After abruptly lifting from three years of coronavirus-related restrictions in early 2023, China’s trade experienced a tumultuous recovery last year due to geopolitical tensions, weak domestic demand and a global economic slowdown.
US economic downturn will put further pressure on China’s exports
And while analysts expect the global economy to slow, hampering external demand for Chinese goods, Beijing expects continued strong growth and the real estate crisis, deflation risks and weak domestic market confidence. He said this pressure could continue until 2024 as it needs to be addressed.
Larry Hu, Macquarie’s chief China economist, said China’s export outlook faces two major downside risks this year: trade barriers and a global recession.
After China’s overall exports fell by 4.6% last year, Hu said, “China’s exports are expected to stabilize in 2024 and reach growth of 0 to 5 percentage points.”
“However, the US economic downturn will put further pressure on China’s exports,” Hu added, after China’s exports to its third-largest trading partner fell by 13.1% overall last year.
China’s overall trade value in 2023 was down 5% from the previous year, close to the growth in world trade estimated by the United Nations Conference on Trade and Development, and slightly better than the 6.6% decline in Vietnam, which is attracting attention as an investment destination. Destination amid global supply chain restructuring. Vietnam’s exports also decreased by 4.4% last year.
With external demand weak, the Chinese government is likely to further stimulate domestic demand to balance overall trade volumes, Macquarie’s Hu added.
Shipments to the Association of Southeast Asian Nations, China’s largest trading partner, fell 5% in 2023, while exports to the European Union (EU), its second largest, fell 10.2%.
Chen Chiwu, a finance professor at the University of Hong Kong, said Chinese manufacturers are likely to continue competing for overseas consumers because of their lower prices.
He added that while US decoupling is likely to further depress Chinese exports, trade between China and Russia will remain resilient.
China’s exports to Russia increased by 46.9% in 2023 compared to the previous year, while imports from its northern neighbor increased by 12.7%.
Since Russia’s invasion of Ukraine in February 2022, the gap between China’s trade with Russia and the United States has rapidly narrowed, and the Chinese government’s trade with Russia has increased sharply, now accounting for more than one-third of its trade with Washington. It recorded an almost double increase in US trade. For the past two years.
“While it is true that China’s exports are not promising in terms of numbers, the surge in exports over the past three years during the pandemic is extraordinary, and China’s exports are only now returning to pre-pandemic levels.” Secretary Ding Shuang said. China Economist at Standard Chartered Bank.
However, Ding added that the company will continue to be a strong global exporter, thanks to a rapidly growing new energy industry and a weaker renminbi that allows it to offer cheaper products.
Despite overall sluggish growth, exports of three so-called new products – electric vehicles, lithium-ion batteries and solar cells – are a bright spot that could be a growth engine for the economy after hitting a record high with a total increase of $29.9. It stood out as. % from the previous year in 2023.
“China’s trade flows to the region will continue to adjust in 2024, with exports to the US and EU declining, while exports to the Belt and Road will surge.” [Initiative] partners,” Ding said.
“China is repositioning its supply chains to avoid higher tariffs, and exports of intermediate goods to emerging markets will increase.”
Slow import growth reflects continued tight domestic demand, and export orders may recover only slowly into 2024.
Analysts also said the improvement in exports was due in part to a recovery in the global technology cycle.
“The good news is that the tech cycle is likely to bottom out, as are electronics exports,” said Gary Ng, senior economist at Natixis Corporate and Investment Banking.
“However, competition in the manufacturing industry remains fierce.” [for China] In the short term, there is a possibility of lower prices, which could lead to deflationary pressures on the world.
“Slow import growth reflects continued tight domestic demand, and export orders may recover only slowly into 2024.”
Wang Lingjun, deputy director of the General Administration of Customs, said the external environment will become more complex, harsh and uncertain.
“Several difficulties need to be overcome and further efforts are needed to further promote the stable growth of foreign trade,” Wang said at a press conference on Friday.
“Global trade growth in 2024 is expected to be only half the average of the pre-pandemic decade,” the Washington-based international financial institution said in its World Economic Outlook report.