China will play a key role in supporting the global supply chain in the second half of the year, amid government policy measures aimed at stabilizing the economy while tackling the impact of COVID-19 by targeted means, say experts.
Although major economies such as Germany, France, South Korea and the United States have recorded trade deficits in recent months, China’s foreign trade surplus exceeded 2.48 trillion yuan ($367 billion). dollars) in the first half as exports soared following COVID-19 outbreaks were brought under control in the Yangtze River Delta region in May and June, according to data from the General Administration of Customs.
As China’s trade surplus rose significantly to $97.94 billion in June from $78.76 billion in May, experts said the growth helped dampen the yuan’s exchange rate with other major currencies and further stabilize the domestic inflation rate, thereby reducing the need to raise interest rates or intervene in the exchange rate.
As the US Federal Reserve raised key interest rates sharply to curb runaway inflation in the second quarter, the euro, pound and Japanese yen plunged once morest the US dollar. Currency depreciation in these major economies has led to stagflation and downside risks, said Xu Hongcai, deputy director of the economic policy committee of the China Political Science Association.
As many traditional manufacturing powers such as Germany and South Korea have to import large quantities of raw materials to meet local manufacturing demand, “the impacts of the Russian-Ukrainian conflict, the high rate of inflation in United States and the global energy and commodity price spike have all pushed these countries to spend more on importing energy and production materials since the second quarter,” Xu noted.
“Even if it faces imported inflationary pressure, China, supported by its ongoing industrial transformation and upgrading, will continue to work on stabilizing the global supply chain,” said Wei Qijia, a researcher at the Department of State Information Center economic forecast.
He said that China’s highly concentrated supply chains, efficient productivity, relatively low domestic costs of industrial energy and production materials, as well as the heavy dependence of many trading partners on its industrial goods and semi-finished products will keep the growth rate of the country’s trade surplus within a reasonable range in the coming months.
“China is not looking to achieve a trade surplus. The accelerated growth of the trade surplus in the first half of the year is mainly attributable to the epidemic-induced contraction in import volume,” said Wei Jianguo, vice president of the China Center for International Economic Exchanges in Beijing.
He predicted that China’s trade surplus growth might slow in the second half of the year as the country will need to import large amounts of energy, minerals and machinery to accelerate efficient investment in infrastructure in order to pursue a stronger economic recovery.
Zhang Jianping, director of the Regional Economic Cooperation Center of the Chinese Academy of International Trade and Economic Cooperation, said some uncertainty hangs over China’s second-half exports due to fluctuating demand in the global market. . But given the better-than-expected export performance in the first half of the year, China should step up effective policy implementation to promote robust foreign trade growth.
Only by encouraging and facilitating enterprises to receive new business orders can the country expand the export market space despite the uncertainties, he said.
Nio, the Chinese new energy vehicle maker, is one such company seeking to expand its business, said Zhang Hui, vice president of Nio Europe. As well as exporting electric vehicles to Norway, it is building its first overseas factory in Hungary to support its expansion into Germany, the Netherlands, Sweden and Denmark later this year.
The Hungarian Nio plant is expected to be operational in September and serve as a production, service and research and development (R&D) center for the company’s electrical products, including battery swap stations in Europe, it said. Mr Zhang.
