China’s Exports Show Striking Growth Momentum While Imports Topple Amid Escalated Tensions

  • 14-Sep-2020
  • China’s Exports Show Striking Growth Momentum While Imports Topple Amid Escalated Tensions

China’s hegemonic appetite serving as a major factor seems to have exacerbated the bitterness of its relationship with several nations. Despite its growing tensions with several economies, China’s trade scenario seems to ride out the storm, on the back of surging global demand. 

As per latest figures released by the General Administration of Customs of the People's Republic of China (GACC), total exports in terms of USD rose by 9.5% for August 2020 on a year-on-year basis. However, total imports by China during August 2020 declined by 2.1% compared to the previous corresponding period. Trade surplus for August 2020 stood at USD 58.93 billion, down from USD 62.33 billion in July 2020.

Robust trade performance of the country continued to move on a growth trajectory, demonstrating resilience of the world’s second-largest economy despite ongoing tensions. 

Exports have grown considerably with global economic activities picking up pace post the lifting of lockdown restrictions. In terms of emerging from COVID-19, China stayed ahead of the curve and kickstarted economic activities at the time when other economies continued to struggle with the virus crisis. It has put China at the catbird seat to leverage off early opportunities. 

Lens through Latest Trade Statistics for China

Exports and Imports

Trade figures for August 2020 highlighted optimism for the Chinese economy. Total exports and imports rose by 8.5% year-on-year in August, after seasonal adjustments. Earlier in July 2020, China posted a 7.2% increase in its USD dominated total exports on a YOY basis. 

The substantial increase in exports value was facilitated by growing demand for work from home devices and personal protective equipment. The statistics by GACC indicate Electrical-Mechanical Products and Hi-Tech Products led the exports, in terms of value. Furthermore, overseas demand for medical devices in the pandemic driven scenario on a YTD basis (till 31 August 2020) increased by 46.1% over pcp. 

Meanwhile, to boost infrastructure and economic growth, the country has been engaged in import of iron ore and concentrate. However, the import of aircraft of more than two ton along with other goods such as crude and petroleum products and fertilisers registered a sharp decline in 2020 compared to the previous year’s data. 

Trade with Major Trading Partners

COVID-19 led subdued demand, especially during the lockdown, economic headwinds along with China’s political or trade tensions with many allies, impacted its 2020 trade scenario. The tension between Washington and Beijing amidst the pandemic led to a decline of 3.5% in bilateral trade activity.

The barriers imposed by China on varying Australian goods affected Australia-specific imports value, posting a decline of 7.5%. Meanwhile, trade activity of China with the UK and Canada, which though witnessed a surge in YOY Chinese goods exports, remained subdued, as imports from the respective countries decreased for the first eight months compared to pcp. 

China’s Manufacturing PMI

Manufacturing Purchasing Manager’s Index (PMI) was down marginally from 51.1 in July 2020 to 51 in August. The slow growth was primarily led by a decrease in new export orders, although domestic new orders continued to grow in August. The changing directions of overseas export orders are signalling worry for the Chinese currently blooming trade scenario.

A Glimpse at China’s Strife with Other Economies

China’s trade policies have been gyrated by the hectoring manner adopted against its contentious trade allies. China seems to adopt trade battle as its most favoured strategy for retaliating against political and social friction. 

The tariff struggles between the US and China took a sharp turn with the US facing substantial economic implications from coronavirus, which originated in China-based Wuhan. Significantly, the world’s two largest economies, the US and China were already at trade war before the COVID-19 pandemic. However, the relationship further went to rack and ruin with severe outbreak in the US, which asked for an international probe into origins of coronavirus, also supported by Australia. 

China levied several trade barriers on Australian goods with beef exports, barley, and wine traders from the island country being substantially impacted. With India-China border standoff, the bilateral relations went downhill. Meanwhile, Hong Kong saw protests against the Fugitive Offenders amendment bill, which allowed extradition to mainland China. The anti-Chinese sentiments in Hong Kong and India also seem to navigate the momentum of Chinese trade scenario.

Given the trade challenges intensified, retaliation by other impacted nations in a similar way may appear par for the course. However, due to the frail economic scenario, they seem to be caught between a rock and a hard place. 

What Lies Ahead for China amidst Global Economic Downturn?

IMF in June 2020 projected global growth at -4.9% in 2020. Fitch Ratings in its latest Global Economic Outlook released on 7 September 2020 projected 2020 global GDP to fall by 4.4%, representing a slight upward revision from the June projections of -4.6%.

Nevertheless, Fitch Ratings expects China’s economic activity to grow by 2.7% for 2020. Fitch Ratings Chief Economist, Brian Coulton indicated that despite China gaining its pre-COVID level GDP and retail sales exceeding February levels in the US, France and the UK, V-shaped recovery is less probable. 

The global economic reboot appears to be impacted by unemployment shocks and capex reductions by businesses. Meanwhile, with coronavirus vaccine still not available, social distancing remains the preventive measure that continues to impact many sectors directly. 

ALSO READ: Business Confidence Still Negative, More Job Losses In The Pipeline

At this point, it remains critical whether China would be able to sustain the edge over market situation with the turbulent economic scenario still plaguing other economies.  

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