(provided by CRU)


A remarkable 10 Year Transition

US$10 Billion of Wire & Cable Exports

In 1998, China exported US$ 0.9 billion of wire and cable products. In 2007 – less than ten years later – these exports passed US$ 10 billion and kept rising to US$11.9 billion in 2008. The compound annual growth rate (CAGR) for the rise from 1998 to 2008 is 28%, which compares with a 9 % CAGR for the corresponding ten-year increase in worldwide consumption of wire and cable products. These data are based on international trade statistics in the harmonized code “8544” product category, which includes all insulated wire and cable, along with, insulated conductors fitted with connectors, harnesses, and other cable assemblies.

Becoming the Top Producer

In those ten years, China progressed from the ninth largest to the largest exporter of wire and cable products. It also progressed from the third largest to the largest in terms of annual production and domestic consumption. This status represents a significant shift over the last 10 years, as China has passed the US and Japan in wire and cable production.

64% CAGR in Net Exports

In terms of net exports, China had the thirteenth largest trade balance in 1998 (US$50 million) and the largest in 2008 (US$7.56 billion). The net export value in 2008 is US$11.9 billion of exports offset by US$4.35 billion of imports. China’s ten-year CAGR for net exports is 64%. This growth far surpasses any other exporting country: Poland, with net exports of US$2 billion in 2008, had a nine-year CAGR of 26%; Hungary had a 49% CAGR from 1999 to 2008, but 2008 net exports were only US$0.6 billion. No other market with net exports above US$0.25 billion has had a ten-year CAGR above 20%

The import and export statistics shown in this figure are based on the Global Trade Information Services database and include the full range of the “8544”wire and cable product categories.

Exports Surged from 2004 to 2008

The strongest growth in China’s wire and cable exports occurred in the last five years. For each year from 2004 to 2008, the year-on-year growth in exports was more than 30%. The CAGR from 2004 to 2007 was 39%. In 2008, the annual growth rate moderated back down to 19%, but the amount of increase was still a gain of more than US$1.9 billion in 2008. India had a larger percentage increase in 2008 wire and cable exports, at 34%, but the amount of increase was considerably less – US$0.2 billion, from exports of US$0.4 billion in 2007 to US$0.6 billion in 2008.

Exports Fell in 2009

Trade data for the last two months of 2009 were not posted when this chapter was written, but the data through October indicate that China’s 2009 exports will be down 25% to 30% from 2008. This downturn reflects the severity of the recession in markets with significant imports of wire and cable from China, including Japan, South Korea, the US, and Western Europe. Exports of wire and cable from Japan, South Korea, and the US will be down 20 to 30%, like China’s. But most other large exporters, including Mexico, and the strong exporting markets of Eastern and Western Europe, will see decreases of 30% to 50%.

China’s Trade is Broadly Distributed

Mexico is the world’s second largest exporter, with US$7.7 billion of wire and cable exports in 2008. Of this amount, US$4.7 billion were shipments of vehicle wiring harnesses – 95% of all Mexico’s exports went to the US in 2008, and 98% of its wiring harnesses went to the US. China’s exports are dominated by low-voltage cables and assemblies, wiring harnesses, and coaxial cable. And China’s trading partners are more evenly distributed throughout all regions, with Japan at 18%, US at 15%, and no others above 15%.

Automakers Drive Harness Exports

The North Asian markets of Japan, Korea, and Taiwan and the North American markets of US and Canada together take in 97% of China’s wire-harness exports. This reflects China’ role in manufacturing automotive harnesses. Almost all the world’s leading automotive harness manufacturers have established production bases in China, either by setting up wholly owned subsidiaries or by entering into partnership with a local Chinese company. There are now more than twenty harness-manufacturing operations in which international companies have an interest, along with many more wholly owned Chinese companies.

China’s Harness Exports Fell in 2009

In the second half of 2008 and most of 2009, worldwide consumption of automotive wires dropped with the economic crisis. Automakers in the US and Japan suffered unprecedented losses in Q4 2008 and 2009. Two of Detroit’s big three auto companies, Chrysler and GM, filed for bankruptcy in 2009. Through October, China’s exports of vehicle harnesses in terms of value (US$) were 29% lower than the corresponding total for January through October of 2008. Mexico’s exports dropped 41% for the same year-on-year period. The top 10 countries in terms of vehicular harness exports all had decreases of 25% to 50% in export sales, with the exception of the Philippines (number nine), which had a 24% decrease.

Domestic Harness Demand Rose

China, on the other hand, had an increase of 27% in domestic vehicle production from 2008 to 2009. Automotive production was much stronger, with year-on-year growth of 33%, compared with 20% growth for commercial vehicles. China’s vehicle production got off to a mixed start in 2009, with automotive production down 2% from Q1 2008 to Q1 2009. In the same quarter, however, commercial vehicle production was up 20% up compared with Q1 2008. In subsequent quarters, Chinese automotive production surged to a level of 1.8 million per quarter and remained there from Q2 through Q4 2009.

China Passes US in Car Sales

Counting domestic vehicles and imports, Chinese customers purchased 13.6 million vehicles in 2009, compared with 10.4 million cars and light trucks in the US. This was the first time China’s demand exceeded that of the US. It also was the smallest US market in more than 25 years.

China’s vehicle demand was stimulated by government incentives, including a significant reduction in taxes on cars with small engines, subsidies for green technologies, and subsidies for farmers to buy vehicles. One result is that automakers from the US, Europe, Japan, and Korea, are taking stronger interest in China not only for purposes of production facilities, but also as a market to sell finished vehicles.

Car Market Accompanies Prosperity

Another factor in the rapid growth of vehicle demand in China is that the country is ramping up from a very low penetration rate, especially compared with the industrialized nations. In 2006, according to China’s National Bureau of Statistics, there were 4.3 automobiles per 100 households in urban areas, and fewer in rural areas. This compares with penetration levels above 50% in the advanced economies of W. Europe, North America, North East Asia.

China’s automotive market is growing at a more rapid pace than its per-capita GDP growth. In this regard, the automotive demand is indicative of the country’s rapid industrialization and urbanization. With China’s economic growth outlook and with continued government incentives, China’s domestic vehicle market is expected to remain strong in 2010 and subsequent years.