General

China's shipping index to the United States has plummeted by 90%, and Chinese manufacturing should be avoided as much as possible. Where will China US trade go? After reaching its peak in the first three quarters of 2022, China's foreign trade imports and exports began to gradually decline. According to the latest data statistics, China's recent shipping index to the United States and Europe has decreased by nearly 90% compared to the peak period. Among them, China's exports to the United States have decreased by about 40%. The contraction of foreign trade import and export data not only cannot contribute to economic growth, but also will affect the employment of nearly 150 million people in the upstream and downstream industrial chains of imports and exports, Is the decline in China's import and export data really due to weak demand in Europe and America, or is it someone causing trouble?

Export trade is not optimistic

China's shipping index to the United States has plummeted by 90%, and Chinese manufacturing should be avoided as much as possible. Where will China US trade go? Firstly, from the perspective of the economies of the United States and Europe, they have indeed shown signs of contraction. Due to the uncontrolled release of monetary stimulus, major European and American countries have experienced historically high inflation. In order to address the potential risks of inflation to the economy, interest rates have been continuously raised since last year. It was during the fourth quarter of the peak of interest rate hikes that China's import and export data began to show signs of weakness, Because the cost of using funds increases after interest rate hikes, the social and economic activity will weaken, so this is indeed one of the main reasons for the weak import and export.

Empty containers piled up like mountains

In addition, as the Federal Reserve continues to raise interest rates, the US dollar index and US bond yields continue to rise, many countries' foreign exchange reserves are rapidly decreasing. There are two reasons for the rapid decrease in foreign exchange reserves. One is to sell foreign exchange to save the local currency exchange rate, because when US dollar assets become valuable, other countries' currencies will quickly depreciate. The way to avoid rapid depreciation is to directly purchase local currency, The source of funds for purchasing local currency is foreign exchange; Another is the passive reduction of foreign exchange through capital outflow, which occurs in almost every country during the tightening of the US dollar.

USD interest rate hike

Once these two phenomena occur, many countries' foreign exchange reserves will sharply decrease, and the reduction of foreign exchange reserves will make normal international trade difficult, because the main settlement currency of world trade is the US dollar. In most cases, only holding the US dollar can buy the goods they need from other countries, and if a country's foreign exchange reserves are not enough, Even if some countries have a demand to purchase goods from China, it is impossible to achieve it. Therefore, the Federal Reserve's interest rate hike is the direct reason for the decline in China's trade.

Foreign exchange factors

China's shipping index to the United States has plummeted by 90%, and Chinese manufacturing should be avoided as much as possible. Where will China US trade go? Secondly, from a deeper perspective, the decline in China's import and export data may be more due to human factors, and the culprit behind this is the United States. In order to gradually decouple from the Chinese economy and reduce its dependence on Chinese goods, the United States is transforming goods that should have been purchased from China into those from other countries. This can be concluded from the fluctuating sources of American goods that China was once the largest trading partner of the United States, At present, it has dropped to the third largest trading partner, and the trade volume between China and the United States has not increased for a long time, while Mexico, Vietnam, and India are rapidly increasing their proportion in the US trade.

Industrial chain

Some friends who do import and export say that it's not that the United States doesn't have so many orders anymore. Although there is a downside risk to the US economy, it's not that big. Instead, as long as the goods produced in China are not needed, some companies have to set up factories in Vietnam, India, Mexico, and India to produce the goods needed by the United States, in order to maintain their past trade partners with the United States, This approach by the United States is a disguised dismantling of China's industrial chain, as in the manufacturing industry, the biggest advantage of Sino US trade is a complete range of industries and a complete industrial chain.

Internationalization of RMB

Finally, since the United States insists on economic decoupling from China, how should China respond? To be realistic, we don't have any good way to deal with the United States. We are all clear cards to each other. After all, the United States is a powerful country with the first comprehensive national strength, but that doesn't mean that we can't make up for the lost trade share of the United States. To make up for this trade share, one of the best ways is to re open new markets through the internationalization of the RMB, and alleviate the domestic overcapacity through the the Belt and Road, Since the United States is unreasonable, we can only launch an impact on the foundation of the US dollar, the petrodollar.