A recent analysis by David Birnbaum reveals a significant shift in China's export focus, specifically concerning the US’ as a major destination for Chinese goods. While the US remains a big player in certain sectors, particularly garments, the overall importance of the US market to China's economy is waning.

Declining US trade significance

Data indicates a clear downward trend in the significance of the US market to China's overall GDP. Twenty years ago, trade with the US accounted for 10.5 per cent of China's GDP. However, by 2024, this figure has dropped dramatically to just 3.9 per cent and continues to decline. This suggests that while trade with the US is still substantial, its relative importance to the Chinese economy has diminished considerably.   

Despite the overall decline in the importance of the US market, China remains a dominant player in garment exports to the US China holds a significant market share of 20.4 per cent by value and 34.5 per cent by units in garment exports to the US. In fact, China's garment exports to the US are growing, touching 22.6 per cent in 2024. This suggests that China is actively working to maintain its position in this specific sector, even as its overall reliance on the US market decreases.

Diversification of export markets

While the US is an important garment importer, China's garment exports to other major importing regions – the EU, Japan, Korea, and the UK – collectively surpass those to the US. Exports to these other major importers totalled 39 per cent, significantly higher than the US. This diversification of export markets highlights China's strategy to reduce its dependence on any single market and capitalize on opportunities across various regions.   

China's garment exports to key markets

To provide a clearer picture of the shifting export dynamics, let's analyze the data on China's garment exports to key markets (EU, Japan, Korea, UK, and US). The table below represents a qualitative comparison, showing the general trend of garment exports to these regions.

Beyond direct finished garment exports, it's essential to consider China's increasing exports of raw materials (fibers, yarns, and fabrics) to Asian and ASEAN countries. This trend is crucial for several reasons:

• Regional production networks: China has become a major supplier of textile inputs to neighboring countries. These countries then use these materials to manufacture garments and other textile products.
• Indirect exports: A significant portion of the finished goods produced in these Asian/ASEAN countries (using Chinese materials) are ultimately exported to markets like the US, the EU, and others. This means that even if the US imports fewer direct garment exports from China, it still consumes products made with Chinese materials. This is what we call "indirect exports."
• Value chain control: By controlling the supply of raw materials, China maintains a powerful position in the textile and apparel value chain.
• Data challenges: Tracking the precise flow and final destination of Chinese raw materials can be complex, making it difficult to quantify the exact impact of indirect exports.

David Birnbaum's analysis highlights a crucial transition in China's export dynamics. While the US remains an important market, particularly for garments, its overall significance to China's economy is diminishing. China is actively diversifying its export markets, focusing on other major importers and leveraging indirect exports through raw material supply chains. This realignment reflects China's adaptation to the evolving global trade landscape and its continued influence in the global textile and apparel industry.