General

The "China Economic and Financial Outlook Report" released by the Bank of China Research Institute recently shows that China's export growth rate is expected to bottom out and repair in the second quarter of this year. Overall, it is expected that the decline in China's exports is expected to narrow to around 4% in the second quarter, "the report said.

The report believes that due to the continuous evolution of the international political and economic landscape, sluggish overseas demand, weakened price support, and a high base in 2022, China's export growth will continue to be weak in 2023. From January to February, China's exports in US dollars (the same below) decreased by 6.8% year-on-year.

From the perspective of major trading partners, the differentiation trend of China's foreign trade has increased. From January to February 2023, China's exports to the United States continued to experience negative growth, a year-on-year decrease of 21.8%, an increase of 2.3 percentage points compared to December 2022. Although the decline in exports to the European Union and Japan has narrowed, the growth rate has not yet turned positive, at -12.2% and -1.3% respectively. Exports to ASEAN have grown rapidly, with a year-on-year growth rate accelerating by 1.5 percentage points to 9% compared to December 2022.

According to import and export data, from the perspective of product structure, the prosperity of upstream products and automobile exports is high, while the export of labor-intensive products continues to decline. From January to February 2023, the exports of refined oil and steel increased by 101.8% and 27.5% year-on-year, respectively. The year-on-year growth rates of automobiles, chassis, and automotive parts were 65.2% and 4% respectively. The number of automobile exports (370000 units) reached a new historical high, with a year-on-year increase of 68.2%, contributing approximately 60.3% to the growth rate of automobile export value.

The report shows that due to weak demand for durable goods among residents in developed economies in Europe and America, the destocking cycle of enterprises has not yet ended, and production countries such as Vietnam, Mexico, and India squeezing out China's export share in labor-intensive fields, exports of furniture, toys, plastic products, shoes and clothing products continue to decline, with year-on-year decreases of 17.2%, 10.1%, 9.7%, 11.6%, and 14.7%, respectively. Import and export data shows that, The decrease was 2.6, 0.7, 7, 13.8, and 4.4 percentage points higher than in December 2022, respectively.

Import and export data shows that China's export growth exceeded market expectations, with a decrease of 3.1 percentage points compared to December 2022. The report analyzes that the main reasons for the above situation are concentrated in the following aspects:

Firstly, international demand is better than expected. Although the ISM manufacturing PMI index in the United States was still in a contraction range in February, it increased by 0.3 percentage points from January to 47.7%, marking the first improvement in the past six months. Consumer confidence in Europe and Japan has also improved. From the perspective of freight index, since mid February, the Baltic Dry Bulk Index (BDI) and Coastal Container Outbound Freight Index (TDOI) have started to bottom out and rebound. The second is to accelerate the resumption of work and production in China after the holiday, break through blockages in the industrial and supply chains, and fully release the backlog of orders during the peak period of the epidemic, which has a certain boosting effect on export growth. Thirdly, new forms of foreign trade have become an important driving force for export growth. In the first quarter of 2023, the cross-border e-commerce index was higher than that of the same period in 2022. The business volume of leading regions in the development of new foreign trade formats such as Zhejiang, Shandong, and Shenzhen generally showed a higher year-on-year growth, with Zhejiang's cross-border e-commerce export amount increasing by 73.2% from January to February.

The report believes that China's export growth rate is expected to bottom out and repair in the second quarter, and structural opportunities are worth paying attention to. From the perspective of pulling down factors, external repair has uncertainty. The global inflation level is still at a high level, and developed economies in Europe and America are likely to "take small steps" to raise interest rates in the first half of 2023, which will have a restraining effect on international demand. The destocking cycle of major developed country enterprises has not yet ended, and the inventory sales ratio of most goods in the United States is still at a high range of 1.5 or above, with no significant improvement compared to the end of 2022. According to import and export data, in the same period of 2022, China's foreign trade base was relatively high, with year-on-year growth rates of 16.3% and 17.1% in May and June of that year, respectively. Affected by this, exports increased by 12.4% year-on-year in the second quarter of that year.

From the perspective of uplift factors, the regional structure still has support. The strengthening of domestic demand in ASEAN countries is expected to drive the growth of China's end product exports. The IMF predicts that the economic growth rate of the five ASEAN countries in 2023 will be 4.9%, higher than the 1.1% of developed Western economies. The deepening and implementation of RCEP will also deepen the cooperation between China and ASEAN countries at the industrial chain level, and promote the development of the "China ASEAN countries Europe and America" export path. Electric vehicles, photovoltaic products, and lithium-ion batteries have a global competitive advantage in the "new three types of exports". According to import and export data, in 2022, China's industrial product exports increased by 9.9%, driving an overall export growth of 9.4 percentage points. Among them, the export growth rate of lithium batteries, electric vehicles and other products exceeded 60%, and new export momentum grew rapidly. Self developed technology, high production capacity, and low electricity cost are the core competitiveness of China's green product exports. There are still gaps in European energy security demand and emerging market countries' demand for new energy products, which will drive China's export growth, "the report said.