Analysis On The Impact Of U.S. Subprime Mortgage Crisis On China's Export Trade

Since the reform and opening-up, China has become one of the fastest growing economies in the world. In this paper, Chapter 1 is introduction. Chapter 2 recounts the tremendous success in the export China has achieved after the reform and opening-up in three aspects separately. First is the analysis on China's export commodity structure. In accordance with the data, we could find that there was a gradual shift of China's export commodity structure which was from primary products like agricultural products and minerals as the main body to industrial products as the main body. China's export commodities are mainly the capital-intensive and technology-intensive industrial goods while they were mainly the labor-intensive and resource-intensive industrial goods previously. The second part is on the change in the trade pattern. Analysis in this section shows that China's general trade exports and processing trade exports develop simultaneously. Meanwhile, the processing trade has played a positive role in China's national economy and made a great contribution in China's development. Finally, study on market structure demonstrates that United States, European Union, Hong Kong, Japan and ASEAN (Association of Southeast Asian Nations) are China's mail export markets which account for about 70% of China's export trade.The United States broke out subprime mortgage crisis in the summer of 2007.The crisis broadens from the United States to Europe and then to the world. And its influence is very deep. World economic growth slowed significantly because of the financial crisis.The United States is China's second largest trading partner, so its crisis has brought tremendous impact to China's export trade. Because of China'a high dependence on foreign trade, China's export trade is also inevitably be affected by the tremendous changes of international economic environment. Chapter 3 of this article analyzes the impacts of financial crisis on China's export trade separately from the three aspects mentioned above. China's capital-intensive products lack core technology competitiveness and their technological contents are very low. Mechanical and electrical products are large part of exports and the proportion of high-tech products is small. China's labor-intensive products with low technological contents and low added value, only have a price advantage. After subprime mortgage crisis, China's textiles, toys, furniture industries have been affected.Although China's processing trade has developed rapidly, totally speaking, processing mainly concentrated in the assembly of the final product and the production of low-end components. China's contract manufacturing businesses are engaged in only processing and manufacturing and lack their own brand. Their profitability is low. So in the global financial crisis, they are seriously stroke. Many companies engaged in OEM (Original Equipment Manufacturer) production failed successively.After the outbreak of the financial crisis, the ratio of the amount of China's export to the U.S. to China's total export is falling.United States as China's largest export market has dropped to the second place, while the European Union became China's largest export area. Hong Kong and Japan remained the fourth and fifth place, but their export share both declined. The Association of Southeast Asian Nations has modest increases in successive years.In the current unfavorable domestic and foreign situation, how to actively respond to the current financial crisis becomes priority. How to ensure export growth, economic growth and employment stability are quite important. Chapter 4 of this article made some suggestions. This chapter consists of two parts. The first one is to analyze the pathway through which the crisis affected China's export trade. On the one hand, the subprime mortgage crisis had led to a drop in USA's output and demand. The decline in private consumption and corporate capital spending reduces imports of consumer goods, capital goods, commodities as well as other raw materials from overseas markets including China. On the other hand, the increase in the international energy and resource prices raises the costs of China's export products, weakening the international competitiveness of Chinese exports. In addition, people worry about the prospect of USA' economy. It is likely to exacerbate the U.S. domestic trade protectionism and trade friction between China and the U.S. would be more frequent. As the development and expansion of the financial crisis, the EU or other countries and regions would be also possible to implement trade protection.The second part of Chapter 4 makes some recommendations for China's export commodity structure, trade patterns and market structure.China should attach importance to improving product technology and knowledge contents, to increase its added value, and strive to enhance the innovative capability of export enterprises and enhance the competitiveness of their products. China should develop the capital and technology-intensive industries, increase scientific and technological input, and actively develop our self-owned high-tech products, developing high-tech industries. For the resource-intensive products, China should control development of their exports.For the processing trade, the government can encourage exports and strengthen lending of the export-oriented enterprises. As an enterprise for its part, it should pay attention to brand building and actively improve the product advantage and product service levels.In addition, China's market diversification strategy should be implemented. At the same time, China should also expand the domestic market and reduce dependence on external markets.