Soybeans are still the United States’ largest export to China, but higher-value goods are starting to close the gap.
US businesses are exporting more goods than ever to China. In 2013, US exports to China reached a new high of $120 billion, up more than $11 billion from 2012, according to the US-China Business Council’s 2013 state exports report.
But higher-value goods like passenger vehicles and airplanes overtook agricultural products to make up the largest share of US products exported to China in 2013.
China on the move
Increasing disposable incomes have changed how the Chinese spend and travel. In 2013, China became the first country to sell more than 20 million vehicles in a year, according to the China Association of Automobile Manufacturers. Foreign brands now sell more vehicles in China than Chinese companies.
Most American cars sold in China are made in China by American-Chinese joint ventures. But American automakers and foreign automakers with manufacturing facilities in the United States are also exporting some of their US-made vehicles to China. In 2013, US passenger vehicle exports increased to $8.5 billion—up roughly 50 percent compared to 2012.
The New York Times reported in December 2013 that Ford Motor Co. would export its 2015 Mustang model abroad for the first time. “We’re really excited to ship it to Europe and China and the Asia-Pacific countries,” Ford’s Chief Operating Officer Mark Fields told the Times.
Sales of civilian aircraft, engines, and parts to China also increased by roughly 50 percent compared to 2012, reaching $12.6 billion in 2013.
Boeing sold 120 aircraft to Chinese companies in 2013—up from 80 in 2012—and the company estimates that China’s market for aircraft will remain strong for the next 20 years. Boeing expects Chinese airlines to purchase nearly 6,000 airplanes worth $780 billion over the next two decades, equal to 40 percent of all the company’s projected sales to the Asia-Pacific region.
Agriculture exports still strong
A closer look at the data shows that soybeans remain the United States’ top export to China. Despite a 10 percent decline in 2013 numbers, US farmers exported $13.4 billion worth of soybeans to China. They exported nearly $15 billion worth of soybeans to China in 2012.
The drop in soybean exports was largely caused by higher soybean prices in 2013, according to Paul Burke, north Asia regional director for the US-Soybean Export Council. But Burke expects US soybean exports to China to rebound in 2014.
“We expect to export a record volume of soybeans to China,” he says. “We anticipate, based on what’s on order, that we’ll break a record this year.”
Soybeans are used for both cooking oil and animal feed in China. Demand for soybeans and other feed grains has been driven by China’s increasing meat consumption. China now consumes a quarter of the world’s supply of meat, or 71 million tons annually, according to the US Department of Agriculture. This is double the amount of meat consumed in the United States.
China grows the majority of its own corn, but the country still imports some corn from the United States and other countries. In 2013, US farmers sent roughly $1.25 billion worth of corn to China, a slight drop compared to 2012.
Demand for US corn has been strong due to the high cost of corn in China, according to Fred Gale, a senior economist at USDA. “China has a price support for corn and this year US corn prices fell because we had a record harvest.”
But US corn exports to China have remained limited for a few reasons. China imposes a quota on corn imports and has rejected shipments of US corn that were found to have genetically modified strains not approved for use in China.
Facing the high cost of domestic corn and limited imports, Gale says China’s feedmills and livestock producers have turned to corn feed substitutes, including US-produced sorghum, which was shipped to China for the first time in October 2013.
“It just came out of nowhere last year where the Chinese started ordering sorghum,” Gale says. “Traditionally sorghum has not been an export commodity.”
Indeed, US sorghum exports to China increased from nothing in 2012 to $97 million in 2013.
Scrap exports decline
In 2013, three of the top 10 US exports to China were various types of scrap material. The United States exported roughly $8.8 billion worth of recycled scrap material to China in 2013, down from $9.5 billion in 2012. The largest scrap export categories included copper ($2.8 billion), aluminum ($2.3 billion), and paper ($2 billion).
Scrap exports declined globally in 2013 by about 10 percent, while scrap exports to China were down 7 percent, says Joseph Pickard, chief economist at the Institute of Scrap Recycling Industries.
“Scrap demand is closely tied to manufacturing,” Pickard says. “As growth slows, there’s going to be less scrap demand.”
Roughly two-thirds of the scrap the United States produces is processed in the United States, but China is by far the biggest overseas consumer of US scrap materials, Pickard says. It depends on the commodity—almost all of Americans’ recycled paper and plastic is sent to China—but overall 40 percent of US scrap sent overseas goes to China.
Pickard says the drop in exports to China in 2013 was likely caused by a combination of commodities prices and regulation. Scrap is a substitute for raw materials, and low raw material prices lead manufacturers to purchase raw material, like iron ore, instead of scrap.
But last year China also began its “Green Fence” campaign to enforce rules limiting imports of contaminated scrap materials that often end up in China’s landfills instead of being recycled. The campaign had a big effect on US exports of plastic scrap, which dropped 18 percent in 2013.
“[The Chinese] are really trying to balance economic growth with environmental protection,” Pickard says. “I think they recognize the value of using recycled materials and they’re trying to use domestic recycled materials.”
US Exports to China, 2013
Value: $13.4 billion
% change, 2012-13: -10%
2. Civilian Aircraft
Value: $12.6 billion
% change, 2012-13: 51%
3. Passenger Vehicles
Value: $8.5 billion
% change, 2012-13: 49%
4. Electronic Integrated Circuits
Value: $3.9 billion
% change, 2012-13: 23%
5. Copper Waste and Scrap
Value: $2.8 billion
% change, 2012-13: -6%
6. Telecommunications Equipment
Value: $2.3 billion
% change, 2012-13: 40%
7. Aluminum Waste and Scrap
Value: $2.3 billion
% change, 2012-13: -5%
Value: $2.2 billion
% change, 2012-13: -36%
9. Paperboard Waste and Scrap
Value: $2 billion
% change, 2012-13: -9%
10. Medical, Surgical, or Dental Instruments
Value: $1.6 billion
% change, 2012-13: 4%
Source: International Trade Administration; Based on 4-digit harmonized system classification
[author] Christina Nelson ([email protected]) is editor of the China Business Review, which is published by the US-China Business Council. [/author]