Families in Xi'an, capital of northwest China's Shaanxi Province, consume a high amount of wheat flour. As the Spring Festival approaches, they have started preparing for reunion feasts and wheat flour is an essential item on their shopping list. However, one of them, 50-year-old Lian Hui, has made a daring decision this year. She plans to experiment with imported flour to make noodles and steamed bread.

"I was told that Kazakhstan grows quality wheat, but I didn't come across the wheat before," she said. "This time, I saw it in the supermarket, so I have decided to try it out."

Due to its conducive soil and weather conditions, Kazakhstan, the world's largest landlocked country, is a premium wheat producer. However, before 2013, Kazakhstan barely exported wheat to neighboring China due to the high cost of transportation and transactions. Then in November 2013, soon after the Belt and Road Initiative began to be implemented, Xi'an, a starting point of the ancient Silk Road trade route, launched a China-Europe freight train service, with trains passing through Kazakhstan. In 2018, the number of trains hit 1,235, more than six times the number in 2017, carrying 1.2 million tons of goods worth of $1.72 billion, according to the local customs.

A good sign

The growing trade between Xi'an and Kazakhstan in 2018 reflected China's record foreign trade performance that year. China's import and export volume hit a high of 30.51 trillion yuan ($4.5 trillion), 2.7 trillion yuan ($396.6 billion) higher than in 2017, marking 9.7-percent growth year on year, according to statistics released by the General Administration of Customs of China (GACC) on January 14.

The data is a good indicator that China's economy remained resilient amid external uncertainties. Both internal and external factors contributed to the growth.

According to GACC spokesperson Li Kuiwen, the growth derived from China's sound and steady economic fundamentals and a string of policies and measures, including lower import tariffs, higher export tax rebates and improvement in the business environment.

Mei Xinyu, a researcher with the Chinese Academy of International Trade and Economic Cooperation, emphasized the impact of the international environment. He told Beijing Review that China's major trading partners maintained a positive economic momentum in 2018. The plunge in the stock markets in the past several months did not spread to their real economies, so there was marginal impact on China's foreign trade performance.

Mei also said in 2015 and 2016, the world trade volume decreased, which lowered the base for 2018. Although 2017 saw a rebound, it failed to reach the historical high during the 2011-14 period. So one reason China's foreign trade hit a record volume was because of the low base in the previous years.

In 2018, exports rose 7.1 percent year on year to 16.42 trillion yuan ($2.41 trillion), while imports grew 12.9 percent to 14.09 trillion yuan ($2.07 trillion). The trade surplus of 2.33 trillion yuan ($342.2 billion) shrank by 18.3 percent measured against 2017, according to GACC figures.

"Foreign trade contributed to China's economic development in 2018 in an all-round manner," Mei said, adding that it promoted the manufacturing and service sectors in the domestic market and facilitated tax revenue and employment.

Internal impetus

The narrowing trade surplus tells of China's resolution to expand imports. The government adopted several measures to encourage imports and improve the business environment, as promised by President Xi Jinping in his address at the Boao Forum for Asia Annual Conference in April 2018.

Import tariffs on over 1,500 items were reduced as of November 1, 2018, with the average rate slashed from 10.5 percent to 7.8 percent. The first China International Import Expo (CIIE) held in Shanghai in November 2018, the world's first national import-themed exhibition, was a new milestone in China's import calendar, showing the determination to open the country further up. The government also reduced the overall time for both import and export customs clearance and the number of documents required by one third. The customs clearance cost was reduced as well.

"There are three reasons for China to expand its imports at the moment," Mei said. "First, as labor costs rise in China, it's no longer cost-effective to conduct domestic production in some downstream manufacturing industries, which could lead to a loss in competitiveness in the international market. Second, engaging in low-efficiency industries can only result in low income. Third, importing provides opportunities for trading partners to benefit from China's fast-growing economy, which leads to mutual benefits."

Lian, the Xi'an housewife, appreciated Kazakh wheat flour for its high resilience and being additive-free.

While benefiting from foreign products and services and satisfying people's growing demand for diversified goods, China is providing its trading partners with a huge market.

The Xi'an Aiju Grain and Oil Industry Group, a time-honored private food enterprise, invested in industrial parks processing farm products in Kazakhstan after the freight train service opened. It signed agreements with local farmers to purchase their wheat and process it in the parks, stimulating the local economy.

"Trade cooperation with Belt and Road countries has become a new driving force of China's foreign trade growth," GACC's Li said. In 2018, China's trade with countries along the Belt and Road routes achieved faster-than-average growth, with the total volume standing at 8.37 trillion yuan ($1.23 trillion), up 13.3 percent year on year.

Private enterprises like Aiju are playing a bigger role. They accounted for 39.7 percent of the total foreign trade in 2018, up 1.1 percentage points compared with 2017. "Private enterprises contributed more than half of China's foreign trade growth in 2018, a highlight of the country's foreign trade development," Li said.

Moreover, the year-on-year growth of foreign trade under the general trade category, with a higher added-value than processing trade, was 1.4 percentage points higher than in 2017, showing an optimized mode of trade. Machinery and electronic products remained a pillar of exports and some high value-added products also performed well. Trade growth became more balanced as less developed inland regions such as central, west and northeast China all outpaced the national average in their growth rates.

These were the internal impetuses for the improved foreign trade structure. Li said as supply-side structural reform and China's opening up advance, the structure of exports and imports will continue to be optimized with both quality and efficiency improved.

External uncertainties

Although having witnessed record growth, China's foreign trade faces headwinds in 2019. "Foreign trade will encounter downward pressure this year as the U.S. real economy might decline in the second half and that will reduce the demand," Mei said.

Li also noted that the biggest challenge lies in the complicated external environment, rising protectionism and unilateralism, and decelerated global economic growth, which will drag down multinational trade and investment.

"To cope with the uncertainties, China should make it clear what the economy's foundation is, which has proved to be manufacturing, and make the most of the market-driven mechanism and strengthen industrial cooperation with other countries," Mei said.

The second CIIE is eyeing more global participants. To date, more than 500 companies in various industries from more than 40 countries and regions have confirmed their participation, according to the CIIE Bureau.

As highlighted by Xi at the Boao forum, "China's door of opening up will not be closed and will only open even wider."

Copyedited by Sudeshna Sarkar

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