By He Jun
Since 2020, the export pull has been an important factor in maintaining growth in China’s economy. In 2020 and 2021, with the global COVID-19 pandemic disrupting global supply chains, the world suffered production setbacks and orders then shifted to China, where production recovered relatively well. For the whole year of 2021, China’s import and export of goods increased by 21.4% year-on-year. Among them, exports reached RMB 21.7 trillion, a year-on-year growth rate of 21.2%. Imports increased by 21.5% year-on-year, and the surplus increased by 20.2% year-on-year.
Entering 2022, as the differentiating factors that stimulate China’s export growth gradually disappear, the momentum begins to weaken. As international market demand slows due to higher interest rates and high inflation in the United States, the economic slowdown in advanced economies has begun to dampen demand, affecting China’s exports.
In the first ten months of 2022, China’s imports and exports of goods increased by 9.5% year-on-year (halving the growth rate in the same period last year), and exports increased by 13% year-on-year. In October, the exports of goods amounted to RMB 2.07 trillion, up 7.0% year-on-year (up 10% year-on-year in September), below expectations of 12.7%. If denominated in U.S. dollars, the export value in October would be USD 298.37 billion, down 0.3% year-on-year, which is the first negative growth of China’s exports since 2020. The slowdown in external demand and export growth will certainly affect China’s economic recovery this year.
Figure: U.S. Import and Export Trade with China, 2015-2021 (USD billion)
Growth in China’s exports to ASEAN and Russia remained generally high in October, but exports to many developed countries declined further, and this is one of the main reasons for weighing down October’s export data. It is worth noting that there seem to be some problems starting to arise with the Sino-U.S. trade. The trade relations between the two countries have always been relatively close, with the U.S. being China’s third-largest trading partner. In 2021, the trade volume of goods between China and the U.S. reached USD 755.645 billion, of which the U.S. exported USD 149.2 billion to China and imported USD 576.1 billion. For many years, more than one-third of U.S. container imports came from China.
In the years following the financial crisis, the U.S. imported far more from China than from other Asian countries. In 2009-2018, the average tonnage of goods imported from China in the first nine months was 47% higher than the average tonnage of imports from all other Asian countries combined. But in 2019, U.S. imports from China increased by only 12%. During the pandemic in 2020-2021, China’s imports were almost the same as those of other countries.
However, recent performance shows that U.S. imports from China are declining rapidly. In the first nine months of 2022, the tonnage of goods imported by the U.S. from China fell by 6% compared to other Asian countries. In October 2022, China’s exports to the U.S. fell 12.6% year-on-year to USD 47 billion (Chinese exports to the U.S. fell 11.6% year-on-year in September), marking the second consecutive month of negative growth. China’s main exports to the U.S., such as mobile phones, clothing, toys, and furniture, all declined in October. Exports of toys, games, and sports fell 36% to USD 2.56 billion, while exports of furniture and bedding fell 23% to USD 2.73 billion.
According to the latest data from Canadian consultancy Descartes, U.S. container imports in October were flat from September (up 0.2%), but imports from China fell 5.5% month-on-month, down 45,071 TEUs. The decline in Chinese exports was offset by growth from Thailand, South Korea, Taiwan, Japan, and other countries. Descartes data for September showed that total U.S. imports fell 12% from August. Total imports from China have plummeted: 18% down, or 83,396 TEUs. Imports from China accounted for 40% of total U.S. imports in August, and 42% in February. However, in September, China’s share of U.S. imports fell to 35%.
China’s export growth to the U.S. has begun to show negative growth, not only related to the reduction in demand caused by the COVID-19 pandemic, but also due to the high inflation and strong interest rate hikes, and there is uncertainty about the outlook for the U.S. economy. Some large retailers and other operators say they are gradually reducing their purchases from China and looking for new alternative sources. According to Freight Waves SONAR, bookings for goods from China to the U.S. have slowed more than overall inbound bookings. Throughout 2021, China’s booking volume index was significantly higher than that of all export destinations. However, since March 2022, this gap has narrowed due to the significantly increased rate of decline in the booking index between the two countries, and it has now almost disappeared.
From 2016 to 2018, China accounted for an average of 36% of U.S. imports and other Asian countries only accounted for 25%. In 2019, China’s average monthly share fell to 31%, while the rest of Asia’s share rose to 29%. In 2020-2021, the ratio of the two began to be equal, with 30% each. In the first nine months of 2022, China’s share remained at 30%, while other Asian countries jumped to the top with a share of 32%.
Researchers at the ANBOUND believe that China’s continued negative growth in exports to the U.S. is a noteworthy phenomenon. In addition to the impact of the pandemic and market changes, changes in Sino-U.S. trade may also involve the impact of factors such as supply chain shifts and national security issues.
Paul Bingham, head of transportation consulting at S&P Global, said the downward trend in Chinese exports to the U.S. is not surprising and began even before 2022. Events this year clearly highlight the new changes that are taking place, with companies considering rebalancing their industrial chains from China, at least diversifying their supply chains, even if they are unlikely to abandon China entirely. Leland Miller, CEO of China Beige Book (CBB), also said not long ago, “You’re seeing certain sectors become very, very sensitive — things like technology and pharmaceuticals. These are being identified as areas that have to have supply chains pulled out of China as a national security issue. They are going to be pulled in the coming months, quarters and years”.
The strengthening of geopolitical factors has also been reflected in U.S. policy since the beginning of this year. The CHIPS and Science Act of the U.S. and the ban on semiconductor exports to China will have a negative impact on Sino-U.S. trade. The restrictions and prohibitions on China in some key technology areas will significantly affect its exports to the U.S.
Final analysis conclusion:
It remains to be seen whether China’s export data to the United States has fallen, and whether such a change is temporary or long-term. However, it is worth noting that bilateral trade is an extremely important link in Sino-U.S. economic relations. If this bond shows signs of gradually weakening, it will have an indelible impact on the relations between the two countries.
He Jun is a researcher for ANBOUND