Fung Group: Exports to hit record amid COVID

China's foreign trade will see challenges in the second half of the year, but the absolute value of exports is likely to reach a new high due to recovering overseas demand and the attractiveness of China as a production base in a time of COVID-19 uncertainty, a senior executive of Hong Kong-headquartered trading and supply chain management company Fung Group said.

Stephen Fung, president of Fung Group in China, said he is optimistic about the near-term prospects of China's exports, although recurring COVID-19 outbreaks across the world could slow the recovery in global trade, and rising commodity prices and shipping costs could add cost pressures to Chinese exporters.

"The further reopening of major economies from pandemic-induced restrictions will further bolster overseas demand for Chinese products, both by retailers restocking their inventory to meet consumer demand and manufacturers importing machinery, equipment and components from China," he said.

He added that because of China's rapid and successful containment of COVID-19, many international buyers have shifted their orders to China from alternative production countries and this could continue for a while, as many countries are still battling the pandemic.

The strong supply chain integration and mature industry clusters in China make its raw material access and production less disruption-prone than other countries. This is positive for China sourcing in both the short and longer terms, Fung added.

As data from the General Administration of Customs showed, China's foreign trade climbed by 27.1 percent year-on-year to 18.07 trillion yuan ($2.8 trillion) during the first half, with exports increasing 28.1 percent year-on-year and imports rising 25.9 percent, and he believes the fast growth in imports was partly fueled by improving domestic demand.

Pursuing the new dual-circulation development pattern, with domestic and international markets feeding off each other and the former being the mainstay, the country will nurture a strong domestic market and spur strong online and offline spending.

The rise in consumption is supported by the expanding middle-income groups, increasing household incomes that lead to growing demand for more sophisticated, higher-quality products and services, and development of innovative retail models and business formats that offer consumers a more engaging and entertaining shopping experience, said Fung.

The new growth pattern, as well as China's encouragement of new forms and models of foreign trade like cross-border e-commerce and offshore trade and overseas warehouses, and the growth of innovative retail models and business formats, also mean increasingly more opportunities for Fung Group, which operates 350 offices and logistics centers and 2,700 retailing outlets worldwide, with diverse businesses across the entire global supply chain for consumer goods including trading, logistics, distribution, and retail.

For instance, its subsidiary Li & Fung's digital incubator LFX has acquired FNX Technologies, a North American-based, apparel 3D render automation startup, in May, to strengthen digital products development and e-commerce services.

The company is also partnering with JD to provide end-to-end digital supply chain management services for the latter's private brand initiatives.