The sharp slowdown in Chinese exports in August after solid monthly growth in the May-July period raised widespread concern about the outlook for the remaining months of 2022. A more pessimistic assessment placed the August figures as the turning point. of a fragile future.
According to data released by the General Administration of Customs (GAC), the country’s foreign trade totaled 3.71 trillion yuan ($531.64 billion) in August, up 8.6 percent year on year. By comparison, the month-on-month growth rate was 1.8% in July, 11.9% in June and 13.4% in May. The year-on-year growth rates were 15.3% in May, 22% in June, 23.9% in July and 11.8% in August, respectively.
Some analysts attributed the sharp slowdown to the weakening global economy, with the JPMorgan Global Manufacturing Purchasing Managers’ Index (PMI) falling from 51.1 in July to 50.3 in August, its lowest since June 2020 .
The Ukrainian crisis, the sharp rise in energy and food prices, the impending sovereign debt crisis in a number of developing countries and the worst inflation in 40 years between the United States and Europe, have all clouded the immediate outlook for the international economy.
In its July version of the World Economic Outlook, the International Monetary Fund (IMF) cut global GDP growth to 3.2% for 2022 and 2.9% for 2023. The report also warned that if the aforementioned risks persist, the growth rate could be even lower. Global global economic risks and downward pressure will undoubtedly impact China’s trade outlook for the rest of the year.
However, the single monthly decline in August is not enough to justify any change in the general trend. August export and import shipments were generally contract execution six months prior and the PMI indicates manufacturing performance six months later.
The direct reason is the exceptionally high growth rate in July. On a year-over-year basis (year-on-year), August trade was still 8.6% higher, with exports up 11.8% and imports up 4.6 %. If we look at the overall three-year growth over the period 2019-2022, Chinese exports in August 2022 were 43.7% higher than in 2019, while the July figure shows a growth of 47.3%. over the past three years. The two characters are quite close.
Therefore, we need to follow the September and October data to identify if a clear downtrend has emerged.
August’s trade performance shows wide disparities between major markets. Trade stopped with the United States, remained stable with the EU and accelerated with ASEAN. Total trade with the United States fell 0.4% year-on-year, with exports up 0.4% and imports down 3.4%. It serves as a wake-up call for Sino-US trade. We need to be vigilant to watch closely if this trend continues into September and into the fourth quarter, and if overall China-US trade enters a sharp decline.
China-EU trade in August shows a slight slowdown in Chinese exports (up 16%, against 19.7% in the first seven months), but a marked recovery in its imports from the latter, which increased of 7.7% year-on-year, compared to 7.6 decline in the first seven months.
China-ASEAN trade accelerated in August with 21.0 percent year-on-year growth, compared with 13.1 percent, up in the first seven months. China’s exports to ASEAN jumped 30.5% (up 19.1% in the first seven months) and its imports from the latter rose 9.6% (6.0%) .
Among the major export categories, the traditional labor-intensive categories continued to perform well. In the first eight months of 2022, textiles, clothing, footwear, ceramics and toys increased by 10.8, 12.8, 31.5, 8.9 and 21.5% respectively.
As a result, China remains competitive in labor-intensive productions. Among the capital-intensive and technology-intensive categories, personal computers and mobile phones performed poorly, up 2.8% and 3.5% respectively year-on-year. Color TV and other appliances fell 8.6%. General purpose machinery grew 12.5% and semiconductor chips 8.7%. The automobile became the fastest rising star, growing 44.5% in quantity and 57.6% in value. It shows that China’s export competitive advantages are increasingly shifting to high-end products.
Going forward, September’s trade performance is likely to show a similar slowdown to August’s due to its high base. Chinese exports in September 2021 were even 5.0% higher than the previous month. Fourth quarter performance will be more indicative of a clear trend.
If the average monthly trade volume remains at the August level, the total trade volume for the whole of 2022 will be 42 trillion yuan, with an annual growth rate of 7.8 percent, with exports up 10.4% and imports up 3.7%. We remain confident that the actual monthly data for the rest of the year will be higher than August. Thus, 2022 will see trade growth of around 10%, with double-digit growth for exports and growth of around 5% for imports.
China’s net exports contributed 1.1 percentage points to GDP growth in the second quarter of 2020. Healthy and stable trade growth will also contribute positively to GDP growth for the year.
We must implement all measures of the State Council to support import and export trade. We must analyze the trends and risks of the main markets, main product categories and take the necessary measures accordingly. We must maintain the policy of reform and opening up, doing everything possible to maintain the growth of trade with major trading partners.
China’s trade in 2022, despite all external risks and difficulties, will remain resilient and make good contributions to economic growth both in China and the world at large.