How high tech has taken a greater share of China’s exports

China has continually adjusted its export strategy to move up the value chain; the proportion of high-tech products in the nation's trade mix steadily increased from 2020 to 2023.

Earlier in China's industrialization and integration into the global economy, the nation identified three key sectors for export growth: household appliances, furniture and clothing. Today, these are known as the "Old Three." These categories have been supplanted by the "New Three": electric vehicles, lithium-ion batteries and solar cells.

As of the most recent data, the export share of "New Three" products had risen to 4.1% of China's total exports, up from 1.5% at the end of 2020. "Old Three" products are still more important in absolute terms, but their relative share slipped -- approaching 9%, down from more than 10% at the end of 2020.

Next, we examine the progress of the "New Three" by various metrics. It's here that we see how sluggish external demand in 2024 is constraining growth.

From 2020 through 2023, growth steadily increased in absolute terms; the line for each calendar year is higher than the last in our second chart, which tracks the absolute value of "New Three" exports over 12 months. However, in 2024, exports have slipped back under the 2023 trend.

Our third and fourth charts break down "New Three" exports into their component industries, charting the growth rate by value and then volume; the slowdown since mid-2023 is clearly visible. And EVs, solar cells and lithium-ion batteries all share a common characteristic: the volume growth rate is outpacing the value growth rate, indicating that prices for these high-tech goods are declining.

Electric vehicles are markedly outperforming of late - the only sector in the "New Three" to post "double growth" in exports: the year-on-year growth rate stood at about 23% by value and 36% by volume, according to the most recent figures. For batteries and solar, the year-on-year growth rate by volume is still positive, but it's negative in value terms.

Of course, China's home market has a healthy demand for "New Three" products; only a small proportion of these goods are exported once they leave the factory. Our final chart shows how this is the case by tracking the export-to-production ratios for these goods.

According to the most recent figures, just 21% of EVs and 14% of lithium-iron batteries produced in China are being exported. The share of EVs destined for export peaked at about 30% in January 2023.

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