China’s Exports Plunge While Sino-Russian Trade Soars: Analyzing the Impact on the Global Economy

2023-06-07 11:23:00

The port of Ningbo on June 6, 2023 in eastern China (AFP/STR)

China’s exports plunged in May for the first time since February, hurt by a fragile recovery in the world’s second-largest economy, while the amount of Sino-Russian trade soared.

Historically key lever of growth for the country, Chinese exports, contracted last month by 7.5% over one year, according to figures in dollars published Wednesday by Chinese Customs.

In a context of sluggish global demand, imports also remained struggling.

Underlining the intensification of bilateral economic ties, trade between China and Russia is in good shape, since the two neighboring countries realized last month for 20.5 billion dollars (19.2 billion euros). euros) in trade, according to Chinese Customs, their highest level since the start of the invasion of Ukraine in February 2022.

Chinese imports from Russia accounted for $11.3 billion. At the same time, exports to Russia experienced their strongest acceleration in May since the start of the invasion (+75.6% over one year).

One-year monthly evolution of China’s exports and imports since January 2021 (AFP / )

The detail of the imported and exported products should be announced only in a few days.

Former rivals during the Cold War, China and Russia have been strengthening their diplomatic, commercial and military relations for the past ten years.

Trade with Russia, however, is not representative of the difficulties that the Asian giant is currently going through.

– Request penalized –

At the global level, analysts polled by the Bloomberg agency expected a more moderate fall (-1.8%) in Chinese exports.

They had experienced a brief rebound in March and April. But the threat of recession in the United States and Europe, combined with galloping inflation, is contributing to weakening international demand for Chinese products.

Inside a supermarket in Nanjing on January 12, 2023 in eastern China (AFP/STR)

In April, the Asian giant’s sales abroad had once more increased by +8.5% year-on-year.

Last month, Chinese exports were “lower in volume than levels at the start of the year,” said analyst Julian Evans-Pritchard of Capital Economics.

“China is partly dependent on the health of European and American industries which assemble their products in China,” notes Guillaume Dejean, macro and foreign exchange analyst for the Convera financial group.

“However, high inflation and the rise in interest rates in these regions have seriously penalized demand,” he noted in a note at the end of May.

In general, Chinese exports had been constantly in the red since October 2022 when the so-called “zero Covid” policy was heavily penalizing the country’s economy.

China had finally lifted most of its draconian restrictions in December, paving the way for a recovery in activity which is, however, struggling to materialize in certain sectors.

– Real estate suffers –

For their part, imports from the Asian giant also experienced a decline last month (-4.5%) over one year, according to Customs.

The port of Ningbo on June 6, 2023 in eastern China (AFP/STR)

Logically, the trade surplus of the Asian giant melted in May to 65.81 billion dollars (61.5 billion euros), once morest 90.2 billion dollars a month earlier.

Freed from health restrictions, China recorded a marked acceleration in its growth in the first quarter (+4.5% over one year).

But the recovery is running out of steam and remains uneven, the economy being weighed down by an over-indebted real estate sector, sluggish consumer confidence and the global economic slowdown.

To support its economy, Beijing might put in place a “new recovery plan for the real estate sector” and decree rate cuts, urges analyst Ken Cheung of the Japanese bank Mizuho.

Real estate, which for a long time represented with construction regarding a quarter of China’s GDP, is an essential pillar of the country’s growth.

It is also an important source of income for local authorities, whose finances are bloodless following three years of fighting the Covid.

To revive a struggling sector, the government announced in November targeted support measures for the financially soundest promoters.

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