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China’s exports are expected to bottom out in Q2

China’s export growth is expected to bottom out in the second quarter of this year, according to the China Economic and Financial Outlook Report released by the Research Institute of the Bank of China. “Taken together, China’s export decline is expected to narrow to about 4 per cent in the second quarter.” “The report said.
According to the report, China’s export growth will remain weak in 2023 due to the continuous evolution of the international political and economic landscape, sluggish overseas demand, weakening price support and a high base in 2022. China’s exports fell 6.8 per cent in dollar terms between January and February from a year earlier.
From the perspective of major trading partners, the trend of differentiation in China’s foreign trade has increased. From January to February 2023, China’s exports to the United States continued to grow negatively, down 21.8% year on year, which is 2.3 percentage points larger than that in December 2022. Exports to the European Union and Japan declined slightly, but the growth rate still did not turn positive, respectively -12.2% and -1.3%. Exports to ASEAN grew faster, accelerating 1.5 percentage points year-on-year to 9% from December 2022.
From the perspective of product structure, the export boom of upstream products and automobiles is high, while the export of labor-intensive products continues to fall. From January to February 2023, exports of refined oil products and steel products increased by 101.8% and 27.5%, respectively. The year-on-year growth rates of automobiles and chassis and automobile parts were 65.2% and 4%, respectively. The number of automobile exports (370,000 units) reached a record high, up 68.2 percent year on year, contributing about 60.3 percent to the growth of automobile export value.
According to the report, exports of furniture, toys, plastics, shoes and clothing products continue to fall, as developed economies in Europe and the United States have weak consumer durable goods demand, the corporate destocking cycle has not yet ended, and producer countries such as Vietnam, Mexico and India have taken a share of China’s exports in labor-intensive sectors. They were down by 17.2%, 10.1%, 9.7%, 11.6% and 14.7%, which were 2.6, 0.7, 7, 13.8 and 4.4 percentage points higher than in December 2022, respectively.
But China’s export growth was better than market expectations, with the decline narrowing by 3.1 percentage points from December 2022. According to the report, the main reasons for the above situation are as follows:
First, international demand is better than expected. While the U.S. ISM manufacturing PMI remained in contraction territory in February, it rose 0.3 percentage point from January to 47.7 percent, the first improvement in six months. Consumer confidence also improved in Europe and Japan. From the freight rate index, since the middle of February, Baltic dry bulk index (BDI), coastal container shipping rate index (TDOI) began to bottom up. Second, the post-holiday resumption of work and production in China was accelerated, blocking points in the industrial chain and supply chain were cleared up, and the backlog of orders during the peak of the epidemic was fully released, providing a certain boost to export growth. Third, new forms of foreign trade have become an important driving force for export growth. The cross-border e-commerce index in the first quarter of 2023 was higher than that in the same period of 2022, and the business volume of Zhejiang, Shandong, Shenzhen and other leading regions in the development of new foreign trade forms generally had a relatively high year-on-year growth. Among them, the export volume of cross-border e-commerce in Zhejiang from January to February increased by 73.2% year-on-year.
The report believes that China’s export growth is expected to bottom out in the second quarter, structural opportunities are worth paying attention to. From the pull down factor, external demand repair has uncertainty. Global inflation remains high and there is a high probability that advanced economies in Europe and the United States will raise interest rates in “baby steps” in the first half of 2023, dampening international demand. The destocking cycle of major developed countries has not yet ended, and the inventory-sales ratio of most commodities in the United States is still at a high range of more than 1.5, showing no significant improvement compared with the end of 2022. In the same period of 2022, China’s foreign trade base was relatively high, with a year-on-year growth rate of 16.3% in May and 17.1% in June. As a result, exports rose 12.4 per cent in the second quarter.


Post time: Apr-03-2023