have been paying attention to the same question: Where will the next growth point of the Chinese economy be?
The real estate industry has entered an adjustment cycle. The dividends of consumer Internet traffic have basically been exhausted. Domestic consumption growth has slowed down. Entrepreneurship competition in various industries has continued to increase. Involution has penetrated into almost all commercial fields.
The industry generally believes that the next trend with real long-term growth potential is new foreign trade, and this round of foreign trade is fundamentally different from the traditional foreign trade model of twenty years ago.
1. The core root cause of domestic involution: the scale of production capacity far exceeds the carrying capacity of domestic demand
First of all, we must clarify a basic fact: China now has the world’s most complete industrial categories, the most complete supply chain system, and world-leading manufacturing efficiency and cost control capabilities. The world’s demand for cost-effective and large-capacity industrial products almost cannot bypass the Chinese supply chain. This is an objective reality that has been verified by global trade.
But the advantage also brings new problems: the expansion rate of domestic production capacity has far exceeded the growth rate of domestic demand. In almost all mainstream industrial product tracks such as home appliances, consumer electronics, photovoltaics, new energy vehicles, building materials, and clothing, the domestic market has entered a saturated state, and the pattern of oversupply has continued.
This has subsequently triggered a price war across the industry. Vicious competition in which you sell for 100 and others for 90 is commonplace. The capacity of the domestic market can no longer accommodate the existing production capacity. This is a development stage determined by economic laws. The only way to break the situation is to put the supply chain advantages tempered domestically into the global market to release value.
2. The global demand gap is huge, forming a natural match with China’s production capacity
If you look at the global market, you will find that 80% of the world’s population lives in developing countries. The consumption and construction needs in Africa, Southeast Asia, Latin America, the Middle East and other regions are extremely strong, and these regions generally have
In terms of infrastructure gaps, there is insufficient supply of roads, bridges, networks, electricity, and housing. There is also a huge gap in home appliances, mobile phones, new energy vehicles, and various building materials. Local industrial capabilities are not enough to support these demands. Locally produced products are either expensive or of insufficient quality, forming a structural mismatch of “China’s overcapacity and overseas demand.”
China happens to have large-scale, low-cost production capabilities for these products. This supply-demand matching is structural, long-term, and irreplaceable. Exporting domestic supply chain advantages to the global market is the underlying logic of China’s economic growth in the next ten years.
3. The Belt and Road Initiative builds a basic channel for foreign trade to go overseas
Many people’s understanding of the Belt and Road Initiative remains at the level of infrastructure projects. In fact, its core business logic is very clear: by helping overseas markets build infrastructure such as railways, ports, electricity, and communications, and breaking through physical obstacles to trade circulation. After the local infrastructure is improved, Chinese goods, investment, and production capacity can enter smoothly.
This model has been put into operation in the past ten years. After the implementation of railways in Southeast Asia, ports in Africa, photovoltaic power stations in the Middle East, and 5G networks in Latin America, the local market will naturally be more inclined to purchase industrial products that adapt to Chinese standards, forming a stable business path dependence.
4. There is an essential difference between the new round of foreign trade and traditional foreign trade
Many people wonder whether foreign trade has been developed for many years and there is still a chance to enter the market now. In fact, this round of foreign trade is essentially different from the traditional foreign trade in the 2000s: in the past, foreign trade was “made in China and consumed in developed countries”, mainly exporting low value-added products such as clothes, footwear and socks.
Products rely on low-cost labor dividends; and the future of foreign trade is “China’s production capacity, global market”, and the output is system capabilities from infrastructure to equipment, from new energy to digital economy, from automobiles to complete industrial solutions. In the past, we sold products, but now we sell production capacity, standards, and solutions. The profit margins, competition moats, and industry ceilings are much higher than traditional foreign trade.
Nowadays, high-speed rail in Southeast Asia adopts Chinese standards, smart cities in the Middle East adopt Chinese equipment, and digital transformation in Africa adopts Chinese solutions. It is already an industrial-level and ecological-level output, rather than a simple commodity trade.
5. The dividends of going overseas have appeared, and the window period is fleeting
Currently, a large number of practitioners have reaped the dividends of new foreign trade: businesses engaged in new energy exports sell photovoltaic panels and energy storage equipment to Europe and the Middle East.
The interest rate is twice as high as domestically; businesses that export building materials sell decoration materials to Southeast Asia, and orders have been scheduled for half a year; businesses that export machinery and equipment sell complete production lines to African factories, with technical training and after-sales maintenance services, which have extremely high added value.
China has surpassed Japan to become the world’s largest automobile exporter. New energy vehicles have contributed to the core growth. Brands such as BYD, NIO, and Xpeng are priced higher overseas than domestically and are still in short supply. Photovoltaic companies have built factories overseas to bypass tariff barriers. Cross-border e-commerce merchants have sold goods to the sinking markets of Europe and the United States through overseas short video platforms. The surge in orders has become a common phenomenon. These are not isolated cases, but clear industry trends.
Of course, there are thresholds in the foreign trade industry. Language, law, exchange rate, geopolitics, and cultural differences are all risks that need to be avoided. However, it is precisely because of the thresholds that there are excess profits. If everyone can easily enter the industry, it will not be in the spotlight.
At present, the general direction of China’s production capacity overseas has been determined, but localized operations, brand building, channel laying and other models are still evolving rapidly. Those practitioners who are the first to run through the landing model will be able to reap the biggest dividends.
China’s economy has shifted from the “mainly internal circulation” to the “double internal and external circulation” development stage. The real incremental space is basically in the field of external circulation. Domestic involution is not the end, but the starting point to force industrial upgrading and temper global competitiveness. China’s production capacity advantages should naturally match the global market. This is an inevitable direction determined by economic laws.
The biggest business opportunity in the next decade is not to seize domestic stocks, but to find growth overseas. Foreign trade is not a short-term trend, but a long-term trend. Currently, a large number of practitioners have embarked on the track of going overseas, and the industry window is opening rapidly.
