China No Longer A ‘Developing Nation’ As One Look At U.S. Exports During Trade War Clearly Shows

In President Trump’s trade war, you can see the evolution of China’s economy.

You see what China both values and can now afford, compared to earlier this century.

U.S. exports to China this year are tilting heavily in favor of high-value products from the more traditional lower-value ones.

It can be seen most easily and readily in a traditional marker:

The percentage of U.S. exports that are flying compared to those that are sailing. (For illustration purposes only, think of this alliterative example: Flowers fly, cement sails.)

This year, for the first time in at least 15 years and perhaps ever, the percentage of exports bound for China is near parity, at 52.92% by ocean and the remainder by air. That is according to the latest data from the U.S. Census Bureau, through July.

That’s because U.S. exports to China over the water are down almost 30% this year while those over the clouds are up more than 5%.

As recently as 2015, for the same time period, the value of ocean-going exports to China was double that of air-bound exports, accounting for 67.27% of the total.

In fact, for nine of the last 16 years – shortly after China was admitted to the World Trade Organization – that has been the case, including four years where the percentage of ocean-going freight topped 70% of the total by value and air-bound freight fell below 30%.

The transition – and it appears to be one, though certainly accelerated this year – has implications for:

• so-called “vessel calls” as ports across the country deepen and widen to accommodate ever-bigger ships;
• in both passenger flights that carry “belly” cargo and freighters that only carry cargo;
• in airport and seaport revenues since China is a leading trade partner for so many of the United States’ hundreds of airports and seaports, including 11 of the top 20 at the end of 2018;
• and even in clout on Capitol Hill, where representatives and senators are already easily outnumbered by lobbyists.

Not all of the change is related to the trade war, of course.

Some of it is due to the incredible quarter-century forward march of China’s economy. That gives birth, of course, to one of the primary complaints of not only the Trump Administration but many China-watchers: China is no longer a developing economy and should no longer expect to be treated like one.

That shows up in the data also.

While ocean-bound trade has been more than double the value of air-bound trade 12 of the last 16 years, as mentioned, 2015 was the last time that was the case, though it did top 60% until this year.

The steep decline this year, however, has laid bare the difference in China of today versus the China before admittance into the WTO.

China is more interested in cellular technology equipment as it builds out its cellular network and focus on next-generation 5-G technology; pharmaceuticals as it moves toward developed-world health care; and make-up, because its people can afford it.

Here’s a look at top U.S. exports to China by air:

• Computer chip exports to China, more than 99% of which fly, are up 55.81% this year.
• Exports of vaccines, plasma and other blood “fractions,” such as white and red blood cells and platelets, are up 157.64% this year. More than 97 of these exports fly.
• Exports in the main category of medicines in pill form are up 25.64%. Just under three-quarters of all these exports fly, by value.
• Exports of medical devices, everything from expensive MRI machines to surgical needles, are up 21.98%. Almost 93% fly.
• And, yes, makeup exports are doing well also. Those exports by air have increased almost 50%, though only 62 percent fly. (Those that sail have increased at less than half the rate.)

On the ocean-side, China is is less interested in agricultural exports, such as soybeans, and oil – largely to poke President Trump in the eye – cotton for apparel, part of a years-old shift from lower-level to higher-level manufacturing; and recycled or waste products, such as those from paper, plastic and numerous metals.

The latter is largely because after a quarter-century of rapid industrialization, China is home to many of the world’s most polluted cities – and American waste, generally far from sanitary, as should probably be expected, is no longer welcome.

• U.S. soybean exports to China, which fell more than 20% the year before, are down another 17.36% this year, a full 100% of which travel by ship. Soybeans are the second most valuable product, by value, exported to China.
• The most valuable ocean-bound export to China, motor vehicles, are off 17.36%. Essentially, 100% of these sail.
• Oil, the third-most-valuable U.S. export to China, is down 63.05%, 100% of which travels by vessel.
• Motor vehicle parts are off 45.83%, at least the 85.83% sent by ship. (Those sent by air are off 34.53%.)
• Cotton exports, 100% of which sail, are down 34.72%.
• And waste of paper and paperboard, copper and aluminum are down 15.22%, 66.05%, 42.64%, respectively. All of these sail rather than fly.