It's hard to be optimistic, though...
In June CPI inflation in China amounted to 0% in the year-to-year ratio (r/r) erstwhile it was 0.2% in May. Although food prices increased by 2.3% (r/r) in June, the strongest in 3 months, but prices of industrial goods fell. Deflation is already a real threat.
Data State Statistical Office (国家统计局) (m/m – period to month; r/r – year to year)
During the same period, maker prices (PPI) decreased by 5.4% y/y. This is the ninth period in a row of falling maker prices, and at the same time the largest decrease in these prices since December 2015.
Data State Statistical Office (国家统计局) (m/m – period to month; r/r – year to year)
This negative trend is expected to slow down in the second half of the year.
Data on inflation, both measured by consumer prices and producers, clearly show that the Chinese government will gotta step up efforts to revive the economy and demand. This situation is not solely dependent on the economical condition of China itself, but depends on the economical situation on global markets. On the another hand, China is simply a driver of global economical growth. Any slowdown in China will affect the global situation, the economies of another countries.
What we may be afraid of is simply a kind of feedback. The recession on planet markets is slowing down the Chinese economy, and this slowdown is exacerbating the recession in the world.
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Is the bike stuck?
Foreign trade has been the strongest side of the Chinese economy for decades. The data late published by the General Administration of Customs of China show that this situation is changing. Chinese abroad trade slowed down considerably.
The first signs of slowdown were already observed at the beginning of the year, but June data and cumulative data for the first half of the year clearly indicate that from the end of the Covid-19 pandemic the global economy, the origin of orders for Chinese industry, did not regain vigor. Moreover, there are expanding signs of global recession.
Turnovers in Chinese abroad trade in June as well as in the full first half of the year decreased importantly compared to akin periods of the year 2022. In June, the decrease was 10.1% y/y, while in the full half of June 4.7% y/y. The inheritance concerns both exports and imports.
Data: (中国海关总署) General Administration of Customs of China
Despite the decline in turnover, there is simply a surplus in the Chinese trade balance sheet with abroad. This surplus, calculated in RMB throughout the six months, increased by 13.5% y/y, calculated in USD by 6.03% y/y. The difference in the size of the surplus in RMB is due to a crucial weakening of the Chinese currency against the US dollar (approximately 10%).
This does not change the fact that Chinese exports declined decisively in June this year. This is most evident in the U.S. turnover, where 24% of exports fell.
Against the background of the general decline in abroad trade volumes (by 8.4% y/y) the volume of trade with France stands out. Although exports decreased by 9.3% y/y, imports increased by 13.9% y/y.
In the case of Germany, trade has fallen, with China, as usual, importing more from Germany than exporting to them.
Trade turnover with the Belt and way countries increased importantly by 37.3% y/y.
Data: (中国海关总署) General Administration of Customs of China
China's trade turnover with Russia in the first half of this year increased by 40.6% y/y, reaching a value of $144.55 billion (approximately PLN 454.61 billion). Imports from Russia amounted to USD 62.26 billion (about PLN 247.1 billion), which means an increase of 19.4% y/y. Chinese exports to Russia amounted to USD 52.28 billion (about PLN 207.49 billion).
Compared to the volume of trade with the United States, these figures seem impressive.
In this case, in the period from January to the end of June this year, the value of trade reached USD 327.26 billion (about PLN 1.3 trillion), which means a decrease in turnover of 14.5% y/y. Exports from China to the USA during this period amounted to USD 239.35 billion (about PLN 949.49 billion) – a decrease of 17.9% y/y, imports from the USA were worth USD 87.91 billion (about PLN 348.75 billion) – a decrease of 3.7% y/y.
The decline in U.S. turnover is simply a consequence of American politics and sanctions, but besides a consequence of a decisive slowdown in the US economy.
In the area of Chinese abroad trade, private companies are the most active. In the first half of this year, they were liable for 52.7% of trade with abroad. abroad companies took part in 30.7% of the trade, and state companies took part in 16.6%.
Given the structure of abroad trade China is worth noting that in the first half of 2023 56.7% of exports were highly processed goods, mechanical and electrical equipment. China's export hit by cars. Their exports increased by 123.5% y/y.
The following positions included electrical vehicles, lithium-ion batteries, wind and solar power plants (an increase of 61.6% y/y).
By 31.3% y/y the exports of steel and its products increased and by 35.1% y/y the exports of fertilizers.
In import, as always, natural materials and materials dominate. Imports of iron ore, coal, gas, oil and its products, soya increased. The volume of imports of copper and integrated circuits (sanctions) fell.
According to the General Administration of Customs, abroad trade should return to growth in the second half of the year. Even though he is facing more pressure. It mostly estimates that Chinese abroad trade has 3 solid grounds.
First It's quite a few vitality. In the first half of this year abroad trade in China was engaged in 540 000 entities, an increase of 6.9% y/y. The vast majority were private (national and foreign).
Second It's a trade structure. The share of (export) highly processed products, machinery, equipment increases.
Third It's abroad trade. Trade with emerging markets (Africa, Latin America) is rapidly developing, where RES products are becoming dominant in the trade structure.
At the same time, customs authorities do not hide the challenges facing Chinese abroad trade. These include: advanced inflation in the main developed economies and ongoing geopolitical conflicts. At the same time, the power to reflect external request is insufficient.
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Author: 梁安基 Andrzej Z. Liang, 上海 Shanghai, 中国 China
Email: [email protected]
Editorial: Leszek B.
Email: [email protected]
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