General

Innovation, high school and American trade are quite resilient! In 2022, the Sino-US trade volume reached a record high, indicating that although the Sino-US trade relationship has gone through various twists and turns, the bilateral trade relationship is still quite resilient. However, from the second half of 2022, the growth rate of China's exports to the United States gradually slowed down, with a year-on-year decline of 3.8% in August (in US dollars, the same below). In the following three months, the decline continued to expand, with 11.6%, 12.6% and 25.4% respectively; Although it contracted in December, it still fell by 19.5%.

Wang Jing, a researcher at the Research Institute of the Bank of China, believes that there are three main reasons for the slowdown in the growth of Sino-US trade since the second half of last year: first, the consumer demand of American residents was overdrawn in advance; Second, the enterprise's inventory is high and the willingness to replenish inventory is low; Third, the supply chains of Vietnam, Mexico and other producing countries resumed to squeeze export share.

In response to the impact of the COVID-19 epidemic, the United States increased its fiscal stimulus. In March 2020, the Coronavirus Assistance, Relief and Economic Security Act passed by the Trump government distributed more than US $600 billion to the US residential sector. Only a year later, the Biden government once again provided additional incremental income to residents through the U.S. Relief Program Act, and the cumulative expenditure was 1.9 trillion dollars, including 410 billion dollars of direct payments to individuals, 110 billion dollars of refundable child tax credits, and 206 billion dollars of enhanced unemployment insurance benefits. The two policies have significantly boosted consumer demand, making the private consumption expenditure of the United States rapidly rise above the trend level.

The epidemic has hindered the consumption of services in the United States. Most of the huge fiscal stimulus has been converted into spending on goods, especially durable goods, with a year-on-year growth rate significantly higher than that of services and non-durable goods. However, the consumption of durable goods overdrawn in advance will take a sharp turn in 2022, and the year-on-year growth rate will drop precipitously. As the main category of China's exports to the United States, the decline in the demand for durable goods by American residents has led to a sharp slowdown in the growth of China's exports to the United States. The decline of toys, furniture, plastic products and textiles was particularly significant. The cumulative year-on-year growth rate in July and December 2022 was 55.1, 38.4, 28.7 and 19.6 percentage points lower than that in the same period in 2021.

The COVID-19 and trade frictions pose challenges to the stability of the global industrial chain. In 2021, the operation of the U.S. supply chain will be significantly hindered, the commodity inventory will always operate at a low level, and enterprises will be willing to replenish inventory. As the global epidemic has entered a stable period and countries have released control measures of the epidemic, the supply chain of the global industrial chain has gradually recovered, the restrictions on production and import of American enterprises have decreased, and the inventory level has gradually reached a high level. At the same time, the end consumer demand has been released in advance, the growth rate of retail inventory is greater than that of consumption, and the inventory consumption ratio of wholesalers and retailers is gradually rising. The high inventory consumption ratio has greatly reduced the willingness of American enterprises to import goods. Except for some professional equipment, the inventory sales ratio of most durable goods is in the range of 1.5 and above. The United States economy as a whole is in a downward cycle of equipment upgrading and production expansion, and the willingness of enterprises to replenish inventories continues to be in the contraction range, putting pressure on the growth of China's commodity exports.

Most American enterprises are located in the R&D and design at the upstream of the industrial chain and the marketing at the downstream, while the production links are allocated to countries and regions with abundant labor, raw materials and other factors. Therefore, the domestic consumption demand of the United States needs to be met by importing from other production countries around the world. The outbreak of the epidemic has had a great impact on the global supply chain, and the regional structure of American imports has changed accordingly. From 2021 to the first half of 2022, the major production countries in the world are still under the control of epidemic prevention and control policies, and production and investment in Mexico, Vietnam, India and other countries continue to shrink. However, China has benefited from the "six stability" and "six guarantees" policies and its well-established foundation, and the industrial chain has quickly resumed operation, becoming the main alternative to fill the gap in the demand for goods in the United States. It can be seen from the data that from June 2020 to June 2022, the proportion of plastic rubber, textiles, transportation equipment and ships imported from China to the total imports of the United States rose 1.2, 2.2, 1.0 and 0.8 percentage points respectively compared with 2019.

However, in the second half of 2022, the epidemic control measures in Vietnam, Mexico, Malaysia and other countries will be fully liberalized. After the short peak of infection, its industrial chain and supply chain quickly recovered to stability. At this time, the epidemic situation in China is frequent, and the epidemic prevention and control policy is based on the principle of "dynamic clearing". China and other producing countries have gradually differentiated in terms of epidemic prevention and control policies, and orders previously transferred to China from other producing countries have returned in succession. In addition, trade frictions between China and the United States have not declined, but have risen. For the sake of supply chain security, American enterprises have begun to reconfigure some production links in Southeast Asia and Latin America. Finally, China's share of exports to the United States gradually declined.

The change in the share of the major import source countries of the United States can illustrate this point. Among them, the share of textiles, plastic products and furniture has changed the fastest, while the share of electrical appliances has changed relatively slowly. The possible reason is that the production chain of electrical appliances is relatively complex, and the share transfer needs more time. In July 2020, the textile imports from China accounted for 78.2% of the total textile imports of the United States, and dropped to 50.1% in November 2022, while the share of India, Vietnam and Mexico increased to varying degrees. Among the export shares of plastic products, Vietnam and Mexico accounted for more obvious. In July 2020, China's export of plastic products accounted for 38.2% of the import of the United States, and fell to 25.3% in November 2022, while the share of Mexico and Vietnam increased from 9.4% and 1.9% to 10.9% and 3.4% respectively. China's share of furniture exports to the United States will also face a run on Mexico and Vietnam after July 2022. In July 2020, the share of electronic equipment exported by China accounted for 35.2% of the import share of the United States, while it fell to 28.5% in November 2022. During this period, Vietnam's share increased significantly. In the second half of 2022, the share of Vietnam and India was negatively correlated with China's share, indicating that China faced fierce competition from other countries in the field of electronic equipment export.