China's "world's factory" status is challenged by a ten-month decline in its US exports due to supply-chain reshoring. Weak demand, a sluggish economy, and inflation have reduced overall US imports, with China experiencing a more significant decline compared to Mexico. Notably, China's share of major US imports, especially in textiles and apparel, has dropped by 4 percentage points from 2022 and nearly half of its level a decade ago.
Factors like Covid disruptions, US-China trade tensions, and the Uygur Forced Labour Prevention Act discourage sourcing from China. China's dominance in low-cost consumer goods, such as furniture and toys, has diminished. Chinese companies have shifted furniture assembly to Mexico-focused industrial parks near the border.
China's share of US imports for mechanical and electrical products has also decreased. While no country can replace China entirely, low-cost Asia-Pacific nations and Mexico can benefit from changing supply chains.
The trend of declining Chinese exports to the US will persist, impacting China's economy in the short term and necessitating a focus on domestic demand. In the long term, China's export advantage relies on high-tech products.
