General

On May 9th, the General Administration of Customs released import and export data for April. After experiencing the impact of the epidemic in important foreign trade cities such as Shenzhen, Shanghai, and Suzhou, the foreign trade import and export data in April can be said to have exceeded expectations. However, due to the slowdown in overseas demand, China's import and export momentum is weaker than that of neighboring countries and regions, and the trend of export contraction has not changed. The significant increase in average import prices in April will have a significant inflationary impact on our production costs and consumer prices. Adhering to both epidemic prevention and economic development is the most fundamental measure to stabilize foreign trade and maintain growth.

1、 Exports increased by 1.9% year-on-year in April, greatly exceeding expectations

Import and export data shows that in April, exports reached 1742.6 billion yuan, a year-on-year increase of 1.9% (I estimated a decrease of over 5% a month ago), and a decrease of 0.6% month on month; Imports amounted to 1417.5 billion yuan, a year-on-year decrease of 2% and a month on month decrease of 2.4%; The surplus was 325.1 billion yuan, an increase of 23% year-on-year and 8.2% month on month.

From January to April this year, the cumulative export reached 6967.4 billion yuan, an increase of 10.3%; Accumulated imports amounted to 5612.5 billion yuan, an increase of 5.1%; The trade surplus was 1354.8 billion yuan, an increase of 38.9%.

2、 Affected by the slowdown in overseas demand, the trend of export contraction has not changed

Although the export growth rate in April exceeded expectations, with the continuous interest rate hikes of the US dollar and most overseas countries following the trend of the US dollar entering the currency contraction cycle, overseas production and consumption demand have begun to contract. As a result, China's export growth rate has significantly slowed down month by month since the beginning of this year.

The year-on-year export growth rate in January decreased from 17.3% at the end of last year to 14.7%, and continued to decline to 12.2% in February. It stabilized slightly in March, with a year-on-year growth rate of 12.9%, but narrowed to 1.9% in April.

Because the domestic macroeconomic situation is still at a low ebb, production growth is sluggish, consumer demand is sluggish, and the trend of imports falling is more pronounced than exports.

The year-on-year import growth rate in January fell from 16% at the end of last year to 13.7%, and continued to decline to 11.8% in February. From March to April, it was already in a phase of year-on-year contraction and decline, with year-on-year declines of 1.7% and 2%, respectively.

3、 China's import and export momentum is weaker than that of neighboring countries and regions

From the Asian countries and regions that have already released import and export data for April, China's import and export data undoubtedly performs the worst in Asia.

On May 1st, the South Korean Ministry of Industry, Commerce, and Resources released the "South Korean Import and Export Trends in April", which revealed that in April 2022, South Korean exports amounted to 57.69 billion US dollars, a year-on-year increase of 12.6%; The import was 60.35 billion US dollars, an increase of 18.6% year-on-year. From January to April, the year-on-year growth rate of imports and exports in South Korea remained in double digits.

Due to the lower growth rate of exports compared to imports, South Korea's trade balance has been in deficit for two consecutive months, reaching 2.66 billion US dollars in April. The reason for the amplification of import growth rate is the significant increase in global energy prices. On the other hand, the fact that the growth rate of imports is higher than that of exports means that domestic consumption in South Korea is still relatively hot.

The import and export data released by the Vietnamese Ministry of Industry and Trade last week showed that Vietnam's export volume reached 33.26 billion US dollars in April 2022, a year-on-year increase of 25%. Accumulated exports from January to April reached $122.4 billion, a year-on-year increase of 16.4%. Among the total exports, the manufacturing products accounted for the largest proportion, mainly mobile phones, computers, machinery, and textiles. The export value was 105.6 billion US dollars, a year-on-year increase of 16.1%.

While exports have significantly increased, Vietnam's imports in April also increased by 15.5% year-on-year, with an import value of 32.2 billion US dollars. The cumulative import volume from January to April was 106.6 billion US dollars, a year-on-year increase of 16.8%. 89% of the total import amount is used for raw materials and accessories for production.

With the increase in vaccination rates and the normalization of the epidemic, Vietnam's economy has stabilized and recovered since the fourth quarter of last year, and labor-intensive industries such as electronic assembly and textile have become too busy. Many textile and clothing companies have received sufficient orders to produce until mid year or even September of this year.

As the world's largest semiconductor processing base, our Taiwan region has seen strong imports, exports, and domestic consumption in the past two years. In fact, Taiwan was also affected by the epidemic from March to April, but due to different epidemic prevention strategies, Taiwan's manufacturing, foreign trade, and transportation industries were not significantly affected.

On May 9th, Taiwan's financial affairs department released data showing that Taiwan's total exports in April were 41.46 billion US dollars, a year-on-year increase of 18.8%; The import reached 36.55 billion US dollars, a year-on-year increase of 26.7%. Among them, exports to the mainland reached 16.34 billion US dollars and imports reached 7.19 billion US dollars, with year-on-year growth of 10.6% and 9.5%, respectively. Data shows that Taiwan achieved a surplus of 4.91 billion US dollars in April this year. The total import and export volume of Taiwan in April increased by 22.5% year-on-year, an increase of 1.7 percentage points compared to the 20.8% increase in March.

As most countries, led by the United States, have started monetary tightening policies and consumer demand has subsided, the manufacturing industry in other Asian countries and regions has rapidly recovered, with import and export business growing in double digits. Intercepting and seizing our export orders has a suppressive impact on our export business.

4、 Where are our top ten export markets in April?

Despite the constant trade disputes between China and the United States, American officials often find our weaknesses in the WTO rules and criticize us. Our netizens also declare in the We Media every day that the US dollar hegemony is ending and the US economy is declining. But in such an environment of beating and scolding, the United States still provides us with the largest export market. In April, we exported 293.1 billion yuan to the United States, accounting for 16.8% of our total exports. The cumulative exports from January to April were 1177.2 billion yuan, accounting for 16.9%. They are 12.1 times and 9.1 times the export value to Russia, respectively. From the proportion from January to April and April, we can see that our export market to the United States is very stable.

Hong Kong, South Korea, Vietnam, Japan, India, the Netherlands, Germany, Malaysia, and Taiwan, respectively, are our 2-10 largest export markets. The export value ranges from 441 to 146.4 billion yuan.

From the growth rate of exports in April, our exports to Italy showed the highest growth rate, reaching 34.9%. The export value to Italy in April was 28.7 billion yuan. Exports to Canada, the Netherlands, India, and the Philippines increased by 25.8%, 17.7%, 15.9%, and 15.9% respectively, ranking 2-5th in terms of export growth rate.

In April, our exports to Russia amounted to 24.2 billion yuan, a year-on-year decrease of 27.5%, with the largest decline among export countries and regions. Exports to Hong Kong, the UK, Japan, and Germany decreased by 17.3%, 17%, 10.9%, and 10.8% respectively, ranking 2-5th in terms of export decline.

5、 Which countries and regions are our top ten import channels in April?

This is a result that everyone may not expect. In April, we imported 133.1 billion yuan of products from Taiwan, and from January to April, we imported a total of 528 billion yuan from Taiwan, accounting for 9.4% of China's total imports. Baodao Taiwan is our largest import channel.

Import and export data shows that in April, we imported 105.4 billion yuan of products from South Korea, 100.5 billion yuan of products from Japan, and 87.7 billion yuan of products from the United States. We imported 69.9 billion yuan of products from Australia, making them our second to fifth largest import channels.

Brazil, Germany, Russia, Malaysia, and Vietnam ranked 6-10 out of our top ten import channels in April.

In April, our import growth from Russia was the largest. In April, we imported 56.6 billion yuan from Russia, although only ranked 8th, with a year-on-year increase of 53.5%, which is the largest increase among all import channels. The import growth rates of Indonesia, Brazil, Malaysia, and Taiwan were 38.1%, 22%, 6.8%, and 5.7%, respectively, ranking 2-5 in terms of growth rate.

In April, we imported 2.7 billion yuan from Hong Kong, a significant decrease of 69% year-on-year, ranking first in terms of import decline. The channels with the second to fifth largest decline in imports are: imports from India decreased by 57.7%, South Africa decreased by 38.6%, France decreased by 28.4%, and Australia decreased by -27.6%.

From the ranking of import scale and import growth rate, semiconductors and energy are our most important imported products and also the products we rely on most for imports. These two imports account for half of our imported products. In comparison, the import prices of semiconductors are relatively stable, and energy prices have significantly increased due to the impact of the Russia Ukraine war. The top four channels with the largest increase in import growth are Russia, Indonesia, Brazil, and Malaysia, with the main imported products being oil, gas, and coal.

6、 Who are the ones who give us the most money and those who spend the most money here?

We have been talking about the three carriages of investment, consumption, and foreign trade, which have driven our economic growth. I don't know if everyone is clear about how foreign trade drives economic growth. When we calculate GDP, the trade surplus constitutes an increase in GDP. A trade deficit will lead to a decrease in GDP. For example, in the first quarter of this year, the comparable price of US GDP increased by 4.3% year-on-year. Due to the widening trade deficit, the US GDP decreased by about 3 percentage points.

So, only countries with surplus in our import and export business are driving our economic growth, which means giving us money. Where trade deficits manifest, they are dragging down our economic growth and taking money away from us.

In April, the United States was the country that gave us the most money, with a trade surplus of 205.4 billion yuan between China and the United States. According to the average monthly gross domestic product for the first quarter, it means that our import and export trade with the United States drove our GDP growth of 2.1% in April. From January to April, our cumulative trade surplus with the United States reached 790 billion yuan, which is equivalent to driving our GDP growth of 2.2% in January to April.

In April, our trade surplus with Hong Kong, the Netherlands, India, and Vietnam was 1436, 514, 501, and 40 billion yuan, respectively, ranking among the top 2-5 trade surplus countries.

In April, the region with the largest trade deficit was Taiwan on the island of Baodao. There is no way, there is only one TSMC in the world. If we look for them to process semiconductors, we must also see if they have abundant production capacity. The trade deficit between mainland China and Baodao in April was 89 billion yuan, with a cumulative deficit of 354.6 billion yuan from January to April. The second to fifth largest trade deficit countries are Brazil, Australia, Russia, and Japan.

Since the beginning of this year, our trade deficit with Russia has accumulated to 67.5 billion yuan, which is equivalent to dragging down our GDP growth by 0.2% from January to April.

7、 The average purchase price of imported goods in April increased significantly by 8.4% month on month

We can calculate the import prices of key commodities based on the import quantity and import amount of key commodities in the "National Key Import Commodity Value Table" provided by the General Administration of Customs. In April, the vast majority of imported commodity prices were on an upward trend. Of course, the main reasons for the significant increase are energy and commodity prices.

Compared to March, crude oil prices increased by 12.9%, raw coal prices increased by 11.7%, edible vegetable oil prices increased by 9.9%, fertilizer iron ore sand and grain prices increased by 9.2%, 8.8%, and 8.5%, respectively. Pulp, primary shape plastics, soybeans, and copper prices increased by 7.4%, 6%, 5.9%, and 5.4%, respectively.

Based on the price increase of key commodities and the import weight in April, we calculated that the average increase in imported commodity prices in China in April compared to March reached 8.4%, which should be said to be quite significant. Based on the proportion of imports to China's total industrial output value in 2021, we can calculate that due to the significant increase in import prices, this imported price increase factor will drive the PPI of China's industrial products to increase by 1.9% month on month in May. Imported inflation will affect our consumer price index CPI to increase by at least 0.6% month on month.

According to import and export data, in the first four months, China imported 354 million tons of iron ore, with an average import price dropping by 29.5%. During the same period, imported crude oil reached 171 million tons, with an average import price increasing by 54.3%; 75.406 million tons of coal, with an average import price increase of 109.1%; 35.866 million tons of natural gas, with an average import price increase of 72.1%; 28.36 million tons of soybeans, with an average import price increase of 22.7%; 10.295 million tons of primary shaped plastic, with an average import price increase of 13.3%; 7.975 million tons of finished oil, with an average import price increase of 36.2%; 4.174 million tons of steel, with an average import price increase of 26.1%. The import of unwrought copper and copper materials reached 1.939 million tons, with an average import price increase of 15.1%.

8、 Persisting in both epidemic prevention and economic development is the most fundamental measure to stabilize foreign trade

Under the impact of the COVID-19 and the Russia-Ukraine conflict, China's import and export faces serious challenges. In order to achieve the economic growth target of this year proposed in the Report on the Work of the Government, China must strengthen top-level design to ensure the stability of the industrial chain and supply chain. Therefore, the Executive Meeting of the State Council proposed measures to promote the stability and quality improvement of foreign trade, aiming to strive to maintain orders, effectively improve operational and customs clearance efficiency, quickly introduce policies to facilitate cross-border e-commerce export returns and exchanges, increase financial support for small and medium-sized foreign trade enterprises, and optimize platform services such as the Canton Fair.

Due to the significant impact of the epidemic on the production and exports of foreign trade enterprises, if the normal production of foreign trade enterprises cannot be guaranteed, it will affect the normal operation of the global industrial chain and may also lead to some demand for Chinese foreign trade enterprises shifting to other countries or regions.

Stabilizing foreign trade is one of the important levers for stabilizing growth, and at the same time, stabilizing foreign trade also helps to stabilize the industrial chain, investment, and employment, promoting internal circulation. Although some targeted foreign trade assistance policies have been introduced in China, the most fundamental measure is to adhere to the dual efforts of epidemic prevention and economy to ensure that foreign trade enterprises can purchase raw materials, produce and operate normally, and transport goods out of the country during the epidemic prevention period.