China’s Foreign Trade Up 8.3% In September: Analysis
A rise in Chinese consumption may be the only bright spot as Western markets tip into recession during Q4 2022 and 2023
China’s General Administration of Customs (GAC) has stated that China’s foreign trade was up 8.3% in September, despite global problems.
The GAC noted that China had achieved such growth despite mounting headwinds amid weakening overseas demand due to a looming global recession, as well as domestic challenges posed by COVID-19 resurgences and China lockdowns. However, some caution was exercised over expectations for Q4.
China’s exports are fueled in part by overseas demand, where economies in the EU and United States have caught a cold following the economic backfiring of sanctions on Russia. Rising energy costs have halved EU production, according to Politico. There has been talk of both the EU and United States being poised to enter recession with some EU nations such as Sweden already anticipating a decline in GDP during 2023.
September 2022 Figures
In terms of the September trade figures, China’s total trade reached 3.81 trillion yuan (US$525.4 billion) in September, with exports at 2.19 trillion yuan, (US$305.2 billion) an increase of 10.7% while imports rose 5.2%.
China’s trade surplus was 573.57 billion yuan (US$220.2 billion), up 29.9%.
In US dollar terms, which show a different performance level due to changing exchange rates over the month with the Chinese Yuan, China’s trade went up by 3.4%, with imports growing 0.3% and exports increasing by 5.7%. Those figures indicate a slowdown in export growth from August, which had risen by 7%, signs of a pending recession in the West.
That sentiment was echoed by Bai Ming, deputy director of the international market research institute at the Chinese Academy of International Trade and Economic Cooperation, who says “Slowing export growth reflects the impact of weakening demand in developed economies such as Europe and the US, while a steady import pace indicates relatively stable domestic demand, supported by government stimulus. Imports are also constrained by factors such as US sanctions.”
China Foreign Trade 9M2022
In the first three quarters of the year, China’s total trade hit 31.11 trillion yuan, (US$4.31 trillion) up 9.9% from 2021. Exports increased 13.8% to 17.67 trillion yuan, (US$2.46 trillion) while imports totaled 13.44 trillion yuan (US$1.87 trillion), rising 5.2%.
ASEAN remained China’s top trading partner in the first nine months, accounting for 15.1% of China’s total foreign trade. China’s trade with the EU grew 9%, and with the United States by 8%. South Korea was China’s fourth-largest trading partner over the period, with bilateral trade up 7.1%. Trade with countries along the Belt and Road Initiative jumped 20.7%.
Trade with Russia surged by 32.5% during the period, with imports from Russia seeing an increase of 51.6%.
Looking Ahead To 2023
Numerous economic analysts have cautioned that demand from EU and United States may continue to decline amid recession risks, and issue that will become more apparent following the Q4 2022 figures. Most economists are expecting the United States, the world’s largest economy may tip into a recession in 2023 or sooner, with a decline in GDP of about 1%.
The EU is also highly likely to enter a recession with business activity contracting at the fastest pace in nearly two years.
Economists have warned of growing risks and challenges for the Chinese economy, including a global economic downturn as well as growing geopolitical disruptions. “We should be mindful that more countries are putting ‘security’ ahead of economic development, and we should be prepared.” Cao Heping, an economist at Peking University has stated.
Chris Devonshire-Ellis of Dezan Shira & Associates says “This means that China exports to the EU and US can be expected to decline over 2023, although exports to ASEAN and other emerging markets in South and East Asia, as well as to Russia, the Middle East, Africa and South America may show growth. An economic slowdown or recession in the West means China will be better able to compete in markets, such as South America, that the US may find more demanding in terms of costs and achievable profit margins.”
China’s Growing Domestic Consumption
“A trend most analysts miss however is the growing imports into China, which rose 5.2% in the 9M2022 to US$1.87 trillion. That is a direct result of Chinese State Policy, and the ‘Dual Circulation Strategy’ which both promotes Chinese exports and its domestic consumption. While the outlook for China’s exports may be patchy in 2023, the same may not be true for China’s domestic consumption, which can be expected to further develop. The Covid hangover China experienced during 2022 should ease up by Spring next year, resulting in an increase in demand and pent-up disposable income being released. More Chinese can be expected to travel again, including overseas. During the recent CPC Congress, Xi Jinping expressly stated that China’s middle class would double in size in the twelve years to 2035. This means an effective doubling in the value of China’s imports to feed this demand.
One way out for EU and US based businesses in sight of a difficult 2023 ahead would be to re-examine the potential of the Chinese consumer market, which could become the only bright spot for internationally minded exporters during the coming year.”