2024-03-08 08:40:00
China’s exports have gained momentum at the start of the year, putting the government on track to meet this year’s ambitious growth target but raising the possibility of rising trade tensions.
While export growth in January-February was much higher than the 3% expected by economists polled by The Wall Street Journal earlier this week, the market reaction to the increase came following top Chinese officials disclosed the data a day early. The high value has already been expected in my heart.
On Wednesday, China’s Commerce Minister and Director of the National Development and Reform Commission told reporters at a press conference during the National People’s Congress that exports increased by regarding 10% year-on-year in January and February this year.
They did not specify at the time whether the price would be in yuan or U.S. dollars. Official data released on Thursday showed that exports in yuan in January and February increased by 10.3% year-on-year.
The Chinese government combines the release of economic data from January to February to eliminate the disturbance caused by the annual Spring Festival holiday time shift. Many companies suspended operations during the Spring Festival holiday.
This is also the second time this year that Chinese officials have disclosed key economic indicators in advance. At the Davos Forum in January this year, Chinese Premier Li Qiang told the global business elite the day before official data was released that China’s economy would grow by 5.2% in 2023.
The move comes as top Chinese officials try to allay concerns regarding the health of the world’s second-largest economy on multiple fronts. China’s economy currently faces a series of challenges, including continued real estate downturn, lingering deflationary pressures, weak consumer demand, and ongoing geopolitical tensions with the West.
At a news conference on Wednesday, Chinese officials warned that export data for March might see some pullback while releasing official data ahead of schedule. They also signaled an easing of monetary policy to put the government on track to meet its official growth target announced on Tuesday.
While the economic growth target of “around 5%” remains unchanged from last year, it was much easier to achieve last year because of the tough lockdown measures introduced in 2022 to curb the rapid spread of the Omicron variant of the coronavirus. It has caused serious damage to the Chinese economy and the comparison base is low.
Most outside economists expect China’s economic growth to be below 5% this year, and they maintained that forecast following the Chinese government unveiled the above-mentioned growth target and announced new policies to achieve it.
The Chinese government said during the two sessions that it would issue ultra-long-term special government bonds this year to stimulate investment. However, the government has not proposed specific measures to stimulate consumption or help the real estate industry get out of the trough.
Wang Tao, chief China economist at UBS Investment Bank, said at a conference on Thursday that UBS believes that a growth target of around 5% is more aggressive, while the policy support mentioned in the government work report is relatively mild.
China’s export growth in January and February was faster than expected, which at least allowed the Chinese government to see some stability in a short period of time. This was achieved on the basis of year-on-year export growth in November and December last year. Before that, exports had fallen for six consecutive months.
In the three years since China’s economy was hit by the epidemic, exports have served as a key growth driver. Chinese government policies at the time prioritized keeping factories and businesses running, allowing the long-standing “factory of the world” to continue churning out goods as manufacturers elsewhere around the world shut down.
As the impact of the epidemic finally subsided, China’s exports no longer contributed to overall economic growth, but instead became a drag. Last year, China’s exports posted their first annual decline since 2016.
Even if exports can maintain their strong start to the year, there is a limit to how much weight exports alone can carry for an economy as large as China’s.
Ding Shuang, China economist at Standard Chartered Bank, said that China’s economy is large and it is difficult to rely on external demand to completely offset the weakness of domestic demand.
Trade data released on Thursday offered a glimmer of hope on that front. As a barometer of domestic demand in the eyes of some economists, China’s imports from January to February increased by 3.5% year-on-year, which was better than the 0.2% increase in December last year and the 2.2% increase expected by economists surveyed.
The General Administration of Customs of China said that from January to February, it achieved a trade surplus of RMB 125.16 billion.
While Chinese officials sought to talk up their economic prospects for the year ahead, they also warned of worsening global trade conditions. Wang Wentao, China’s Minister of Commerce, told reporters on Wednesday that the foreign trade situation this year is still very serious and trade protectionism is on the rise. Both the European Union and the United States have launched investigations into Chinese-made electric vehicles, one of China’s most promising export industries.
According to calculations by the Wall Street Journal based on data released on Thursday, overall, China’s exports to the United States increased by 5% from January to February this year, reversing the 6.9% decline in December last year. In addition, China’s exports to Europe The year-on-year downward trend has also slowed.
Ding Shuang of Standard Chartered Bank said that if China’s exports to the United States and Europe accelerate, coupled with the competitive prices of Chinese goods, it may intensify trade frictions.
In the U.S. Senate, calls have grown for higher tariffs and other restrictions to prevent Chinese-made electric vehicles from entering the United States. Republican senators have introduced several bills this month, including imposing new tariffs on Chinese-made cars and blocking what Sen. Marco Rubio described as the Chinese government’s attempt to “flood the U.S. market with artificially low-priced cars.” practice.
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